Amarenco is a household name in Ireland’s renewable energy sector, yet with no solar farms developed by any player in the Republic until now, the company had somehow drifted away to the back of my mind – and, I suspect, to that of many industry observers – as an essentially French operator with distant connections to its original investors and formal headquarters in Cork. 

There were occasional announcements, which tended to become more frequent in recent months: a capital restructure, two funding rounds in the €10-15 million range, a strong showing in the results of Ireland’s first Renewable Electricity Support Scheme (RESS) auction. Each one interesting, but none individually game-changing. 

Then on November 10, Amarenco suddenly announced a €150 million fundraise. A few weeks earlier, Amarenco Solar Ltd, the group’s top holding company, had filed consolidated accounts for the first time. They provide an unprecedented bird’s eye view of the business, spread over more than 100 subsidiaries across a complex corporate structure stretching from Cork to Singapore and involving some of Europe’s largest energy and finance players, as well as prominent families in Ireland’s engineering industry.

Notes to the accounts also detail a recent sequence of events pointing to a step-change in the scale of Amarenco, its capital structure and the very nature of its business.

I pulled the threads, combing through more filings in Ireland, France and further afield, before talking to group CEO Alain Desvigne as he unveiled the latest round of funding. As I drew the map of what the multinational Amarenco had become, I became more intrigued: Who was investing in this business, and when could they hope to start returning a profit? How did most of its workforce end up working in a château in the south of France, complete with its own swimming pool and vineyard? And if Amarenco claimed to have completed solar panel installations at around 2,000 locations, how come its balance sheet was so small?

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Since its foundation in 2013 by Desvigne, former Bord Gáis chief executive John Mullins, and renewables financier Nick Howard, Amarenco reports having delivered or begun construction on solar farms totalling 700MW in capacity, nearly all in France, and plans to top 1,000MW next year thanks to acquisitions in Iberia and the Middle East. On a video call from his home in the Nice area, Desvigne tells me that his company now targets 3,000MW in operation by 2023, evenly split across Europe, the Middle East and Asia-Pacific. Such investment would be worth billions. “France will represent 10 to 15 per cent of our asset base, so it’s going to be, really, more like a foundation,” he adds.

The company’s business model so far has been to form what it calls “investment platforms” with external partners. Successive such joint ventures have seen the Cork-based company replicate the template several times: Amarenco provides the development expertise while an investor with deeper pockets brings equity to the table. The largest examples, both operating in France, are called Energie Développement and Infram. 

Energie Développement brought together Amarenco and the Paris-based oil major Total when the French government launched a tender to support large rooftop solar installations at the end of 2016. The subsidy targeted commercial and agricultural buildings. Under the scheme, 10 successive auctions ending this year have allocated price subsidies to projects capable of delivering the cheapest and most climate-friendly solar electricity.

Total had been investing in solar for decades, but not in France. The energy giant teamed up with Amarenco to bid for support when the scheme opened and they have been dominating tenders ever since. After the second-last round this summer, Amarenco and Total’s joint projects had won 185MW of the total 478MW subsidised across the country over the past four years – nearly 40 per cent, according to analysis by renewables financial advisors Finergreen.

Amarenco initially held a minority 20 per cent stake in Energie Développement. As Total made acquisitions in the renewable electricity sector, it placed its 80 per cent stake under its new branch Total Quadran. When Energie Développement last filed accounts to the end of 2018 (mid-way through the tender process), it had just under €10 million in assets, including stakes in and receivables from 17 individual solar project subsidiaries, almost entirely funded by debt owed to its parents. Since then, it has doubled the number of such project subsidiaries. In January 2020, Amarenco France paid €1.5 million to increase its stake in the joint venture to 50 per cent – a sign of things to come.

Infram, meanwhile, is a vehicle set up with UK finance behemoth M&G and established at Amarenco’s Cork headquarters. In turn, it owns 10 intermediary holding companies and a slew of subsidiaries carrying more solar developments in France. M&G is the former asset management arm of the retail savings provider Prudential, which floated it last year. Through Infracapital, a £1.25 billion fund targeting investments in European infrastructure, M&G took a 90 per cent stake in Infram. 

The two partners have again been funding the joint venture with inter-company loans. At the end of 2019, Infram owed €57.2 million in long-term loans to its shareholders, including €53 million to Infracapital. This debt attracts an interest rate of eight per cent. In turn, Infram had loaned a balance of €54.5 million to its own subsidiaries “to finance their investment in solar generation assets”. At the start of this year, it reported close to 150MW across its projects, 90MW of which were commissioned and connected and the rest under development.

There are signs that Infram has not been performing as well as expected. In 2019, its parent Infracapital (AIRI), which holds M&G’s investment, wrote €1 million off the loans it had extended and ended the year with a net current liability of €1.6 million. Meanwhile, Infram itself ended the year with a shareholder’s deficit of over €2 million. In April, the company issued new shares to its parents to raise fresh capital.

