Jon Powers: Thom exciting times here at CleanCapital. Really looking forward to talking through our new investment with John Hancock and the transformational way that it’s going to affect both our company, but also the industry. But before diving in, I want to step back for a second. You know, when you and I co-founded this company in 2015, you had a really great vision of where we were headed, and look back, put yourself in your shoes in 2015 and talk about your vision for the company then and how the company has sort of evolved since then. Thom Byrne: Sure. Thanks, Jon, for finally giving me an invite to Experts Only. Jon Powers: Of course. Thom Byrne: The lengths we have to go to actually get invited to it. It’s awesome to be on, awesome to talk to all your listeners. We’re very proud of the Experts Only podcast at CleanCapital. Thom Byrne: The vision, as you well know, we had a vision of getting institutional capital, well more capital generally, into clean energy and institutional capital into clean energy, and then when we sort of funnel it down and we thought about what sector is lacking capital the most and we really honed in on what we’ve increasingly called the middle market over the last couple of years. The middle market is everything that’s not residential rooftop and not utility, and that comprises a lot of things. It doesn’t necessarily need to be rooftop, commercial and industrial. We have clients, we have small utility projects, community solar. Thom Byrne: It’s a challenging, challenging segment of the market with a lot of complexity, a lot of moving parts, and we thought there wasn’t a lot of institutional capital in that space. So we wanted to focus on how do we solve that? How do we figure out ways to drive capital, the most institutional of capital into this complicated segment of the market? That was like the core vision then, it’s in many ways the core vision now. There’s a lot of different pieces to that puzzle, but that and what we’re announcing now is an extension of that original vision. Jon Powers: If you look at sort of the three phases, phase one, the first year, we actually crowdfunded our first portfolio. Phase two, we partnered with a private-equity firm, generate capital, and were able to bundle some deals, but really the third phase where we really scaled, we did it with both CarVal Investors and BlackRock. We did it in a little bit of a different structure then we’re going to be here in a second, but talk about that, that last structure, what it gave us in terms of opportunities, but also challenges, because I want to talk about what the new structure does both for ourselves and going forward. Thom Byrne: Sure. So we had very much focused on… When we originally did our first few deals, we wanted to find a wide array of capital, and that’s how we ended up crowdfunding and raising significant amount of capital online to fund a number of solar projects. As we morphed and evolved and started to learn what’s really needed in the market, what became obvious is that there’s a lot of investors of many different stripes, like CarVal, like BlackRock, who were eager to participate in this middle market, but found it challenging to originate deals, underwrite deals, finance deals, diligence deals, again, because it’s so onerous and complicated. Thom Byrne: And when we formed, what was really important about those two partnerships back in 2018, CarVal and BlackRock is that it was the most institutional of capital on the one hand that we were pulling into this space, but at the same time we were showing the value that we offer, which is how a platform like ours is able to solve all those challenges for the CarVals and BlackRocks of the world to give them an entryway into the middle market. Thom Byrne: Getting those two partnerships was critical for us because it gave us one, significant capital to invest in the space, two, a lot of credibility which enabled us to build our reputation and refine our business model that then served then as a platform for us to now embark down this capital raise that we did over the last year. Jon Powers: Yeah, that track record is really important in the next phase four of CleanCapital really here, which is the investment we’re about to talk about, but before diving into the investment, I want to talk about a little bit of the market and we decided to launch capital raise in the middle of a global pandemic. Perfect timing on our part, but putting that aside, we launched it in the midst of a time… 2020 really proved the fundamentals of the clean energy industry were strong and only getting stronger. What were some of the trends that excited you about this space and really gave you the heart to really go to the market and start to drive a little bit of a change for our company? Thom Byrne: Well, you just saw… I mean, when we were first doing this back in ’15 or ’16, there wasn’t many investors participating of any Private equity, pension, insurance, there just was, the list was short. Thom Byrne: In clean energy broadly, by the way, but also certainly in the C and I space, and what changed since then is the desire for investors to get into clean energy again broadly, the middle market more narrowly, increased significantly. It’s funny, there were investors who we reached out to, either you or me or anyone in 2016 to just take a meeting. Jon Powers: Right. Thom Byrne: And then they wouldn’t even take a meeting with us, insurance