Akereos Capital’s €680m debt financing for BNZ’s 1.7GW solar pipeline provides a zero-to-100 capex financing solution without the need for a penny of equity, according to CEO and founder Kostas Nikolopoulos. The energy transition-focused merchant bank’s goal is to offer full-service, A-to-Z support across the renewable energy sector in Europe. By Jordan Bintcliffe
Akereos Capital, founded in 2019, has grown to around 35 people, mostly in the London office although there’s a second office in Hamburg. It also plans to enter the US in the coming years. The business did around €4bn of transactions last year and has done about €5.5bn this year and there’s expectation of another deal closing before year-end, Nikolopoulos said.
The business looks to meet sponsor needs from equity to debt, special situations to monetising power and more. It operates across four main pillars including M&A, project finance and debt advisory, intermediate capital solutions and power markets. M&A and the advisory business are fairly self-explanatory, while the intermediate capital solutions pillar does structured credit, equity, specialised lending and structuring. The fourth pillar is the markets business which advises on power purchase agreements and runs auctions for monetising power for sponsors, utilities and IPPs.
“If you put it all together we're trying to offer A to Z support in the energy transition, equity and debt, and monetising of the commodity, the electrons,” Nikolopoulos says.
Akereos Capital’s recent work includes a portfolio financing for BNZ structured as a holdco, soft mini-perm and warehouse facility backing buildout of a 1.7GW solar pipeline. The structure has provision for the possible addition of batteries to the portfolio later.
It has a senior piece done by the debt advisory business and then a holdco piece done by the intermediate capitals solutions team. Together these two offer a “zero-to-100 capex financing solution”, Nikolopoulos says, referring to the structure providing 100% of the business capital needs. “There was a senior warehouse and a holistic holdco.”
“It's the first time you have a senior warehouse in three countries through one facility coexisting with a holdco offering full equity replacement, there's no need to put an additional penny of equity into this, so zero-to-100 capex is financed by our total IPP financing. It's one facility in three countries and it accommodates merchant as well.
Akereos Capital particularly excels at complicated deals, Nikolopoulos said. In the case of BNZ: “When we pitched this we almost lost the pitch because all the competing banks were saying this is impossible. Really large institutions, they were saying you can't do a zero-to-100, you can't have a warehouse in three countries, you can't accommodate merchant. And we did all three of these together.”
Akereos Capital has multiple of its business pillars working across the parts of a given deal. In the case of BNZ that helped make the deal possible as a holistic zero-to-100 rather than structuring it as a PF in a separate mezzanine or a separate holdco.
“A lot of the merchant financings that we’re able to do are because we have a markets team that understands power markets, understands PPAs, hedging, and power auctions,” Nikolopoulos said.
BNZ’s financing comprises a €420m green loan, the warehousing facility, split across a senior credit facility and auxiliary tranches from a syndicate of European commercial banks plus a €260m holdco debt facility backed by private equity investors.
Debt pricing is less than 200bp over Euribor with most of the debt swapped. The tenor is around seven years with one of the tranches longer than the other.
The commercial banks include ABN AMRO, Intesa Sanpaolo, NatWest, SMBC and Bankinter, and the EIB has contributed a tranche under the InvestEU programme. The EIB took about half of the €420m with the remaining banks’ ticket sizes approximately equal.
Funds managed by Ares Management, including its Infrastructure Debt Fund and US Direct Lending Fund, provided the entirety of the holdco debt facility.
The strength of the sponsor, Glennmont Nuveen, helped get lenders comfortable with the zero-equity structure as well as the large amount of equity already in the business, Nikolopoulos said, and that the portfolio is located across three euro countries.
“And then it is really about structuring and showing complementarity, diversification and the results of over collateralisation across the full backlog,” he said. “This is a full corporate financing; it's not an asset financing; it's not a traditional PF.”
“The sponsor is projecting a 1.7GW pipeline and the lenders know that you will keep throwing assets into that pipeline as these assets go to ready-to-build and the holdco, the junior makes sure that these assets go to notice to proceed and the holdco picks up whatever the senior doesn't pick up,” Nikolopoulos said. “So if the senior, let's say does zero to 70% of the costs, the holdco does 70% to 100%. And like that you completely replace the need for any equity.”
The senior lenders have recourse over assets in the warehouse or whatever has gone through notice to proceed and is in construction. The holdco, junior debt, has security over the full pipeline, and that overcollateralisation allows the junior to provide, on an asset level, 100% loan-to-cost.
Some of the holdco money goes to development and some to construction capital – a split of about 80/20.
The junior debt has a broader security over the assets because it comes in earlier when the assets are riskier.
“The junior is fully replacing the needs for construction equity and then the senior is doing what PF would do, but does it across three countries, across the pipeline and the full perimeter of assets rather than specific assets, and does it in a merchant fashion,” he said.
