First Mover Royalty Company in the Renewable Energy Sector
This profile is part of a paid investor education campaign.*
RE Royalties Ltd. (TSXV:RE) provide investors the ability to invest in a growing clean energy economy and to generate strong capital returns over the near-to-medium term and above-market yield over the long term.
The global renewable energy market is very large, with $280 billion invested in the sector in 2017 alone, and continues to grow rapidly. RE Royalties utilizes its unique royalty financing model to invest into a portfolio of operating and/or shovel-ready renewable energy projects owned by small-to-medium sized renewable energy companies. These projects are long-lived assets, with long-term cash flows generated by the sale of electricity to investment grade electricity buyers. Although these companies have great assets, they are underserved by traditional financiers due to their size.
RE Royalties is the first royalty financing company to focus on the renewable energy sector. The royalty financing model is well-proven and royalty financing companies have a longstanding history of success in other sectors such as mining, oil and gas, pharmaceuticals, consumer services and agriculture. RE Royalties saw the rapid emergence of the renewable energy sector as an untapped opportunity to apply this foundational model that allows renewable energy companies a more flexible way to grow.
RE Royalties acquires and manages a portfolio of royalties focused on five key principles: (i) clean energy generation, (ii) strong risk-adjusted returns, (iii) stable long-term yield, (iv) high growth potential and (v) robust risk mitigation practices. Under this model, RE Royalties acquires royalty rights from small-to-medium sized renewable energy companies in need of capital for their projects. The company aims to acquire royalties with an internal rate of return (IRR) on investment between 12%-15%. To date, the company’s portfolio of acquired royalties in Canada, Europe and the United States boasts an IRR of 34%.
In April 2018, the company announced a reverse takeover with Baetis Ventures Ltd. (TSXV:BATS). Upon completion of the reverse takeover, which is subject to the approval of the TSXV, the company will be listed on the TSXV as RE Royalties Ltd. Concurrent with this reverse takeover, the company is proposing to complete an equity financing for $10 million.
Renewable energy demand continues to grow year over year due to its environmentally-friendly nature, low operating costs, reliability, long-life and vast inexhaustible energy supply. In recent years, technological improvements have made new renewable energy projects more efficient to the point where government subsidies are no longer needed, and the cost to produce electricity from renewables is now lower than the cost to produce electricity by burning fossil fuels. Global investment in renewable energy capacity increased to $280 billion in 2017, far higher than fossil fuel capacity, and since 2010, a total of $2.2 trillion has been invested in renewable energy generation capacity.
RE Royalties benefits from a seasoned management team with experience in the resource, finance and renewable energy sectors. The company’s founders, Bernard Tan, Marchand Snyman and Peter Leighton, have combined experience of over 60 years in the corporate finance, resource and renewable energy development.
- First mover in the renewable sector to provide royalty financing
- Signed agreement to go public on TSXV via reverse takeover with Baetis Ventures
- Focus on operational or shovel ready projects with long-term, predictable cash flow
- Strong pipeline of royalty acquisitions in a growing global renewable energy market
- Diversified portfolio of cash-flowing royalties from solar, wind and hydro projects
Royalty Financing to fund the Renewable Energy Revolution
RE Royalties seeks to transform the way renewable energy projects are financed. For renewable energy project owners, royalty financing provides an option that is more flexible than debt, and is less costly and less dilutive than equity financing. Royalty financing also allows renewable energy project owners to raise capital to fund their growth plans without having to sell their existing assets.
For investors, the royalty business model can create significant shareholder value through the acquisition of long-term sustainable royalty streams, strong capital protection, high reinvestment rates to drive growth, and low operating costs. The renewable energy royalties are:
- Backed by long-term power purchase agreements from credit worthy utilities or strong merchant markets
- Able to provide predictable, low volatility, future cash flows that will support a growing dividend
- Diversified across technologies (hydro, wind, solar, geothermal and biomass)
- Diversified globally across regulatory jurisdictions
- Secured against a project developer or owners’ assets
- Based on gross revenues
Renewable energy is a low cost, abundant and inexhaustible resource. As long as the sun is shining and the wind is blowing, royalties from renewable energy projects will be able to produce cash flow for investors.
RE Royalties’ Business Model
Although royalty companies are an established and proven form of investment in other industry sectors, RE Royalties is a pioneer and first mover for this business model in the renewable energy sector. The company currently has ownership of royalties from 11 renewable energy projects in North America and Europe, and plans to grow this portfolio in the near future. As part of a diversified portfolio, these projects include solar parks, wind farms, and small scale hydro facilities. Additionally, the company is currently looking to expand into the Asian renewable energy market.
RE Royalties applies a strict investment criteria in its royalty acquisition process. The transactions must provide sufficient collateral to secure the company’s investment, have a clear path to cash flow and generate enough margin to warrant a long-term royalty. Finally, the investment should generate risk-adjusted IRR above the company’s long-term financial targets.
RE Royalties’ targeted IRR for its investments ranges from 12% to 15%. The company’s existing portfolio of acquired royalties have an aggregate IRR of 34% with an average royalty life of 20 years. Additionally, RE Royalties anticipates it can enhance the rates of return for shareholders to a range of 22% to 25% by eventually issuing green bonds to add leverage to the company’s capital structure.
RE Royalties’ current portfolio of royalties includes the following:
- 1 percent of the gross revenue from an operational 102 MW wind farm in Canada;
- 1.2 percent of the gross revenue and a 10 percent equity interest in 332 MW of advanced stage solar projects in the US; and
- 1.2 percent of the gross revenue on a 39MW portfolio of six fully operational projects in Europe, including hydro, solar and wind projects.