companies, pension funds, and then we were talking to them in a very intimate way in 2020 about this capital raise. In many ways, they know they’re behind the curve. They wished they had picked up the phone or answered the phone back in ’16, and now they’re eager to find ways to participate in this space here only four years later. I think it really reflects an awesome trend for not just our business, but our industry more importantly. Jon Powers: Yeah, I think it’s really exciting to think… We’ll talk about our new investment through John Hancock here in a second, but there was a lot of really exciting folks that came to the table this last year and really helped look under our hood and had some amazing conversations. What did you learn through that experience the last six months? Thom Byrne: What I learned is CleanCapital’s platform, its team, its approach to business, its reputation are second to none honestly. I’m very proud of what we, meaning the two of us and our entire team, have built over the last four years, and it’s only starting. I’m more excited about the next four years as we look forward, but people did kick the tires. Thom Byrne: The most serious of investors, the most serious of financing parties, lawyers, and we passed the test in flying colors. We have a platform and an approach to our business that’s credible, repeatable, and people want to keep doing business with us both from an investment standpoint, but just as importantly, as you look at who we do deals with it’s people we’ve done deals with before and it’s relationships that we’ve built over the last four years. So I think this process of going through the capital raise, which was as you know, intensely painful because it was a massive. It was a restructuring of our business for the long run and going through that though, revealed the quality of business that we’ve created. Jon Powers: And we’ve chosen a really premier partner in John Hancock. You’ve had a chance to talk to some of the most senior folks in the team who are excited about the investment they’re making in CleanCapital. First, why John Hancock? Why did we make that decision? Thom Byrne: So when we… Back in 2016, we did our first deal, which you referenced and that was- Jon Powers: One of our first meetings we ever took. Thom Byrne: Yeah, one of our first meetings that we ever took was with Hancock, and John Hancock was the lender on that deal and they provided a debt, was named Megawatt projects. We anticipated doing tons more debt with them over the years, which never came to bear because the bank markets got that much more competitive over the last three years, but we built a relationship with Hancock over the last four years, since that original partnership, that original lending facility. Got to know their team really, really well, and there were challenges along the way as there are with any lending facility, and we always worked together in a very compatible way, and a very constructive way, and built trust intensely over that period of time. Thom Byrne: So when it was time to hit the market and identify the right institution to partner with, to back us in a meaningful way, certainly Hancock, given the past business and the trust that we’ve built over the years, was top on the list. And I just add to that, when you think of any partner that is ready to tackle this segment of the market, the challenges of this segment of the market, there’s a certain sophistication that we benefit from the through Hancock. They understand this market intimately, they understand the challenges of all the challenges that this segment of the market has, so to think of the quality of the trust that we built coupled with the benefits that we’re going to experience by having such a sophisticated investor backing us, it really just made tons of sense. Jon Powers: Yeah. I want to… What excites me about John Hancock is we do view the world very much the same and you know, what we… Much of the market talks about distributed generation, right? They talk about solar and storage, both behind the meter, to community solar, we call that the middle market. So, what in sort of the DG space, do you see as a consolidation begins to happen across the industry? I think there is not a lack of capital we’re seeing coming to the market today, but what puts us in a unique position to be able to do these deals and acquire these assets? Thom Byrne: When I look at this market, I mean, did we use the term community solar in 2016 at all? Like, I don’t even… Storage was like a glimmer in our eyes, right? So you think about how much the market has changed in that period of time. We were looking, the first deals we were buying were 20-year PPAs- Jon Powers: Right. Thom Byrne: 25-Year PPAs with universities and we don’t see a lot of those anymore. You know, better than anyone. The market is substantially changed. It’s very dynamic. It has been very dynamic over the last four years, in my opinion, it will be that much more dynamic over the next four years, and that requires an ability to get your arms around that complexity, get your arms around those types of deals and be able to create underwriting strategies, underwriting approaches, theses about different markets and different asset classes that are sophisticated and in depth, that’s what we’ve done. Thom Byrne: For every single new market we go into, we are creating new models, we are creating new curves in many cases for the different