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It's Davids vs. Goliaths in early-stage solar

Alan Neuhauser
Apr 14, 2022
Illustration of a large hand placing a solar panel into desert sand

Illustration: Annelise Capossela/Axios

As the solar market has matured, attracting larger pools of capital, investors hoping to escape that pricier competition have launched firms focused on the earliest stages of the development cycle.

Why it matters: Smaller players face a changed landscape where they now have increased competition for projects traditionally too early and too risky for the big players.

What's happening: "If you're just a couple of guys putting one or two projects together, you can be getting these big-dollar premiums," Anthony Sibilia, who leads the acquisition team at Primergy, tells Axios. "It's almost easier when you're putting less money to work."

  • "This market is lending itself to near, early-stage developers — and new, early-stage investment shops," he says.

The details: Two firms that have dived in are Lacuna Sustainable Investments, founded in 2019, and Segue Sustainable Infrastructure, launched in July.

  • "We tend to see deals about as early as one can imagine, and that drives a higher return, because the amount of risk is about as high as one can imagine," Joseph Song, a partner at Segue, tells Axios. "But I can underwrite the fact that some of these projects might die."

Yes, but: "The irony, of course, is the degree to which it’s gotten crowded over the last 8-10 months," Song says. "Then it was quiet, and now it’s not."

  • In a matter of months, private equity and asset managers have pushed their mega-yachts of capital far upstream.
  • "Folks are trying to pursue a more vertically integrated model with big private equity behind them," Lacuna managing partner Patrick McConnell tells Axios.

What's next: Between supply chain challenges, inflation and potential expanded tariffs, those big vessels might founder.

  • "Those same folks probably should, and we think many will, be way more careful and less aggressive about doing this in an environment where the tariff-uncertainty risks are hanging over everything," says Segue managing partner David Riester.
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