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$52.8M funding vaults Nexus from power developer to producer

Toronto-based renewable energy company plans to develop multiple U.S. battery projects

A Nexus Renewables battery energy storage system in California. (Courtesy Nexus Renewables.)

Nexus Renewables has received $52.8 million in financing from three investors for a series of U.S. battery projects, which CEO Keith Sandor says will elevate it from power developer to power producer.

The Toronto-headquartered renewable energy company was founded in 2020 as a pure-play renewables developer funded by local family offices, Sandor told SustainableBiz in an interview. Its first milestone was proving its success in the “develop-and-flip model,” by which Nexus would assume the soft costs — engineering, design and permitting — and then flip a project over to an institutional partner.

Now it looks to cross a second milestone with its latest round of funding by becoming an asset owner, which “solidifies us as a power producer.”

Nexus is pivoting to energy storage by constructing a 10-megawatt battery energy storage system (BESS) project in Fairfield, Calif. and advancing plans for battery projects in Texas, including a 300-megawatt BESS near Houston.

“The financing that we closed, part of it is associated with funding our longer-term growth, but also a good portion of it is for putting projects on our own balance sheet.” Sandor said. “It’s just a natural progression of the business model, which is to move from developer to asset owner.”

Merging finance with energy expertise

Sandor has spent over 20 years in the power and utilities space across roles in EPCOR Utilities, Just Energy, Scotiabank and the Independent Electricity System Operator. His time in Scotiabank’s capital markets team attuned him to the North American markets, he said, and figuring out what investors were seeking.

Nexus’ staff is similarly structured, blending expertise in capital markets or investment banking and “industry-based folks” with experience in project execution or project development. Marrying the two fields of expertise leads to a “really potent outcome” he said, which is proven out by Nexus’ growth.

Beyond California and Texas, it is active in other U.S. markets such as New Mexico, Illinois, New York and Massachusetts.

The firm raised US$100 million in January 2022 with Scale Microgrid Solutions to fund the development, construction and acquisition of a portfolio of distributed grid-connected solar and battery energy storage projects across the U.S.

In March 2022, it sold three distribution-scale solar projects in New York state totalling 14 megawatts of capacity to Scale.

After succeeding in the smaller-scale develop-and-flip model projects, Nexus is growing into utility-scale U.S. battery projects.

Funding the BESS projects

The BESS projects were funded by Aiga Capital Partners (a $17.6 million senior secured loan), Synovus Bank (a $19.2 million project-level financing), Greenprint Capital (a $14.3 million tax equity commitment) and a $5 million commitment for privately-placed preferred shares.

The Aiga financing was “relatively low compared to what they would normally offer,” Sandor said, referencing a separate round of financing it closed for US$200 million. Though the size of Aiga’s cheque was comparatively small, the real benefit is its expandability, which drew Nexus to Aiga for the financing.

Sandor said as Nexus grows, so can the financing commitment. Nexus is aiming to expand the facility over the next few months so it can grow to the US$100 million-plus range.

Part of the financing will go to building the 10-megawatt BESS project in California. The project is a behind-the-metre, standalone battery system. It is contracted through California’s resource adequacy, which is similar to a capacity contract.

“We find there is a lot of appetite for capacity-based contracts in California,” he said. “We do intend on repeating this project over multiple different sites we currently have in our portfolio.”

Nexus would like to expand or advance the development of a few battery sites it has in Texas, including the 300-megawatt project.

The remainder of the financing will go to growth.

Nexus has approximately one gigawatt of projects at various stages of development. There is also an increased focus on mergers and acquisitions opportunities so it can assist other developers with their capital needs.

Plans for a homecoming and growth

Nexus prioritized the U.S. market because it offered more opportunity and access to capital than Canada. But with more positive tailwinds, like the Canadian fall economic statement offering an investment tax credit for renewable energy, Sandor said Nexus is considering circling back to its home country.

“. . . Now that policy is starting to take shape in a lot of these provinces, including Nova Scotia and Ontario, we do feel we’re in a really good position to really put together the piece or narrative to really look for some Canadian-based investment to complement some of the U.S.-based investors that we currently have,” he said.

Nexus will also focus more attention to project size rather than quantity, slowly moving away from distribution-scale ventures.

“Our long-term vision is to become a major player in North America. Recognizing that we would like to continue to be based out of Canada . . . We see a great market opportunity and it’s something that we’re looking forward to building out in the next few years.”

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