revenue streams, and that’s only going to increase. That intensity of underwriting is only going to increase and we built our institution here, our company, our platform to do exactly that, to be able to absorb that complexity, sift through it, and spit it out for our shareholders now, our large institutional shareholders in a simplistic way. And I think- Jon Powers: Yeah. Thom Byrne: And I think that’s really the attraction of the platform. Jon Powers: You know when I have a lot of conversations with developers who are just getting to know us, they often ask what makes us different, and when we started this company, you had a vision of using technology to support that underwriting. Jon Powers: Can you talk for a second about how our technology has matured and really it puts us in a very unique position to be able to underwrite the middle market efficiently. Thom Byrne: Yeah. And we’ve created technology that’s tailored not just to our market, but to our business, which is really important. This is a technology that our co-founder Marc Garrett and his team created, it’s effectively a diligence tool, a diligence and underwriting tool to help usher through all of our deals through our technology platform so it makes it easier for our investment team to evaluate the deal and transact a deal ultimately, And that has allowed us to do a lot of volume. Thom Byrne: By being able to bring tons of assets in at once, many of these deals that we look at are multi-asset portfolios, and we’re able to filter them in through our platform, enabling us to go through them more efficiently, more transparently, with more of a fine tooth comb that simply others just aren’t able to do. They’re not able to absorb the amount of volume that we can at one time. So that’s certainly an edge that we have in the market that’s been very beneficial to CleanCapital over the last- Jon Powers: Yeah, it’s amazing, when I demo the model or demo the platform in conversations, there’s often a light bulb moment for the partners who see the value, and for folks, this is a little commercial for CleanCapital, but go to CleanCapital.com. You can actually watch a video of the platform in action that’s there today so you can sort of understand why it is our secret sauce and helping us transact. Jon Powers: So I want to get a bit wonky here for the finance side, and I want to talk about structure and why the new investment from John Hancock really provides us with flexible sort of stable capital, and allows us the ability to price competitively. We’re bringing… We’ve announced over $300 million in equity through this partnership, with the ability to do more. Why does the structure that we’re doing, why does the investment from John Hancock support that idea of flexible capital that allows us to be competitive in the market? Thom Byrne: So we try to strike the balance, so we had these two amazing partnerships with two of the highest quality investors in this space over the last number of years and we’re really proud of that, but that model was effectively a separately managed account model or a partnership model, and we weren’t combined under one entity. Thom Byrne: And there are certain alignment issues that go along with that, there’s also certain views of the long-term goals that perhaps there’s not complete alignment on. What we wanted to do here was solve some of those challenges. We wanted to partner with an investor who was long-term focused, that would come onto our balance sheet and be aligned with us for the long-term so the growth of the company benefits everyone, there’s no misalignment there, and then thirdly had the flexibility and sophistication to play in all segments of the market that we want to play in. The ones we know today and the ones that we’re probably going to learn about over the next 12 to 24 months as we deploy the capital. Thom Byrne: And in John Hancock, we achieved that latter point, which is having the ability to invest throughout this segment of the market from community solar deals, to storage deals, to plain vanilla, the thing we love, solar PPA deals, or virtual net metering type deals. We have the ability with our partner to invest in all of that, and we now have, it’s all on our balance sheet, it’s all long-term focused which is exactly what a developer I would think would want is someone who is thinking about the long-term and not the two-year trade of a portfolio. We now have that, and for our development partners who are listening, we will be very cost competitive, but we’re not going to be the lowest cost of capital. We don’t want to be the lowest cost of capital in town. We don’t want to be the last one holding the bag, so to speak. Thom Byrne: We want to be able to be a partner to our development partners and being able to offer them the full suite of investment capabilities that they need to build these projects ad in this new investment, this new balance sheet investment, we certainly are accomplishing that. Jon Powers: Yeah, let’s talk about that a little more for a second. I mean, early in the stages of CleanCapital, we sort of known as a private Yoco, right? We were buying up operating assets, but now we’re able to buy assets at NTP through COD, we’re buying storage assets, bringing that longterm view both the acquisition side but also really the asset management side. If you’re a developer and you’re now looking at CleanCapital, what is a lens you should be looking at in terms of