Arevon Energy has closed $350 million to build and run Condor, a four-hour battery in Grand Terrace, California. Banks lent $164 million. The other $186 million came from two separate sources: a buyer of tax credits and a provider of preferred equity. The investor usually found at the centre of a US clean energy financing is missing.
Key takeaways
- Arevon Energy announced on 13 February 2024 a $350 million financing package for the 200 MW, 800 MWh Condor Energy Storage project in Grand Terrace, California.
- The Condor package comprises an investment tax credit (ITC) transfer to Stifel Financial Corp, a preferred equity investment from Blackstone Credit & Insurance, together recorded at $186 million, and a $164 million debt facility from a consortium of banks.
- CoBank, Helaba and Sumitomo Mitsui Banking Corporation were coordinating lead arrangers on Condor's $164 million debt facility, with Bank of New York Mellon as collateral and administrative agent.
- The Condor battery is contracted under a 15-year agreement with Southern California Edison and was anticipated to begin operations in the first half of 2024.
- Condor's $350 million package equals about $1.75 million per MW, or about $0.44 million per MWh of storage, of which debt accounts for about $0.82 million per MW.
What replaced the tax equity investor?
A pairing of two simpler instruments. Traditionally, a US renewable project monetised its federal tax credits through tax equity. A tax equity investor, usually a large bank, buys into the project to absorb its tax benefits and takes a share of the cash flows in return. The structures work, but they are complex and the pool of investors is small.
The Inflation Reduction Act added another option: selling the tax credits outright to a third party for cash. That is a tax credit transfer. Condor uses one, selling its investment tax credit to Stifel Financial Corp.
A transfer on its own does not have to line up with when construction money is needed, and Blackstone's preferred equity sits alongside it in the stack. Preferred equity ranks ahead of ordinary equity for distributions and behind debt. The record states that Blackstone's investment simplifies the monetisation of the tax credits and removes the need for traditional tax equity financing. Leap records the transfer and the preferred equity together as $186 million and does not split them.
How much of Condor is funded by debt?
Less than half. The $164 million bank facility is about 47 percent of the $350 million package. That works out at about $0.82 million of debt per MW of battery capacity.
Battery duration changes the picture. Condor stores 800 MWh behind 200 MW of power, so it can discharge at full output for four hours. Measured against the energy it can store rather than its power rating, the whole package comes to about $0.44 million per MWh and the debt to about $0.21 million per MWh.
The proportion matters because a battery's lenders size their loan to the revenue they can rely on. Condor has a 15-year contract with Southern California Edison, the utility, which gives lenders a contracted cash flow to lend against. The tax credit and preferred equity layers then carry the share of the cost that the contracted revenue does not support on its own.
The advisers reflect the number of layers. Stoel Rives was sponsor transaction counsel and CRC-IB advised the sponsor on tax equity. Milbank was preferred equity counsel, Winston & Strawn was lender counsel, and Paul Hastings acted for the tax credit purchaser. Monarch Private Capital advised the tax credit purchaser, with Orrick, Herrington & Sutcliffe as Monarch's counsel. Seven firms for one battery is what a three-part capital stack looks like in practice.
How does Condor compare with other California batteries?
It is leaner on debt than the largest California battery loan of the period. Calpine's roughly $1 billion syndicated loan for the 675 MW Menifee battery complex, announced a month earlier, came to about $1.48 million of debt per MW, as Enerdatics' review of the Menifee financing sets out. Condor's debt is a little over half that per MW. The difference is the $186 million of non-debt capital that sits alongside it.
Enerdatics records 53 battery financings in the United States announced between July 2023 and June 2024. Eight are tax equity investments, including four for Plus Power projects ranging from $82 million to $212.2 million. Three are tax credit transfers, of which only Tokyo Gas's $118.5 million sale to Foss & Company carries a disclosed amount. Two records describe preferred equity: Blackstone's in Condor and Captona's investment in a 728 MW UBS Asset Management battery portfolio in May 2024. Tax equity was still the more common route for US batteries in that period, but transfer-based structures had clearly arrived.
What does the deal signal for US battery financing?
It signals that private credit is moving into the space banks used to occupy. Tax equity has traditionally come from large banks. Here a credit and insurance business takes the role that ranks between the lenders and the sponsor, while a separate buyer takes the tax credit. Splitting the job opens it to more investors.
The contrast with Plus Power's $1.8 billion package for Texas and Arizona batteries a few months earlier is useful. That deal still leaned on traditional tax equity from Bank of America and Foss & Company. Condor shows the newer route working for a contracted California battery. On the solar side, Vesper Energy's $500 million tax credit sale for Hornet Solar showed how large a single transfer could become.
For sponsors, the attraction is simplicity and speed. For investors, it is a defined position in a contracted asset without the full complexity of a tax equity partnership. Whether preferred equity plus transfer becomes the default will depend on pricing, which none of these records disclose.
Frequently asked questions
How much financing did Arevon raise for Condor?$350 million in total: a $164 million debt facility from a consortium of banks and $186 million from an investment tax credit transfer to Stifel Financial Corp and a preferred equity investment from Blackstone Credit & Insurance.
How big is the Condor Energy Storage project?Condor is a 200 MW, 800 MWh battery in Grand Terrace, California, contracted under a 15-year agreement with Southern California Edison.
Why did Condor not use tax equity?According to the record, Blackstone's preferred equity investment simplifies the monetisation of the project's tax credits and removes the need for traditional tax equity financing, with the credits sold separately to Stifel.
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