Energy Capital Partners Acquires Industrial Energy Storage Specialist Convergent

Private equity firm Energy Capital Partners has bought its way
into the energy storage development business with Convergent Energy
+ Power, the companies announced Wednesday.

New York-based Convergent develops, owns and operates
large-scale storage for industrial customers and utilities. It
distinguished itself as a rare startup that chose to self-fund its
projects, raising $70 million to do so. Convergent also took the
title for
largest commercial and industrial storage project
, with a 10
megawatt/ 20 megawatt-hour system in Ontario, Canada.

Energy Capital Partners owns and invests in a wide portfolio of energy
companies, including gas generator Calpine and residential solar
company Sunnova, but this marks its first storage acquisition. The
firm acquired Convergent as part of its multi-billion dollar Fund
IV.

The companies declined to name the sale price, but noted that
upfront acquisition payments and ongoing funding for projects will
amount to several hundred million dollars of investment. Convergent
will put that capital to work in what CEO Johannes Rittershausen
calls a “storage IPP,” self-financing projects for customers
and owning them for the long haul.

“The model we have now, moving forward with ECP, is much more
efficient, and we can offer better value propositions,”
Rittershausen said. “Funding is of no issue to us.”

From the buyer’s perspective, Convergent stood out for its track
record of operating projects and customer relationships, said ECP
principal Andrew Gilbert.

“We’ve been pitched on pipelines, but Johannes and team have
actually executed,” Gilbert said. “Convergent delivers real savings
to customers almost immediately, in material ways. The returns are
quite attractive compared to other things we see in renewables or
storage.”

Notably, both parties expressed wariness about competing in the
major utility-scale procurements, where big players like NextEra
and First Solar compete on tight margins for massive projects. They
described that market as more commoditized than the middle ground
where Convergent operates, which is bigger than the typical
commercial project, but still driven by private customer
needs. 

That’s not a particularly crowded field right now, and
Convergent’s self-funded model differentiates it from the
competition. Venture-backed developers typically hand off their
projects to project financing funds to own.

Convergent took an
early stab at non-recourse financing
for standalone storage in
2016, but found the process to be cumbersome.

“That was such a hard and inefficient process that we realized
we had to raise money into the company and deploy it as equity,”
Rittershausen said. 

The acquisition, then, serves as a drastic scale-up of that
infusion of capital into Convergent for it to spend building
projects. The company doubled its staff in the last nine months in
anticipation of the growth to come.

At the same time, it marks an early if not unprecedented step by
a private equity firm to take pure-play energy storage expertise
in-house.

“This is way ahead of the market for storage,” said Elta Kolo, a
senior analyst at Wood Mackenzie Power & Renewables who tracks
mergers and acquisitions in the grid edge sector.

ECP’s controlling stake in Calpine, which specializes in
flexible thermal generation, raises a possibility of future
collaboration. Certain Calpine plants have
run into competition
with energy storage in California. Power
producer Vistra has started
swapping out its old generators
in California for battery
packs, to continue delivering fast response power without local
emissions.

Such an arrangement is not in the works just yet for Calpine and
Convergent.

“This is really a separate platform for us, not that there
won’t be opportunities to work together,” Gilbert said. “It’s
not integrated with Calpine, and the investors are different.”

In the meantime, Convergent will chase more numerous and more
ambitious storage projects thanks to the newly available capital,
Rittershausen said.

Source: FS – GreenTech Media
Energy Capital Partners Acquires Industrial Energy Storage Specialist Convergent