Separately, Amarenco warned of a potential liability for €1.6 million for compensation to M&G over Infram’s performance. “The way Infram was working is based on an IRR target. Depending on the IRR target, there’s a mechanism to stream some additional cash flows back to our Amarenco as a service provider,” Desvigne explained. “This €1.6 million was under discussion – whether we were still owed that money based on the IRR target or not.” The chief executive added that this was fixed as part of a broader, confidential agreement. “This has been settled and there’s no outstanding issues there,” he said.

As previously reported, Amarenco also recently sued SDCL, the UK financial advisory firm that had initially arranged the Infram deal. Desvigne said SDCL made an unexpected claim against Amarenco four years after their last contact, adding that two other clients of the firm were in a similar situation. “The claim was cancelled,” he said. “This has been fully fixed once and for all.”

Developing, crowdfunding, refinancing

Amarenco has so far essentially generated revenue by charging investment platforms such as Infram and Energie Développement to help them develop projects outside its own balance sheet. Its staff lease properties, apply for planning permission for solar panels, secure power purchase agreements and subsidies to sell electricity and obtain connections to the grid. “These four elements of the development are very human-intensive,” says Desvigne. “We’ve been doing this for both JVs, developing the projects and then arranging debt (project financing). For all these services, we were paid, and we still are.” 

Construction is outsourced to contractors and Desvigne says Amarenco has no plans to move into this space: “There’s a lot of complexity for a low-margin business. And that’s really not the core know-how of what we do.” 

Once a project is secured, Amarenco and its joint ventures start refinancing it. First, they typically invite the general public to subscribe to mini-bonds through crowdfunding platforms. While the target is to raise only two per cent of funds needed, Desvigne insists that crowdfunding is a “strategic objective”: “When you have local citizens participating, there’s more adoption of the projects on the ground. For us, it’s really important that we have not only institutional capital, but also citizen capital.” The rest of the project finance required to build out the project comes from senior debt arranged by Amarenco.

Finally, when the solar farm begins to sell electricity, it is refinanced for the duration of its productive life. For example, at the end of 2019, Infram reported that it had closed the refinancing of assets totalling 77MW of capacity for €137 million. 

“We offload the assets to a joint assetco that we are structuring for Europe, for the Middle East and for Asia – so three different platforms. The joint assetco is basically owned 51 per cent by Amarenco, and 49 per cent by a low-cost-of-capital, limited partner,” Desvigne says. These are pension or insurance funds looking for 25 to 30-year fixed-income products, he explains. “Selling the 49 per cent of the lower cost of capital allows us to recycle cash and be less dependent on additional sources of equity in the future.”

Cost of debt eats into profits

Amarenco’s new consolidated accounts show that it remained a very light company at the end of 2019, with less than €50 million in assets on its balance sheet. From the service and joint-venture model described above, it grew revenue to €39 million and was profitable on an operating basis, returning €2.6 million Ebitda. Desvigne plans to grow this to €150 million by 2023. “It’s not a very fat margin,” he says. “But it’s a reasonable fixed income.”

Yet for the moment, Amarenco is less profitable than some of its direct French competitors, such as Neoen or Urbasolar. Once the cost of debt and its share in the results of joint ventures are accounted for, it actually posted a pre-tax loss of €2.2 million last year. 

“One of the biggest targets we have is to reduce the cost of corporate debt,” says Desvigne. At the end of 2019, Amarenco owed €16.5 million on private loan notes attracting seven to 10 per cent interest. Cutting this is a priority for the next two years because it “is really the most important item in the whole business to be very competitive,” Desvigne says.

One way of achieving this is to issue green bonds, where investors seek both environmental and financial returns to improve their own environmental record and potentially claim associated tax breaks. Some €50 million of the fundraising announced on November 10 was under the form of green convertible bonds, for which the coupon can decrease by up to one per cent if the company meets environmental, social and governance (ESG) criteria. “It’s a great product and it’s, of course, avoiding dilution for the founders of the company,” Desvigne says.

“[This] is really about being able to have more than 51 per cent in every single asset, so that we consolidate electricity sales in our P&L.”

Alain Desvigne

There was some dilution, however, as the other €100 million came under the form of a share capital increase issued to French institutional investors Tikehau Capital, a €27 billion alternative asset manager, and Crédit Agricole bank. Amarenco’s founders put in several million themselves – to keep “skin in the game,” Desvigne says. 

This is not the first time I come across Tikehau’s Energy Transition Fund in Ireland. In January, it made a €30 million investment in Norman Crowley’s Cool Planet Group. Meanwhile, Idia Capital Investissement and other vehicles of Crédit Agricole, the largest retail bank in France, had first bought a 15.9 per cent stake in Amarenco for €9.8 million in April. (They also extended €4.2 million in debt finance under the form of seven-year convertible bonds at a rate of 3 per cent). By this metric, November’s new investment by Tikehau and Crédit Agricole represent a comfortable joint majority shareholding in the company. 