The company has identified and is in discussions to acquire an additional $100 million in potential royalty acquisition opportunities in Europe, North America and Asia. The targets include solar, wind and hydro projects. RE Royalties is in varying stages of negotiations with the projects’ owners, from initial due diligence to signed letters of intent.
Management and Board of Directors
Bernard Tan – Chief Executive Officer and Director
Mr. Tan is the founder of RE Royalties and former CFO of Hunter Dickinson Inc. (“HDI”), where he managed diverse teams in the strategic development and execution of new opportunities for HDI, and provided financial oversight and governance on HDI’s affiliated companies. He was CFO of Curis Resources Ltd., a previously publicly listed company that traded on the Toronto Stock Exchange (“TSX”). He has over 15 years of experience in corporate finance in resource and technology and is a recipient of Young Mining Leader Award from Canadian Institute of Mining, Metallurgy & Petroleum. Mr. Tan is a CPA, CA and has a MBA (Finance) from McGill University and BComm from the University of British Columbia.
Peter Leighton – Chief Operating Officer
Mr. Leighton is a co-founder of RE Royalties. Mr. Leighton is an experienced renewable energy executive with 20+ years of experience in mergers & acquisitions and project development in the energy sector. He was the President and Chief Operating Officer of Finavera Wind Energy Inc., where he delivered $750 million worth of wind energy projects from the embryonic stages of development through to the ready to build stage. Mr. Leighton was the Chief Operating Officer of Accenture’s Business Services for Utilities from 2001 to 2008 and was a director of Clean Energy B.C. (from 2010 to 2016), and a director of Health Shared Services of British Columbia (from 2008 to 2018). Mr. Leighton has a BSc from Queens and MBA from University of British Columbia.
Marchand Snyman – Chairman and Director
Mr. Snyman is a co-founder of RER. Mr. Snyman has over 20 years of senior executive experience in global corporate finance, mergers & acquisitions, financing and divestiture activities. He also currently serves as a director and officer on a number of publicly traded companies. Mr. Snyman is currently a Director and the Chief Operating Officer of Hunter Dickinson Inc. Mr. Snyman is a Chartered Accountant (Australia and New Zealand) and a Chartered Accountant (South Africa).
Stephen Cheeseman – Independent Director
Mr. Cheeseman is the President of Chinook Power Corp., a private renewable energy company that identified and developed the 142MW Quality Wind Project. He is a current director of the Clean Energy Association of B.C. (CEABC). Mr. Cheeseman is a recipient of the 2016 Clean16 award for his dedication and contribution to sustainability and clean capitalism. In 2017, the CEABC honoured him with a Lifetime Achievement award for his advocacy work in the field of renewable energy.
Rene Carrier – Independent Director
Mr. Carrier has been the President of Euro-American Capital Corporation, a private investment company, since May 1991. He served as Vice-President of Pacific International Securities Inc. where he worked for ten years until 1991 and as Lead Director of International Royalty Corp. (“IRC”) from 2003 to 2010. IRC was a global mineral royalty company engaged in the acquisition and creation of natural resource royalties which was acquired by Royal Gold Inc. in 2010. He also serves as an independent director of various other public companies involved in the mining industry.
Gord Fretwell – Independent Director
Mr. Fretwell is a former partner at a large Vancouver law firm. Mr. Fretwell is currently a partner for a boutique law firm in Vancouver practicing primarily in the areas of corporate and securities law. Mr. Fretwell was also a founding director of IRC from 2003 until its sale for $700 million in 2010.
Jill Leversage – Independent Director
Ms. Leversage is a senior investment banker with over 30 years of executive experience in investment banking and private equity. Ms. Leversage was the former Managing Director, Corporate & Investment Banking for TD Securities Inc., a global investment bank and Former Managing Director at Highland West Capital Ltd., a private equity and merchant bank. She currently serves as a director on various public and private company boards. Ms. Leversage is a Chartered Business Valuator and a Fellow of the Institute of Chartered Accountants of BC.
Bryce Anderson—Financial Analyst
Bryce Anderson has a Bachelor of Engineering in Mechanical Engineering from the University of Victoria. He has 5+ years hands-on technical experience in construction, instrumentation, electrical and surveying. He has international work experience as part of the design team for a large magnetics manufacturer in Germany. He is a CFA Level 2 Candidate. He is a volunteer for CFA Society Vancouver. He is a member of the Canadian Society for Mechanical Engineering.
DISCLAIMER: This document and the information herein are supplied by RE Royalties Ltd. (“RER” or the Company) for use by interested parties to determine the viability of RER’s proposed business opportunity. This document does not constitute an offer to sell securities of RER or any other entity and it is not soliciting an offer to buy any such securities. This document is not, nor is it intended to be, an offering memorandum. While information in this document derived from third parties is obtained from sources which the Company believes to be reliable, such information is not guaranteed as to its accuracy or completeness. No representation, warranty or undertaking, expressed or implied, is or will be made and no responsibility or liability is or will be accepted by the Company or any of its affiliates or associates or their respective directors, officers, employees, partners, agents, shareholders or advisors as to, or in relation to, the accuracy or completeness of the information contained herein. Any party reviewing this document should not construe its content as legal, tax, or investment advice. This document includes projections that are forward-looking and not based on actual operating performance. The forward-looking statements constitute management’s current estimates with respect to the matters covered herein. We expect that these forward-looking statements will change as new information is received and, accordingly, there is no assurance that such information will prove to be accurate, as actual results and future events could differ materially.
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