The 190 megawatt Paintearth wind farm is Potentia and Greengate's third jointly developed wind project in a province undergoing a multibillion-dollar boom in renewable energy development.Stephan Savoia/The Associated Press
Potentia Renewables Inc. and Greengate Power Corp. have closed $250-million in financing for their newest Alberta wind farm joint venture, taking advantage of an unusual debt product that rewards borrowers for meeting climate and social objectives and penalizes them if they fail to meet those goals.
Desjardins Group is providing half of the financing, offering Potentia and Greengate a swap feature designed to reduce interest-rate risks and also give them cash back for meeting environmental, social and governance performance goals. The structure is unique to North America, the Montreal-based financial co-operative said.
Germany’s KfW IPEX-Bank is providing the remainder of the financing.
Potentia and Greengate are developing the 190 megawatt Paintearth wind farm 40 kilometres south of Stettler in central Alberta. The project, which includes 38 turbines, began construction in 2022 and is scheduled to be in service next year. Potentia, a unit of Montreal-based Power Corp., owns 75 per cent of the project and Greengate of Calgary has the remainder. It is their third jointly developed wind project in a province undergoing a multibillion-dollar boom in renewable energy development.
The financing differs from a green bond, which typically offers borrowers a lower interest rate for ensuring the capital is spent on projects that meet specific environmental goals, Desjardins chief executive officer Guy Cormier said in an interview. Instead, it is based on interest-rate swaps – derivative contracts in which fixed-rate payments are exchanged for floating-rate payments.
”Where it’s innovative is, if a company accomplishes certain ESG actions – it could be emissions, it could be involvement in communities, it could be more worker security in manufacturing, or more diversity on the management committee – we will return an amount of cash to the company,” Mr. Cormier said. If the company fails to meet the agreed-to criteria, it will have to contribute to an organization dedicated to meeting U.S. sustainable development goals, he said.
Borrowers will report to Desjardins annually on progress toward the objectives, and payments will be made every five years following accounting reviews to make sure companies are living up to their claims, said Mathieu Talbot, vice-president of the business services group and corporate banking at Desjardins. The aim is to help clients improve their sustainability performance.
For a renewable-energy developer, the financing makes sense as the climate benefits of the projects are obvious, said Ben Greenhouse, Potentia’s CEO. “It seems like, in many ways, things that are best practice already. If we can get extra credit for those, why not?” he said. The partners also have to be good citizens in the community and improve diversity in hiring, he said.
Last year, Microsoft Corp. agreed to purchase power from the Paintearth wind farm under a 15-year contract. Such power purchase agreements have been a key factor driving a rush to wind and solar development in Alberta. The structure allows buyers, from major corporations to municipal governments, to contract for supply over lengthy periods, providing financial backstops. Amazon Corp., for example, agreed to buy most of the electricity generated by the 465 MW Travers project – Canada’s largest solar farm – built by Greengate and Copenhagen Infrastructure Partners near Vulcan in southern Alberta.
By the end of last year, private and public entities had signed supply deals for a total of nearly 2,300 MW, or enough to power more than 740,000 homes. That’s an increase from 290 MW in 2019, according to Business Renewables Centre Canada.
“The lenders in the space and the equity investors are looking for good opportunities to get a return on the capital they’re deploying, but there’s also impetus to try to deploy capital into ESG-type businesses and obviously renewable energy projects meet that because of their ability to produce electricity with no emissions,” said Dan Balaban, CEO of Greengate.