UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-U
CURRENT REPORT PURSUANT TO REGULATION A
November 10, 2021
(Date of Report (Date of earliest event reported))
ENERGEA PORTFOLIO 4 USA LLC
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
84-4475410
(I.R.S. Employer Identification No.)
62 Clementel Drive, Durham, CT 06422
(Full mailing address of principal executive offices)
860-316-7466
(Issuer's telephone number, including area code)
Class A Investor Shares
(Title of each class of securities issued pursuant to Regulation A)
Waltham is a 541 kW (DC) solar power plant to be located on the roof 360 Second Ave. in Waltham, MA that will be connected to the Eversource electricity distribution grid ("Project"). The Project was qualified for the Massachusetts' Renewable Target ('SMART') Program. Under this program, the Project is entitled to a compensation rate calculated over the electricity generated for a 20-year term.
Energea acquired the Project from Plankton Energy LLC ("Plankton"), the original developer. The Project has hired Plankton to do Engineer, Procure and Construct ("EPC") and to provide the Operations and maintenance ("O&M") services.
The total cost of the project is USD $1,005,356 and it is expected an 8.0% IRR.
Project Owner | Energea Portfolio 4 LLC |
Project Location | Waltham, MA USA |
Technology | Rooftop Solar |
System Size (AC/DC) | 466 kW/ 541 kWp |
Estimated Year 1 Production | 667 MWh |
Coordinates | 42.387984° N 71.26780° W |
Roof Status | Rented |
Project Status | Notice to Proceed |
Useful Equipment Life (Years) | 25 |
SPE | Phytoplankton 360 Waltham Solar LLC |
Offtaker | NSTAR Electric d/b/a Eversource Energy |
EPC Contractor | Plankton Energy LLC |
O&M Contractor | Plankton Energy LLC |
Roof Owner | 360 Waltham Associates, LLC |
Project Hard Costs | $799,431 |
Project Soft Costs | $29,367 |
Developer Fee | $176,558 |
Total Equity | $1,005,356 |
Tax Equity | $ 279.481 |
Sponsor Equity | $725.875 |
Project IRR ($) | 8.0% |
SPE
The Project's Special Purpose Entity (SPE) was fully formed on November 12, 2020, Plankton being the sole member of the company. Energea Portfolio 4 USA LLC ("Energea") and Plankton signed, a Membership Interest Purchase Agreement on September 23, 2021 to purchase and transfer all the limited liability interests of the SPE to Energea.
Additionally, the SPE contracted Plankton through a Development and Construction Management Agreement (DCMA) to provide services for the Project.
Table 1 - SPE General Information
SPE | Phytoplankton 360 Waltham Solar LLC |
Registered Office | 16192 Coastal Highway, Lewes Delaware 19958, County of Sussex |
State File Number | 4124163 |
FEIN | 87-3051658 |
Roof
The 360 Waltham Associates, LLC ("Roof Owner") owns the site for the project. The SPE entered into a Site Lease Agreement with the Roof Owner to secure approximately 95,903 sq foot of the site to the project for a 20-year term on April 30th, 2021.
The roof is warrantied by Firestone - Red Shield for a 20-year period, starting on September 1st, 2017.
Design
The Project will employ 1,252 x 435 Wp solar modules manufactured by Canadian Solar, a Tier 1 solar manufacturer based in China. The plant will also use 7 x 66.6 kW SE66.6KUS inverters manufactured by Solar Edge.
Regarding Energy Production, the Project is estimated to produce 667.37 MWh/year with a Specific Production of 1220 kWh/kWp.year. The AC Capacity Factor and Performance Ratio are, respectively, 16.3% and 83.3%.
On the roof structure, EAH Consulting did a design check on the existing roofing and framing systems for the installation of the solar panels over the roof top. The roof structure was analyzed applying IBC 2015 codes and standards to evaluate the structural integrity under the impact of the solar installation. EAH Consulting concluded that the roof is capable of supporting an additional 6 psf solar dead load. In this analysis all applicable loads required by IBC 2015 with Massachusetts amendments were applied to the partially-ballasted solar system.
