Hexagon CEO discusses recent royalties investment from Great Bay; PJM pipeline
by Jon Berke
Hexagon Energy’s recent USD 45m royalties investment from Great Bay Renewables will provide the developer with options as some of its PJM-heavy portfolio starts to finalize in the coming years.
Hexagon has historically taken projects to notice-to-proceed (NTP), before selling, but the company’s CEO Matt Hantzmon said the additional capital will allow it to take the project further through the lifecycle to COD, before pursuing a sales process.
Its most advanced project, the 138 MW Woodridge Solar project in Albermarle County, Virginia, might convince Hexagon to take that investment thesis even further.
With PJM now under a three-year queue reform schedule and unable to process new projects until 2026, Woodbridge expects to hit NTP in 1Q24 and Hexagon is expected to announce an offtake before the end of this year.
This kind of advanced project would likely fetch a premium on the market, particularly amongst IPPs, but Hantzmon indicated that all options are on the table at this point, including retaining the project, particularly with strong contracted revenue options in-state.
“Dominion Energy has traditionally done business in-state through build-transfer agreements, but there are IPPs with strong C&I offtake who are looking for PJM projects to satisfy their renewable needs,” said Hantzmon.
Hexagon’s large PJM exposure was really a defining factor when looking for a new capital markets transaction.
The royalty investment into Hexagon will be funded in tranches as Hexagon achieves certain project advancement milestones. As individual projects are developed Great Bay will receive a gross revenue royalty agreement on each project until a target minimum return is achieved.
“We had been working on this transaction for over 12 months, and talked to a lot of banks, but the Great Bay investment provided the best structure,” said Hantzmon, alluding that this type of capital is “attractive to early-to-mid-stage developers” such as Hexagon.
The company’s pipeline is mostly comprised of just over 3,000 MW in PJM, 1,000 MW in MISO and 940 MW in ERCOT. The balance of the 5,330 MW pipeline is in NYISO, DG and a non RTO-market. In PJM, 650 MW are in transitional cluster 1, with 1,500 MW in transitional cluster 2 and 811 MW in post-queue reform.
The capital infusion from Great Bay also might incentivize Hexagon to expand into the Rocky Mountain West and eventually the Western markets, according to Hantzmon. Hexagon is also eyeing additional possible funding sources for these projects but said the company is still a year away before making that kind of decision.