the partnership? Thom Byrne: If you’re a developer and you are trying to put multiple megawatts in the ground over the next two, three years, we are a great partner for you. We have the ability to provide capital throughout, from NTP to COD and even thereafter for operating assets. Thom Byrne: We have even small slugs of development capital that we’ll be able to put to work, we have debt facilities and tax equity facilities that we’re closing imminently to enable us to fund all of the new build pipelines of all of our development partners, but the thing that I come back to that I think is most important is, do you have a good partner from a relationship perspective? Jon Powers: Right. Thom Byrne: We can solve all the capital needs of our development partners now, if they’re building community solar, they’re building storage, they’re building regular rooftop solar, we can do all that. So check what we’re investment capabilities are, but what I think is more important is do you trust the counterparty? Do you trust your investment partner? And there’s no better validation for that trust then repeat customers, repeat business. Thom Byrne: We have numerous, numerous partners we’ve done deals with before, and they keep coming back to us even if we’re not the lowest cost of capital, even if we’re not providing the highest purchase pricing. Why do they come back to us? Because they trust us. They trust us. They know our money is good, they know our word is good, and they know that we’ll be transparent throughout the entire process, all with the common goal of getting projects built. No one wins if investment dollars were not put out and the projects don’t get built. Jon Powers: Yeah. Let’s talk about project. So I think outside of just the capital, that’s really the big story coming out of this announcement within the investment from John Hancock, we’re also acquiring 46 megawatts and almost a hundred projects in 11 different States, we’re growing to now the company manages 200 megawatts, almost 155 projects in 18 States. What are the type of projects that we really see as our sweet spot, as developers are thinking through where we can partner? Thom Byrne: Sure, the areas that we are probably best suited is again, if you look at what do we define the middle market as, we define it as small, utility connected projects, community solar projects, which are obviously utility connected, grid connected, again, the rooftop projects on the community colleges, the universities, things like that, but that are not so big that they’re going to be attracting sort of the larger players, public companies in the market. Thom Byrne: Like if you’re thinking about solar, anywhere from call it 500K, that will be one megawatt up to 25 megawatts or so, that’s sort of a market, those are deals that we do well, and we actually built our entire platform and built technology around doing those types of deals. Again, the community solar, but we want to be an active participant in the evolving energy market. Thom Byrne: A lot is going to change here in the next five years with the White House switching over the last couple of months, there’s going to be, we expect a very meaningful backing of clean energy and a wide array of clean energy tools coming out of the federal government, in addition to whatever the States are doing. And therefore in this rapidly changing and dynamic segment of the market or rapidly changing clean energy market, we want to be an investor for all different types of asset classes. Thom Byrne: So it’s going to be the smaller scale, solar storage and community solar, for sure. We’ll do a lot of it and we love it, we’ve done it before, but we’re also preparing ourselves to be embarking on new segments of the market that arise, new business models that are undoubtedly going to arrive here in the next couple of years. Jon Powers: Yeah, and I think this new structure allows us the ability to be nimble, to be able to execute on a vision that we’ve developed over years, and I believe fully that the market is about to get a steroid injection from things like an infrastructure bill and we’re going to be really well positioned to catch that all going forward. Thom Byrne: Yeah, and that’s… We’re going to see what comes out of Congress under the White House over the next couple of months, but early indications are that there’s going to be a pretty robust package, infrastructure package, and clean energy is going to be at the forefront of it, which is in many ways overdue, certainly desperately needed as we try to decarbonize and CleanCapital is positioned to be a player in that next phase of the clean energy market’s growth. Thom Byrne: I’m more excited for not just our company, but for our industry than ever before, by a long shot. I think we’re seeing traditional fossil stalwarts now coming to the clean energy table for the first time ever. Jon Powers: Absolutely. Thom Byrne: You were talking about API’s endorsement of a carbon tax, and you’re seeing a lot of the big titans of the oil industry now trying to figure a way to be active in the market. Boy, things have changed quite a bit in a decade. Jon Powers: Yeah. So step forward five years from now, how does this investment really launch CleanCapital forward and what do we look like as a company sort of leading into the second half of the clean energy decade? Thom Byrne: So I want CleanCapital to be an unequivocal leader in the clean energy space. I want