Interconnection
The Interconnection for the project is secured through an Interconnection Service Agreement signed on June 8, 2021, between NSTAR Electric d/b/a Eversource Energy ("Utility Company") and the SPE.
System modifications were necessary for the project's interconnection. The construction will be under the Utility Company responsibility, but the total cost of $2,500.00 was paid by the Project.
Offtaker
The Offtaker is the local Distribution Company, namely Eversource MA East through the company NSTAR Electric d/b/a Eversource Energy. Both Fitch and S&P has given an A (Stable) Corporate Credit Rating for the Utility Company.
The project was qualified by the Massachusetts Department of Energy Resources to participate Solar Massachusetts Renewable Target (SMART). According to the Statement of Qualification, dated July 21st, 2021, the mechanical completion of the project must occur before June 21, 2022 to remain valid.
Table 2 - PPA Main Terms
Contract Type | Incentive Program |
Revenue Contract Term | 20 years |
Contracted Rate | Fixed Rate |
Rate | $ 0.1997 /kWh |
EPC
Plankton has been selected as the EPC partner for the Project. The SPE and Plankton signed a turnkey contract for a fixed-price of $799,431.38 on September 23, 2021.
The EPC Contractor will provide a warranty for all services for the first 2 years following completion of the works.
Plankton hired a General, Automobile and Excess Liability insurance. The insurers are Lloyd' London (AA1122000) and Hartford Accident and Indemnity Company (22357). The General Liability covers up to $2,000,000, and the Excess Liability up to $ 5,000,000. Energea and Phytoplankton 360 Waltham Solar LLC are additional Insured on the policy and the certificate holders.
O&M
Plankton has been selected as the O&M partner for the Project. The terms and conditions of the O&M contract are being negotiated and the agreement will be dully signed prior to the project's COD.
The resulting nominal IRR of Waltham is projected to be 8.00%, with an estimated payback of 9 years and 6 months from the NTP date. The income statement, cash flow statement and balance sheet up until 2030 (shown annually) are presented on Exhibit I.
The project financials are modeled with a tax equity partnership flip structure. The portfolio has executed a term sheet with a tax equity investor resulting in a tax equity investment of approximately $261,393, in exchange for 99% of the Investment Tax Credit. The proposed pre-flip preferential return to the tax equity investor is set at 2.50% per year, with 99% of the allocated depreciation. For the partnership flip, the date of the flip is defined as December 2026, 5 years from the anticipated COD date of the project, with a fair-market-value buyout price, set as a bullet payment, calculated at an 8% discount rate.
The contracted PPA with Eversource is a take-or-pay contract where the customer pays the project based on the amount of electricity metered at the project regardless of how much is delivered or used by the offtaker. The main aspects of the PPA are defined below on Table 4.
Table 3 - Revenue Assumptions
Contract Type | PPA |
Revenue Contract Term | 20 years |
Contracted Rate | Fixed Rate |
Rate | $ 0.1997 /kWh |
Rate Readjustment | N/A |
Operating Expenses
The model assumes the Operating Expenses described within the "Project Review" section, with its values priced as on Table 4.
Table 4 - Operating Expenses Assumptions
Operations & Maintenance | $8/kWp | 2% Annual Escalator |
Land of Roof Rental | $43,000/year | No Readjustment |
Insurance (GL & Property) | $1,033/year | No Readjustment |
Banking Fees | $100/month | 2% Annual Escalator |
CAPEX assumptions are set as seen on table 5 below. All items are assumed to be depreciable under State and Federal Level.
