Danish pension pops $307 million cork on California solar power


If you’re a bank, and you believe the solar finance package in front of you has a high chance of being bought by an investor with big pockets later, then you’ll assign a lower risk to the project, and increase chances of success. If those buying the projects are pension funds – some of the deepest-pocketed, most careful investors – then you have a solid argument on market liquidity being high, high enough at least for large sized utility scale solar power market.

Pensionskassernes Administration is acquiring Canadian Solar’s 49% passive equity stake in its Garland and Tranquillity solar facilities. The projects are 51% owned, and actively managed by Southern Power – owner of more than 1,230 MW of solar across 28 projects.

Per its site, Pensionskassernes Administration (PKA) is one of the largest pension service providers for labor market pension funds in Denmark. It is their job to choose the assets to invest in for the fund based on board-stipulated policy. The fund pays benefits toward retirement pensions, spouse pensions, child pensions, disablement pensions, lump sum retirement pensions and group life insurance benefits.

This is the fund’s first solar power investment in its 2020 ambition to invest 10% of its capital in climate related projects, about equal to 30 billion Danish kroner ($4.6 billion).

The two projects were directly owned by Recurrent Energy, a Canadian Solar subsidiary, and Southern Power Renewable Partnerships, a subsidiary of Southern Company.

The Tranquillity facility is 258 MW-DC / 200 MW-AC, and uses single axis trackers. The plant began generating power during Q3 2016, and the electricity it generates is purchased by Southern California Edison through a long term power purchase agreement (PPA).

The second facility – the Garland solar power plant, is a 272 MW-DC / 200 MW-AC facility also in Kern County. The plant uses 723,000 Canadian Solar CS6X-P solar modules, and is also mounted on a single axis tracker system. This project also has a long term PPA with Southern California Edison and came online in Q4 2016.

Increasing the liquidity of solar power investments will come by proving to pension funds that solar power can be a long-term, consistent, predictable cash producer. That the project was built and is managed by some of the largest, most experienced groups in the solar space was probably a large factor in determining the risk profile, and it is this low risk profile that allowed the project to move past rule-based investment committees.