Spruce Power Holding Corporation has entered into a multi-year agreement to sell its Solar Renewable Energy Credits (SREC) in the state of New Jersey. The transaction is valued at approximately $10 mn in fully hedged revenues until 2029, according to a company statement. The buyer is an energy sector counterparty with an investment grade rating and ranked among the Fortune Global 50. Business Wire reported on August 8.
Hedged revenues and visibility until 2029
Spruce stated that the forward contract fixes the sale prices of the SREC and secures a recurring cash flow. The company described the registration and sale of SREC as a low-cost, low-risk mechanism to generate margins without tying up significant capital. SREC certify the production of electricity from solar sources and can be used by suppliers to meet the state’s compliance requirements. The exact scope of the credit volumes involved has not been disclosed.
Statements from management
“We view scaling SREC registration as a low cost, low risk opportunity to generate capital-light high margin, cash flow for the Company,” said Chris Hayes, Chief Executive Officer of Spruce. He added: “This transaction is another example of Spruce’s expertise in maximizing value from our assets while hedging against future price movements.” The company stated that the forward contract strengthens the predictability of its cash flow generation. The buying partner has not been named.
Expansion into other regional markets
Spruce stated that the counterparty uses the SREC as a compliance instrument to hedge its electricity supply positions in New Jersey. Chris Hayes said: “We believe the counterparty is utilizing Spruce’s SRECs as a compliance instrument to hedge their electricity supply positions in the state of New Jersey.” The company reported it is exploring similar opportunities in certain northeastern U.S. states as well as in California. He added: “We anticipate similar opportunities may be available to Spruce in certain northeastern states as well as California, which we are actively pursuing.”