Table 5 - Capital Expenditures Assumptions
Acquisition Costs | N/A | N/A |
|
|
|
Hard Costs | $ 799,431 | $ 1.47 /Wp |
Solar Modules | $ 231,645 | $ 0.4257 /Wp |
Solar Inverters (With Optimizers) | $ 69,082 | $ 0.1266 /Wp |
Racking & Trackers | $ 43,695 | $ 0.0801 /Wp |
Electrical Materials | $ 87,139 | $ 0.1597 /Wp |
Civil Materials (Ballast Blocks) | $ 1,873 | $ 0.0034 /Wp |
Site Works | $ 53,57 | $ 0.0982 /Wp |
Electrical Work | $ 196,063 | $ 0.3594 /Wp |
Mechanical Work | $ 108,924 | $ 0.1997 /Wp |
Others | $ 7,440 | $ 0.0136 /Wp |
|
|
|
Soft Costs | $ 29,367 | $ 0.05 /Wp |
Appraisals | $ 11,000 | $ 0.0202 /Wp |
Land Rental | $ 7,167 | $ 0.0131 /Wp |
Preliminary Engineering* | $ 11,200 | $ 0.0205 /Wp |
|
|
|
Developer Fees | $ 176,558 | $0.32/Wp |
|
|
|
Pre-COD OpEx | N/A | N/A |
|
|
|
Total CapEx (All-In) | $ 1,005,356 | $ 1.84 /Wp |
*MIPA Contract
Lastly, the project depreciation is split under two different schedules, one for State level, which follows a Placed in Service (PIS) Half Year convention, and is depreciated over 5 years, as seen on Table 6 below, and the other for Federal level, that is accelerated under MACRS.
Table 6 - Depreciation Schedules
Year | State | Federal |
1 | 20.00% | 100.00% |
2 | 32.00% | 0.00% |
3 | 19.20% | 0.00% |
4 | 11.52% | 0.00% |
5 | 11.52% | 0.00% |
6 | 5.76% | 0.00% |
Relevant Documents
A Legal review was performed in the project's available documentation. The most relevant documents are listed below:
All contracts submitted are duly signed. There was no major red flag in the contracts/documents.
Issues List
Table 7 - Issues List
O&M Contract | The contract is pending. |
Contract Summary
SMART Program
The State of Massachusetts has an incentive program to support the development of solar energy projects, called Solar Massachusetts Renewable Target (SMART) Program and established by the Department of Energy Resources (DOER) in 225 CMR 20.00. The tariff-based incentive is paid directly by the utility company to the system owner, following the approval of the application by the Solar Program Administrator and DOER.
Phytoplankton 360 Waltham Solar LLC received its Statement of Qualification for the SMART Program on July 21st, 2021. According to this Statement of Qualification, the project met the requirements for eligibility as a Solar Tariff Generation Unit and is granted an initial reservation period of 12 months from the issuance date of the Statement of Qualification.
Table 8 - SPE Operating Agreement Summary
Contract | Operating Agreement of Phytoplankton 360 Waltham Solar LLC |
Date | November 12, 2020 |
Place of Incorporation | Delaware |
Owner | Energea Portfolio 4 LLC, a Delaware limited liability company |
Management | Energea Portfolio 4 LLC has all rights and powers that are conferred by law |
Table 9 - Site Lease Agreement Summary
Contract | Site Lease Agreement (and 1st, 2nd and 3rd Amendments) |
Date | April 30, 2021 |
Parties | Phytoplankton 360 Waltham Solar LLC - as Tenant 360 Waltham Associates LLC - Landlord |
Term | 20 years from the COD date |
Object | Landlord will lease to Tenant the 95,903 square foot roof area where the facility will be installed, at 360 2nd Avenue, Waltham, MA |
Basic Rent | $38,000 (thirty-eight thousand dollars) annually, commencing on the COD and thereafter on each anniversary of the COD. 1st Amendment: changed Basic Rent to $43,000 (forty-three thousand dollars) |
Rent Payment | Annually, in advance |
COD | Day on which the facility commences commercial operation and in no event later than February 15, 2022. |
Table 11 - EPC Agreement Summary
Contract | EPC Agreement |
Date | September 23rd, 2021 |
Parties | Plankton Energy LLC - as Contractor Phytoplankton 360 Waltham Solar LLC - as Owner |
Schedule | NTP - September 30, 2021 Racking Installed: October 29, 2021 Modules Installed: November 12, 2021 Inverters Installed: November 26, 2021 Substantial Completion: December 24, 2021 Final Completion: December 31, 2021 |
