The Tribune

• RF leads conglomerate’s pan-Caribbean bid

• Result springboard for own regional ‘ambition’

• Local Esso owner in 23-state renewables goal

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian investment bank yesterday said it has entered “new territory” by spearheading a pan-Caribbean $42m capital raise to fund the renewable ambitions of a conglomerate that owns the local Esso operation.

Michael Anderson, RF Bank & Trust’s president, voiced hope to Tribune Business that its success in fully sourcing the sum targeted by Sol Petroleum’s renewable division will provide a springboard for its “ambition” to become a growing player in the region’s capital markets.

The private placement, which Mr Anderson said attracted Bahamian investor participation, was designed to raise 50 percent of the equity capital for the Sol Ecolution Fund. The remaining $42m balance is being injected by Sol Ecolution, the renewable energy arm of the Barbados-based Sol Group, with the proceeds set to help finance a series of investments in solar and other sustainable energy plants throughout the region.

The RF Bank & Trust chief, disclosing that total Caribbean-wide investment in such renewable projects will likely be $400m when debt financing is included, told this newspaper that Sol Ecolution has already been “speaking to potential partners” in The Bahamas on developing solar plants here although no deals have been finalised.

And he suggested that The Bahamas “could easily become a bigger piece of their plans” if this nation was to further enhance its laws and regulatory regime for solar and other renewable projects so that they become even more attractive for investors and private capital.

With the Sol Ecolution Fund’s offering having closed on Friday, Mr Anderson argued there “is no reason why Bahamian institutions cannot build a regional presence” in the Caribbean’s capital markets. He acknowledged, though, that this nation’s exchange control regime and perception that The Bahamas is a “closed economy” for accessing and providing US dollar financing had always counted against such expansion in the past.

“We met the full amount,” Mr Anderson confirmed, adding that the private placement proceeds will finance solar and renewable projects across the 23 Caribbean, central and Latin American territories where Sol operates. The group has already “generated a 152 Mega Watt (MW) pipeline of renewable energy projects in the solar segment in two years since [Ecolution’s] launch, of which Ecolution has won or has exclusivity on 102 MW”.

“They have indicated an interest in doing plants in The Bahamas, and have been speaking to potential partners here, but I don’t know if they’ve finalised any agreements as yet,” the RF Bank & Trust chief said. “They’re busy exploring what opportunities in the Caribbean look like, and will be exploring more opportunities as they go along.

“We’d be one of the islands potentially where they’d be happy to put some plants up. The total expected investment today is close to $400m that they intend to put into the market over the next four years. It’s a big project for the Caribbean, all in renewable, all in solar, and I don’t think we’ve seen anything in the Caribbean of that kind of scale....

“I’d like to think there’s an opportunity for development of [solar] plants here, and for The Bahamas to benefit more from solar. There’s a huge opportunity for solar here, and it’s just a matter of trying to get it organised. At the moment, I don’t think The Bahamas is a big component of what they’ve got in their plans, but it easily could be a bigger piece.”

Sol acquired The Bahamas-based Esso wholesale business almost a decade ago in 2014. In recent months, it has been installing solar panels on the roof-tops of several Esso-branded gas stations on New Providence and, region-wide, Sol is targeting some 300 of its property assets - service stations, fuel terminals and office buildings - for solarisation. The group has already secured deals to supply 22 MW of solar energy in Barbados, and 7 MW of roof-top solar in Bermuda.

RF Bank & Trust acted as financial advisers and placement agent for the Sol Ecolution Fund offering, and will continue to play a role moving forward as its fund administrator and custodian. It will also appoint two members of its Board of Directors. “For us, it’s an exciting project,” Mr Anderson said. “We’ve not really raised capital regionally; we’ve been more specific to The Bahamas and Barbados.

“It’s interesting to see investors coming into a project from a number of different islands in the Caribbean. We’ve been trying to see ourselves more as a regional investment bank that can participate right across the Caribbean. We set up a Cayman office, and to be able to have the first transaction in Cayman with an entity like Sol is a nice position for us. You don’t often start with one of the huge players in the business.