PPAs agreed so far on the portfolio are with corporate clients. The senior has a two-year availability period where approximately only a fifth of the portfolio requires PPAs, with that requirement rising to a majority of the portfolio needing to be contracted after two and a half years. This gives the sponsor flexibility when choosing an offtake partner and terms.
“What happened a lot around Covid and then with power prices spiking on the back of the war, nobody wanted to contract because the merchant revenues were just so high,” Nikolopoulos said. “And then as power prices started to collapse that started causing problems to a lot of projects. So the lenders are now at the other side of the cycle and prefer to be careful with their structuring so we're seeing less appetite for merchant.”
“But this is where structuring comes into play. If you have the right structured solutions, the right collateral and the right interaction between different parts of the capital structure, you still can get away with a lot of merchant exposure like the BNZ deal. But there is less appetite for merchant financing than a couple of years ago, they probably just need a little bit more equity.”
Power demand and the makeup of offtakers is also changing with more disintermediation of utilities and intermediaries, according to Nikolopoulos. There is more demand from data centres, AI-driven data centres, and mid to large corporations trying to build capabilities to contract power that reduces the news for intermediaries or traders. Companies are also increasingly trying to combine wind, solar and batteries to come up with a more baseload profile.
Part of the role intermediaries have traditionally played in the market has been shaping power so that it is 24/7 but increasingly corporates have purchasing teams, power buyers, and “understand how to even trade power in the case of the large tech giants, and that is moving a lot of the market away from the need for a utility-style PPA,” he said.
The financing covers the entire portfolio of assets including ones that are ready to enter construction now as well as those that will be ready to build over the coming six to 12 months.
About 40% of the warehouse facility debt will be drawn immediately for construction, with the volume rising to around three-quarters over the next six months. There is little development risk within that portion of the debt package.
As projects reach ready-to-build stage the sponsor will use the facility to finance construction rather than having to go back to lenders.
NatWest said the funding will enable construction of 17 solar plants totalling 710MW of capacity. The facility includes an accordion, it said. BNZ will consider opportunities in adjacent countries to those targeted under this finance package, and in the future may consider hybridising the solar assets with wind or battery storage technologies.
BNZ received debt advice from Akereos Capital, which acted as sole arranger and structurer, and legal advice from Linklaters. The senior lenders were supported by Clifford Chance and Ares was advised by Ashurst. Palmer is the acting agent for the senior lender club and alterDomus the agent for Ares Management.
Other legal and tax advice was provided by Garrigues, Gianni & Origoni, EY and Mazars with technical consulting by Enertis, EOS Consulting and Everoze. AON provided insurance advice and ESG advisory was done by DNV and Tauw Group.
Akereos Capital has done 15 holdco financings in the last two and a half years. The structure is useful as it allows sponsors to avoid going back to markets on an asset-by-asset basis and can instead finance an entire pipeline without paying lawyers, technical and other advisers multiple times, Nikolopoulos said. Tapping the market multiple times a year becomes resource intensive, as well as taking the sponsor’s senior management’s attention away from the day-to-day running of the business.
Holdco financings give sponsors “much better terms and much more flexible financing because you have much bigger exposure and hence you're much more protected as a lender,” Nikolopoulos said. “You have much more recourse than an individual asset. You have a lot of value in these things that you don't have on an asset level.”
Improvements to the terms can include more competitive pricing, longer tenors, and coverage ratios tightening.
Another benefit is that a holdco’s perimeter covering multiple assets can provide further comfort to lenders, Nikolopoulos said. If one or two projects default, the rest of the portfolio is still cash flowing so there is greater protection there. This can mean if there’s an individual asset that on its own is less appealing or perhaps wouldn’t be financed on a standalone basis, its risk profile is offset by being part of a wider portfolio.
Nikolopoulos expects to close a few more deals in the run-up to the end of 2024, including a “very large” biogas acquisition. It’s mostly an equity deal but Akereos Capital will work with them on a financing package afterwards, with a mix of bank and institutional debt.
Another project financing construction facility to bond deal is in the works, for an approximately 500MW solar portfolio in Europe. The plan is to structure a back to back, where the two are done simultaneously with the borrower having no execution risk on the bond, to take it out with a 30-year investment-grade bond, Nikolopoulos said. The construction facility is done by a global bank and the bonds are taken by institutional investors – an investment-grade rated private placement.
Akereos Capital is looking into hydrogen, carbon capture and storage, and other new technologies. The business is starting to diversify into transport including electric vehicle charging, green buses, aviation and eventually green shipping.
Renewables, power and energy is 95% of what the business does, while transport is a steadily growing sector that will become gradually more significant. A final strand of infrastructure and decarbonising core infrastructure is an even longer-term play, according to Nikolopoulos.
“Energy and power is about one third of global emissions,” he said. “Even if in the next thirty years we fully replaced our power systems – which is a very difficult task and probably isn't going to happen – but even if we did, you’d still have two third of global emissions unaddressed, so you're not getting anywhere unless you manage to address the other big pillars.”
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