Bernard Tan is the CEO of RE Royalties (Courtesy RE Royalties).

RE Royalties believes it is transforming the way renewable energy projects are being financed.

The company acquires revenue-based royalties from renewable energy generation facilities by providing a non-dilutive financing solution to renewable energy generation and development companies.

Bernard Tan, CEO of the Vancouver-based company, said it is the first to apply this proven business model to the renewable energy sector and it owns 84 royalties on solar, wind and hydro projects in Canada, Europe and the United States.

“The way we typically utilize these financings is quite flexible,” said Tan. “We work with small, mid-size developers to great projects to really sort of bring their dreams and projects to fruition.”

The company officially started in 2016, but the inspiration and idea for it came a few years before that.

Prior to establishing RE Royalties, Tan was manager, assurance with KPMG, then chief financial officer at Curis Resources (which was recently acquired by Taseko Mines) and then chief financial officer at Hunter Dickinson.

Climate change concerns led to RE Royalties

After the birth of his first child, Tan became passionate about climate change and wanted to do something to help mitigate the problem. About that same time he was acting as an advisor for a clean tech/independent power producer in Vancouver, on a pro bono basis, with its financing plans.

At that point he raised the question about raising some royalty financing.

“That’s when I got a blank look . . . There’s no such thing as royalty financing, they said,” Tan explained. “That was really how the whole idea incubated; at the crossroads between the inspiration of being a new parent and trying to do something new that would help better the world.

“That’s when I reached out to my partner Peter Leighton (chief operating officer) and we started the company from scratch. Basically boot-strapped it in the early days — friends, family, private investors in Vancouver.

“We took the company public in 2018 and started building the business from there.”

Tan said the company provides financing through these royalty financing vehicles to a wide variety of privately held and publicly traded developers and operators in the clean energy space.

The 80-plus royalties acquired to date are in British Columbia, Ontario, Nova Scotia, Europe, the U.S. and soon it plans to move into Australia as well.

Royalty financing explained

He explained the unique form of royalty financing in this way: When you go to Costco, you see Starbucks coffee on the shelf and buy it.

“It’s almost like licensing. Starbucks didn’t source the beans,” he said. “They didn’t do anything with the beans. It’s actually Costco that did all the hard work with the private label and they slapped the Starbucks label on it. Starbucks receives a royalty for each bag of coffee that they (Costco) sell.

“Another example is the mining industry. The way that some projects get financed is developers trying to build a mine, they can’t raise any capital, so they sell a percentage of their revenues sort of on a forward basis.

“This mine is going to last 20 years, so I will sell you five per cent of the revenues I will generate for the next 20 years in the life of the mine. In exchange I will receive a lump sum amount of cash today to actually build the mine. That’s another form of royalty-based financing.”

RE Royalties works with groups to reduce GHG

Tan said the company is focused on wind, solar and hydro — anything that creates a positive, clean GHG impact.

“We’re also working with groups that are now in the battery storage space — helping developers, operators put in batteries into the electrical grid,” Tan said. “We’re also helping renewable natural gas operators.

“One project that we’re currently working on in the U.S. right now is with a developer that’s working directly with dairy farms.

“So if you think of a dairy farm, they have a lot of cows. The cows poop. They create a lot of waste. These wastes go into a lagoon which is highly toxic and release(s) a lot of methane into the atmosphere.

“Our client basically takes the waste stream and they convert that waste stream by basically extracting that methane and pump that into the natural gas grid.”

Tan said the company has invested more than $20 million to date in projects. Revenue for the company last year was about $2.5 million.

“Our future is definitely growing larger and working with a more diverse group,” he said. “Last year that $20 million invested and that $2.5 million revenue all came from solar, wind and a little bit of hydro.

“From a growth perspective, we are getting now into the renewable gas sector which we find is very attractive from a carbon impact but also from an economic impact.

Robust pipeline of new opportunities

He said four of the next five deals RE Royalties is working on closing are in the battery storage space.

“We find that as the next step in the maturation of the renewable industry. Batteries will be part of our portfolio as well.”

In a corporate update July 20, the company reported a robust pipeline of potential royalty financing opportunities and was in advanced discussions on several opportunities with a transaction value of $46.8 million, including:

– Renewable Natural Gas 1: $8.5 million loan and royalty acquisition of two renewable natural gas projects in the United States. The loan will be used to complete the conversion of an existing facility, and construction of a second facility, to convert agricultural waste from local dairy farms to produce renewable natural gas;

– Battery Storage 1: $12.5 million royalty acquisition with a U.S. company to finance the production of mobile utility-scale battery storage units, for sale and rental to electricity utilities;

– Battery Storage 2: $5.8 million sale-leaseback and royalty acquisition with a Canadian company to finance a battery-powered electric generator rental pool program for a major utility in California. The generators are portable and will be utilized for emergency backup power to assist the utility in building grid resiliency during fire season;

– Battery Storage 3: $10 million loan and royalty acquisition with a Canadian company to finance the acquisition of a portfolio of operational commercial-scale battery storage projects and to finance the construction of a second portfolio of battery storage projects, located in Ontario;

– Battery Storage 4: As previously announced on March 29, the company entered into a non-binding letter of intent for a $10 million loan and royalty acquisition with Canigou Molonglo Bess Pty Ltd. to finance a 10-megawatt battery storage project near Canberra, Australia. It continues to advance due diligence with Canigou and hopes to close the transaction in Q4 2021.