Leapfrog finances utility scale solar and battery storage plants

In 2016, we originally advised Leapfrog Bridge Finance Limited on their bridge loan, which enabled a “community interest company” (Verdant Community Energy CIC) to own two adjacent utility scale solar parks.

This was the UK’s largest community solar project at the time (9.3MW including a shared grid connection arrangement with an adjacent commercial solar park). The 2016 financing was an innovative 100% debt (0% equity) bridging loan to enable the acquisition of Verdant Community Energy CIC, by community-focused developer and asset manager Communities for Renewables (CfR), from Gamma Energy.

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In December 2017, we then advised Leapfrog on the refinancing and restructuring of the debt, with Leapfrog’s facility being repaid in part by Triodos Bank (as incoming senior lender) with the remaining Leapfrog debt restructured as mezzanine debt.

Finally, in 2018, an innovative (and largest at the time) 18-year community investment bond offer (circa £4 million with 5% inflation linked bonds) was launched to local retail investors, underwritten by Triodos Bank and Big Society Capital. The result was to refinance Leapfrog in full.

Our role was to conduct the full legal due diligence on the project, and we prepared and negotiated the finance documentation throughout the various iterations of the project from 2016 until 2018. We ensured the community-focused approach was maintained at all times (across the senior, mezzanine and shareholder documentation) to guarantee surplus cashflows for the local community.

The projects are innovative in that they have a guaranteed return for the local community, ahead of equity distributions, and the potential to generate approximately £3 million of income for local community organisations and projects over the next 20 years, an achievement all parties involved can be proud of – thanks primarily to the vision and commitment of everyone involved who made this project happen, and the power of the sun!

A link to Leapfrog’s website is here: www.pureleapfrog.org

First utility scale wind farm in Jordan

A first of kind and a ground breaking project in many respects, the 117MW Tafila wind farm in Jordan was the start of the journey for Lux Nova.

The founding partners, Tom, Louisa and Sandy worked together closely over a number of years on every legal aspect of the project: from power purchase, construction, O&M, equity investment to project finance. It was during journeys back and forth to Jordan that some “blue sky” thinking was done and where the idea of a boutique and dedicated renewable law firm was formed. Learn more about our journey here.

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Tafila Wind Farm was the first wind farm to reach operation in Jordan, in September 2014 (and was inaugurated by King Abdullaj II in December 2015). It was one of the first and largest windfarms in the Middle East when it started generating. A truly global project, it was equity financed by a consortium of Inframed Infrastructure, Masdar and EP Global Energy and debt financed by a consortium of funders including the International Finance Corporation and the European Investment Bank for the sum of $221 million debt.

We negotiated the power off-take, grid connection and Government support agreements developing a template PPA which was subsequently used on the roll out of projects across the country (including the Shamsuna solar farm) and formed templates for PPAs in other countries within the region. We also negotiated a full turnkey integrated Design Build Operate & Maintain contract with Vestas, the construction, operation and management contractor who supplied the Vestas V112-3MW turbines and completed the full suite of project finance documentation with the consortium of primary lenders.

As a dedicated team throughout project development, we worked closely with the project developer to deliver this seminal project and continue to advise through various contract variations and equity sales, an example of joining and continuing with the client on their journey, one of the most rewarding types of projects!

Leapfrog Finance go from strength to strength

We are incredibly proud of our long-standing partnership with Leapfrog. We have provided pro bono advice to the Charity arm of Leapfrog (now Pure Leapfrog) for over 10+ years.  In 2015, shortly after setting up Lux Nova, we advised on the initial structuring (including state aid compliance) setting up and securing £15 million investment from Big Society Capital for a commercially operated finance arm (Leapfrog Finance) to the existing charity division.

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This addition was needed in order to address a market failure, namely lack of affordable debt capital available to social and community enterprises to develop their own utility-scale renewable energy assets. The bridge fund remains the only source of debt capital available to fund 100% of the project development/construction cost or acquisition cost (if already constructed), providing a breathing space and assistance to the community organisation to then raise long-term debt capital and secure equity funding through undertaking a community share or bond offer.

Leapfrog has deployed approximately £40 million loan commitments (including co-funding commitments from a community-oriented energy supply company secured in 2018, which we advised on). The fund supports a range of technologies from ground mounted solar & rooftop in conjunction with battery to heat and energy efficiency that will create long-term social and environmental benefits for local communities, with a specific focus on targeting communities in areas of highest deprivation.