us to be investing dollars and on behalf of our shareholders in a sound imprudent way and advancing the transition to a clean energy economy. That’s what we were set up to do in the early stages, that we’re even more set up to do now is to be a leader in this space. You need companies that are the conduits for the investment community, and that’s what we are. And there’s different setups, there’s different great PE shops with great companies, we have friends at all of them all up and down the clean energy sector who are conduits for getting the capital out, getting the assets built, so we no longer have fossil fuel assets powering this country and this globe, but clean energy assets instead. Jon Powers: So when we get to the end of 2021 and they’re looking at sort of marquee deals done this year, where is this deal going to rank in those marquee deals because of just the complexity of it? Thom Byrne: This was a complex deal. This deal brought together a restructuring into a balance sheet operation coupled with multiple acquisitions that are occurring at closing and management of multiple financing, tax equity, and debt facilities to bring this all to close. Thom Byrne: I don’t know how many stakeholders were at the table, but I feel like it’s at least 50 different stakeholders that we had to manage over the last number of months to bring this thing to a close. I’ve never worked on a deal as complicated and with as many moving parts as this, so I’m really proud of what we’ve accomplished. And I’ve worked on a lot of deals in the day as a lawyer and as an investor, and this is probably the most complicated one, but it was an important one. It was important for our business and I think it’s an important transition for the company to be the leader that we want to be in this business. Jon Powers: Just for a second, part of the team that helped us through this process was Javelin Capital, we decided to sort of partner with them. Can you just talk for a second about their role and Jason and his team? Thom Byrne: Jason Segal leads Javelin Capital, they’re the investment advisors on this transaction. They led the entire marketing outreach to the investor community, managed all of those conversations, managed the structuring, the negotiations. Their entire team has worked tirelessly to see this transaction pulled off and they’ve done a great job at it. Jon Powers: And finally, what makes you most proud, now that we’ve let the champagne dry a little bit from celebrating here, of the work that’s been done over the last few months on this? Thom Byrne: The thing I’m most proud of is the team and in this… The last year has been stressful for everybody on personal and business fronts, being cooped up in their homes with their families, trying to educate their kids, and we decided to launch this ambitious capital raise and restructure in the midst of that. Thom Byrne: We did it despite the challenge or in spite of the challenge. We did it because we thought it was the right thing to do for our shareholders, for our place in the market, and through it all our team’s held up. There’s been ups and downs over the last year and our team has been steady. They worked tirelessly on many instances to push this deal forward and pull it off, and that, if you think about what makes up a company, it’s the people. It’s the people and it’s the vision and the strategy going forward. How much more is there than that, and then you, hopefully, if you’ve got the strategy right and the people in place, then you can attract shareholder capital to grow. Thom Byrne: And we had the team, we had the strategy, and there can be no better validation than one of the leading infrastructure investors, and one of the most sophisticated, clean energy infrastructure investors said, we believe in that too. We believe in that too, we believe in the CleanCapital team, we believe in what they’re trying to achieve over the next number of years and that they’re getting behind us. But that ultimately comes back down to who’s the team and what is the quality of the people that comprise the company? Jon Powers: Yeah. Hey man, thanks for leading us through this. It’s been a roller coaster. I think everyone’s excited to start to execute moving forward so… Thom Byrne: Yeah, I’ve never been more excited. Honestly, I was speaking to our one of our colleagues last week and I said, I’m so excited about closing because I’ve never been more excited about CleanCapital, about our industry, and I’m just gearing up for the year ahead. Jon Powers: So if you want to learn more about the investment from John Hancock you can go to CleanCapital.com. We’ve got a tremendous amount of information you can learn about the structure, but also for developers, learn about what we’re looking to acquire. Jon Powers: Always reach out to me through the website or Jpowers@CleanCapital.com. We look forward to finding acquisitions because we are hungry to go out and continue to grow and scale as Thom sort of laid out what the future looks like. We want to be partners with you in creating that future. Jon Powers: Thom, thanks so much for taking the time today. Thom Byrne: Thanks Jon. Great to finally be here. Jon Powers: Yeah, absolutely. Only took a hundred episodes. Jon Powers: And I want to thank I don’t think Carly Battin and Colleen Young, our producers, and as always you can get more episodes at cleancapital.com. And I look forward to continuing the conversation, thanks.