“We see it as an exciting opportunity to get our name out more in the Cayman market where, hopefully, we will get recognition for what we do.” Noting that RF Bank & Trust had previously placed a so-called “green bond” for one of Barbados’ local renewable energy providers, Mr Anderson added: “We see RF positioning around the region in the green bond space, and looking to build or expand in the area of solar and renewables.

“As other entities want to come and build their plants and renewables around the Caribbean, we can help them do that. We’d like this to position ourselves to a broader audience as people become more familiar with what we can do. We’ve been in the Cayman market for five years, and been in Barbados for 15 years.

“It takes time to establish a brand outside the market, but the opportunity is now out there. There’s no reason why a Bahamian institution cannot build a presence regionally. It’s just spending the time to do it.” Mr Anderson, though, acknowledged that this nation’s exchange control regime, designed to protect the one:one currency peg with the US dollar, has hindered or deterred local institutions and firms with similar ambitions in the past.

“The biggest impediment has been access to US dollars,” he explained of the obstacles for local financial institutions. “If you can find a source of US dollars around the region then you can actually start to help companies raise capital around the region. We need sources of US dollars, and the perception of The Bahamas has always been that we’re a closed currency, a Bahamian dollar market.

“That’s why it’s been hard for Bahamians to find sources of US dollars. That’s always been one of the limitations to the banks thinking of moving outside. Having set up a base in Cayman positions us better to access the US dollar market and raise capital, and we see that as an opportunity for companies to raise capital and increase our offering outside The Bahamas.”

Asked whether the work for Sol has established RF Bank & Trust as an emerging player in the Caribbean capital markets, Mr Anderson said: “I’d like to think it’s a start. It’s definitely been an ambition of ours to be more regional. Being able to find a transaction to help establish ourselves and multiple projects in the Caribbean are nice opportunities for RF. It’s really an introduction of RF to a market we really haven’t been in. This is definitely new territory for us.”

Mr Anderson said that, while the $42m was nowhere near the largest capital raise RF Bank & Trust has undertaken for corporate clients, having successfully solicited $140m-$150m in a single issuance previously in The Bahamas, it represents its largest-such transaction outside this nation. Some Bahamian investors in the Sol offering are now awaiting the Central Bank’s approval for currency conversion.

The RF chief, meanwhile, said the Bahamian investment bank was keen to expand its involvement in financing renewable energy projects as environmental, social and governance (ESG) factors grow in importance as investment considerations.

The move to ‘net zero’, and countries’ commitments to countering the impact of climate change through reduced fossil fuel use and lower greenhouse gas emissions, are making renewable projects such as those targeted by Sol increasingly more attractive to investors - especially as many of the components reduce in cost.

“Ecolution believes that the total addressable market in the Caribbean includes, but is not limited to, 7.3 GW (gigawatts) of generation capacity within the 23 markets in which Sol currently operates,” the group said in its private placement offering document. “This includes the residential, commercial, industrial and utility-scale segments across Sol’s current footprint.

“Solar, battery storage and wind technology are likely to be the primary renewable energy solutions used to facilitate the energy transition in the Caribbean. Secondary technologies under exploration in the region include geothermal, hydrogen and biofuels.

“Leveraging the relationships, history and experience of Sol, Ecolution is uniquely positioned to capture and quickly grow market share within this segment. There is also significant potential for growth into new and addressable markets as Sol’s geographic footprint expands.”

Sol is forecasting a “minimum pipeline project” internal rate of return (IRR) in excess of 10 percent, with operating income (EBITDA) projected to hit a “run rate level” of $32.4m by 2027. Key to those targets will be identifying opportunities with sufficiently attractive capital returns, and executing on them, plus the power purchase agreements (PPAs) that will have to be signed with legacy electrical utilities - many of which are state-owned.