EQT Infrastructure discusses MEI deal and expectations for strong C&I solar growth
Increased market demand for commercial and industrial (C&I) solar developers helped Madison Energy Investments (MEI) as it finally found a buyer, and in a big way, after being on the auction block for the better part of a year.
EQT Infrastructure Fund VI, which is targeting a fund size of EUR 20bn (USD 21.2bn), bought MEI from Stonepeak Infrastructure Partners earlier this week. Stonepeak initially backed MEI’s founders in 2019 to scale the DG platform via a USD 200m commitment from its USD 2.75bn Stonepeak Global Renewables Fund.
In an interview with NPM, Alex Darden, president of EQT Partners and head of the EQT Infrastructure Advisory Team Americas, walked through some of the drivers for the deal. Darden pointed to a mix of tax credit certainty related to the passage of the IRA2022, declining solar and solar + storage capex costs and certainty of demand from C&I customers given the increase in corporate sustainability commitments.
“The enabler is the Inflation Reduction Act of 2022 as it establishes a 10-year ITC extension, adders for certain milestones and allows for transferability of tax credits,” said Darden, adding that the DG industry has strong tailwinds.
Darden expects that this should add up to 15% growth per annum in the DG market.
The New York-based MEI has historically carved a niche catering to a tier of C&I clients that are investment grade, but not Fortune 100 companies, said sources familiar with the situation. The strategy has allowed it to avoid competing head on with other developers in the crowded Fortune 100 space where returns could be less as a result.
MEI has developed a good network of local and regional developers and has bought projects from them at notice-to-proceed, such as its partnership with Novitium Energy and Influent Energy. These developers are usually the first point of contact for the C&I customers, but MEI has assumed that role as well.
Overall, MEI has built a portfolio of 386 MW across the US and EQT expects to support MEI’s leadership—Steven Cunningham, Jack Hachmann and Richard Walsh— in their next chapter, including offering EQT’s in-house digital expertise to further digitize the organization and expanding MEI’s reach across a broader customer database.
Darden wouldn’t comment on specific valuation metrics included in the sales process but said MEI has been on their radar for a number of years.
EQT’s renewable footprint took a major leap in 2021 as its EUR 15.7bn fifth flagship fund did a take private of Spanish IPP Solarpack and also acquired US-based IPP Cypress Creek Renewables from two funds. There are no plans to merge MEI with either company, though Darden said ownership of these companies has certainly helped as the ongoing supply chain crisis has unfolded for solar panels.
“The IRA has given more certainty of supply in the US down the road,” notes Darden.
*This story was originally published exclusively for NPM subscribers last month.
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