Object | Performance by Contractor, on a fixed-price turnkey basis, and except as explicitly excluded, design, engineer, permit, procure all Equipment (other than Owner-Furnished Equipment) for, construct, start-up, commission and test the Facility, perform all obligations set forth in the Scope of Work and perform related activities for the successful completion of the Work and the delivery of the Facility and associated documentation in compliance with the Contract Documents. |
Price | $799,431.38 |
Payment | (a) $208,480.34 upon the Effective Date; (b) $264,179.04 upon issuance of Notice to Proceed; (c) $87,139.20 of the Contract Price upon completing installation of 100% of the racking; (d) $87,139.20 of the Contract Price upon completing installation of 100% of the modules; (e) $87,139.20 of the Contract Price upon completing installation of 100% of the inverters; (f) $43,569.60 of the Contract Price upon Substantial Completion of such Facility; and (g) $21,784.80 of the Contract Price upon Final Completion of such Facility. |
Events of Default | With respect to either party: (i) failure to make a payment when due, if such failure is not remedied within fifteen (15) days after the defaulting party receives a written notice, (ii) the filing of any petition in bankruptcy or for reorganization by or against such Party, (iii) the appointment of a trustee or receiver for such Party, (iv) the attachment, execution, or other judicial seizure of all or substantially all of the assets of such Party, (v) such Party becoming insolvent or being otherwise unable to pay its debts as they come due, and (vi) failure to perform or observe in any material respect any obligation under the EPC if such failure is not remedied within thirty (30) days after the defaulting Party receives written notice of such failure from the other Party.
With respect to Contractor: (i) Contractor abandons the Work; (ii) Failure of Mechanical Completion with respect to the Facility to occur within sixty (60) days of the Guaranteed Mechanical Completion Date; (iii) Failure of Substantial Completion with respect to the Facility to occur within sixty (60) days of the Guaranteed Substantial Completion Date; (iv) Contractor fails to maintain insurance pursuant to Article 16, and Contractor has not, within (5) Business Days obtained replacement insurance. |
Remedies of an Event of Default | The non-defaulting party may terminate the EPC by written notice to the defaulting party. |
Warranty Period for work and equipment | 5 years after the Substantial Completion Date |
Termination | In case of event of default or Force Majeure |
Governing law | Massachusetts |
Schedules | Schedule 1 - Description of Premises and Facility Schedule 2 - Description of Facility Schedule 3 - Scope of Work Schedule 4 - Certain Contractor Permits Schedule 5 - Project Schedule Schedule 6 - Contractor Deliverables Schedule 7 - Final Facility Testing and Test Reports Schedule 8 - Warranty Requirements for Major Equipment Exhibit A - Contractor's Security and Safety Procedures Exhibit B-1 - Conditional Partial Release of Liens Exhibit B-2 - Unconditional Partial Release of Liens Exhibit B-3 - Conditional Final Release of Liens Exhibit B-4 - Unconditional Final Release of Liens Exhibit C - Form of Warranty Assignment Agreement Exhibit D - Form of Mechanical Completion Certificate Exhibit E - Form of Substantial Completion Certificate Exhibit F - Form of Final Completion Certificate Exhibit G - Site Control Documents |
Documentation Checklist
Table 12 - Documentation Checklist
SPE | Opening Agreement | X |
FEIN | X | |
Formation Documents | X | |
MIPA | X | |
Roof | Roof Photos | X |
Warranty | X | |
Validation Letter | ||
Roof Lease | X | |
Design and Application | Energy Resource Study | X |
Preliminary Engineering | X | |
Interconnection | Interconnection Application | X |
Interconnection Agreement | X | |
Permission to Energize | ||
Permit | Installation Permit | |
Electrical Permit | ||
Offtaker | Offtaker Credit Analysis | X |
SMART Program | X | |
EPC | Construction Set | X |
Equipment Warranties | X | |
Equipment Purchase Order | X | |
Equipment Datasheet | X | |
EPC Contract | X | |
EPC Insurance | X | |
O&M | O&M Agreement | |
Investment | Project Model | X |
The Investment Committee members have reviewed the Project Memorandum and hereby approve the investment on the Waltham Project.
Name: Mike Silvestrini
Title: Co-Founder