The capital injection comes at a time Amarenco is reorganising its corporate structures to transform from investment management and development services company into a fully-fledged independent power producer (IPP). “It happened this year in 2020, thanks to the first fundraising in April and the second one now, which is really about being able to have more than 51 per cent in every single asset, so that we consolidate electricity sales in our P&L,” says Desvigne. 

While this could have happened earlier, he says he has no regrets: “The value of the company has increased with time and we have less dilution, and now we are very well capitalised to execute the business plan.” While the company’s new role – holding onto assets and selling electricity – will pit it against some of its existing JV partners such as Total, Desvigne says there is enough space in the “ocean” of this growing market for companies of all shapes and sizes.

Bringing in new shareholders is just one of many deep changes that have taken place in Amarenco’s corporate structures this year. Since 2016, the Irish company had been building a stake in Groupe Carré, a fledgling French solar IPP which has since become Amarenco France and provided boots on the ground to develop the first assets destined to remain in the group’s ownership. 

Olivier Carré, Groupe Carré’s founder and now Amarenco France’s chief executive, retained a 44 per cent stake in the French business until he swapped it for shares in Amarenco’s Irish mothership in April. Carré became, at least temporarily, the largest shareholder in the overall group, which in turn gained full ownership of its French subsidiaries. Carré also owns a 19th century château near Toulouse, where much of the group’s technical staff are based – in offices overlooking the domain’s vineyards.

At the same time, Amarenco began to use the growing equity it was raising from its new investors to buy out some smaller, founding shareholders and joint venture partners, especially those funding upcoming developments in Ireland.

Amarenco finally set to break ground in Ireland

Amarenco’s big capital spring clean extended into subsidiaries established to develop projects in Ireland. On March 30, the company acquired Macquarie Capital’s 50 per cent stake in Amarenco Solar Ireland. Two weeks later, it bought out Southgate Investments from an intermediary holding company for the group’s Irish business. Southgate is the investment vehicle of the Foley family, who sold their Cork-based engineering business ESI Technologies in 2012.

Amarenco Solar Ireland itself contains 38 subsidiaries, now wholly owned, each developing an individual project in the Republic. Eight of these secured support in the first Renewable Electricy Support Scheme (RESS) auction in August, which awarded the first ever subsidised price contracts for solar farms in Ireland. More will apply in subsequent years.

Desvigne said the majority of Irish projects Amarenco applied for in this round were successful. “We applied with a tariff which was higher than the average, without disclosing the number. But that means the value per megawatt is significant,” he said, adding that most projects were located in the Cork area where weather conditions allowed good electricity yields. 

Amarenco’s Irish pipeline totals over 200MW, with most projects 5MW in size, typically on small parcels of agricultural land leased from farmers. “That’s the strength of John Mullins. Given his background in Ireland, he chose that strategy because it made a lot of sense for grid,” Desvigne said. The administrative burden and chances of success when connecting assets up to 5MW here have been much more attractive than for larger projects.

Despite delays caused by Covid-19 social distancing on sites, Desvigne says construction on approved Irish projects will take place next year and power production is set to begin at the end of 2021.

In April, Amarenco also acquired a 17.2 per cent stake in Amarenco Solar Projects, the vehicle used by clients of Cork-based MC2 Accountants to invest in the group. While Amarenco Solar Projects does not own significant assets, it charges the group around €1 million annually for “service fees and development cost recharges”.

Other prominent Irish backers still invested in the company include Galway entrepreneurs Ian Quinn of Creganna Medical and James Murphy of Lifes2Good, whom Desvigne describes as the “cornerstone family office” investors in the company. Bill McCabe’s Oyster Capital is understood to have disposed of half of its stake in this year’s transactions.

Amarenco also raises debt from Irish investors, most recently securing €12 million loan notes through Cantor Fitzgerald after similar rounds in previous years.

Until recently, Amarenco continued to develop joint ventures with partners. Last year, it injected fresh capital in Solar Wadi, its 34 per cent-owned Middle-Eastern beachhead in Oman. Meanwhile, it formed a new joint venture with French financial advisors Fidae “to identify and source development opportunities within France, Corsica and overseas” – though in this case, Amarenco owns a majority stake. In February of this year, it formed two subsidiaries in Singapore, reserving significant minority stakes for the group’s two top executives in the Asia-Pacific region, Steve Iyer and Utpal Guha.

Desvigne will not be drawn on the fate of Amarenco’s historic joint ventures – the large Energie Développement and Infram where it remains a minority shareholder – now that the group wants to control its own energy-producing assets. “The future of the two platforms is a bit too early to state. There is some complementarity for some of the platforms,” he says, while readjustments or changes in focus may also play a part. “There will be strategic discussions.”

Now that the vast majority of Amarenco’s shareholding, along with its staff and existing business, are French, I also ask him about the location of the group’s Irish headquarters. “We remain Irish,” he says without hesitation. Crédit Agricole and Tikehau are interested in a global footprint and have “have invested in the Irish business, which is the mother company,” he adds.