Since setting up the fund, we have acted for Leapfrog on the deployment of all of their loans (including providing due diligence, structuring advice and preparing and negotiating loan and security documentation) covering various construction, acquisition and bridge loans, and underwriting of share offers. To date, this includes an aggregate of 117MW of community- and publicly owned renewable energy projects, and where the initial bridge term is complete the majority of the loans have been refinanced with long-term debt from commercial banks (we have acted for Leapfrog on all of these refinancings).

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As a most recent example of our work with Leapfrog, we advised them on their £11 million mezzanine revolving construction bridge funding to GRIDSERVE, as developer, undertaking the UK’s largest subsidy-free integrated solar and battery farm developments (circa 60.4MW solar, 27MW battery storage) across two sites in the North of England. Once commissioned the two parks will be acquired by Warrington Borough Council, which will make Warrington the first local authority to produce all of its own electricity from clean sources. Leapfrog funded these projects alongside Investec Bank (as senior lender in a common bridge financing structure), playing an active role (with our support) in the structuring of both the contractual and acquisition documentation as well as the financing documentation (including intercreditor arrangements). The panels and tracking system are a new design for the UK. The projects are expected to generate over £2.25 million of community benefit over their life.

It has been incredibly satisfying to drive such a critical element of the community solar market, making projects happen that otherwise may not have materialised. We are already focussed on further and even bolder innovation, together with the Leapfrog team – watch this space!

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“The knowledge and professionalism that Louisa brought to the deal was second-to-none, addressing project financing risks, the complexities of a commercial & local authority transaction and enabling Leapfrog to secure £2.25m in community benefit funds to help local people in the Warrington area. We are enormously proud to partner with Lux Nova.”

— Claire Hanratty, CEO, Leapfrog

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Further reading here.

Largest publicly owned ESCO from India acquires CHP market leader EDINA

Acting on this project has been a very rewarding journey for us and our clients. We were retained in 2017 to act for EPAL (the joint venture vehicle between English developer EnergyPro and EESL, established in 2009 and currently the world’s largest publicly owned super ESCO and one of the most highly regarded innovative finance companies).

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Given India’s extensive need for energy efficient power generation, EESL expanded its business model to include an earmarked £150 million investment programme of strategic acquisitions in Europe and beyond, to help diversify its portfolio. EPAL’s first UK acquisition was a portfolio of energy efficiency performance contracts developed by Anesco. They then went on to acquire a battery storage project in Ontario, Canada. The £55 million acquisition of Edina (the market leading provider of energy efficient CHP engines in the UK, with a presence in Dublin, Lisburn and Stockport) followed in 2018.

The aim was to grow the Edina business into a global leader and creating a platform to scale up the combined heat and power market (and adoption of tri-generation technology) in India, further transforming the energy landscape in India, enhancing its energy security and achieving significant reductions in its current carbon footprint. An interview with EESL’s Managing Director, Saurabh Kumar, is here, explaining EESL’s impressive progress and transformative agenda even prior to the Edina acquisition, with another interview here, following the acquisition.

The Edina acquisition is the largest and strategically most significant international direct investment by EESL to date.

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The transaction involved creating the JV and investment arrangements between EESL and EneryPro, followed by full due diligence of the Edina business – a journey that took us from Colorado all the way to New Zealand, via Dublin, Lisburn, Stockport, London, Switzerland, Germany and India – unfortunately only from the safety of our desks.

We negotiated the share purchase agreement, as well as the full suite of acquisition financing arrangements with the senior and mezzanine funders, including all intercreditor arrangements between the numerous existing and new funders to Edina. And when a change in India’s investment legislation was introduced half-way through the transaction, we took the lead in restructuring the financing accordingly.

We supported EPAL and its shareholders every step of the way, with strategic board-level advice as well as all day-to-day negotiations, to ensure the success of the transaction. But when the documents were signed in 2018, the real journey of Edina, now under new ownership, had only begun. Since then, we continue to advise Edina and EPAL on their legal needs, as well as offering a sounding board to management, on their continued journey to leveraging their investments, including making Edina the global market leader.

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Neelima jain, ceo, epal, and a Director at Edina

“The acquisition is an important development in bringing together the efforts of two companies that have achieved distinguishing competencies in their respective energy efficiency markets. This partnership has far-reaching implications on the global energy sustainability scenario, and for promoting low-carbon growth by industries in Europe and Asia. With CHP technology’s contribution to the UK energy portfolio expected to double between 2015 and 2020, UK is a promising market for EESL to grow its own capabilities in the trigeneration sector.”

— Neelima Jain, CEO, EPAL, and a Director at Edina

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