In 2024, US-based Enfinity Global, a leader in renewable energy, secured €500 million financing to fund the development and construction of 2 gigawatts of solar energy assets across Italy. Structured in collaboration with other institutional investors, this marked the first investment from the second vintage of our European Junior Infrastructure Debt Strategy.
The project will see around 60 solar photovoltaic (PV) plants built in Italy, well diversified across the country with the majority of projects situated in the north of the country, where demand for electricity is high.
A compelling investment case
“We initially considered this transaction because it aligned perfectly with our investment strategy focused on energy transition and high-quality asset providing an attractive relative value to our junior strategies,” says Stéphanie Charlet, Investment Director in the Infrastructure Debt team. “But there were a number of other factors that attracted us to the project.”
Among these was the quality of the pipeline. The deal was structured as a holding company transaction, with the debt secured against the assets in the portfolio, which includes operational, under-construction and ready-to-build projects alongside a pipeline of plants that are currently under development. Charlet adds that, in renewables infrastructure, there has been a general trend in recent years toward independent power producers (IPP) seeking financing for projects at earlier stages. In this transaction, the pipeline was already well advanced with a strong part of the collateral constituted by projects already fully permitted or in construction.
“In addition, the sponsor is a reputable global IPP with considerable experience in the development process and a proven ability to raise senior project financing with tier-one institutions,” Charlet adds.
“Meanwhile, the size of the project means it benefits from significant levels of diversification.”
Managing investment risk
In view of the various stages of advancement of the projects in the pipeline, “It was therefore quite challenging and crucial to accurately value these projects,” explains Charlet.
“We had to discuss with the sponsor the valuation parameters, which required a full understanding of the solar PV permitting process in Italy, and ultimately be able to assign a probability of success to the projects depending on their development stages.”
However, this deal is structured so that the financing can be drawn only once the project reaches ready ready-to-build stage. “That limits the risk, because it means that the facility cannot be drawn for projects that are unable to proceed,” Charlet says. “In the end, we were sure that we were not spending money for a project that would not actually reach the ready-to-build stage.”
Another advantage of the project is that Italy already has a sophisticated power purchase agreement market. “A key feature of the deal is that a minimum of 60% of the revenues need to be contracted, so the borrower is obliged to contract the revenues with eligible offtakers – mostly investment-grade companies or their subsidiaries. This means we can get a high level of visibility on the transaction’s cash flows.”
A robust investment process to reach sustainability goals
Each of the potential investments are assessed by the BNP Paribas Asset Management Sustainability Centre. Transactions are graded with a net environmental contribution (NEC) score – a metric that rates economic activity in accordance with its environmental impact on a scale from -100% to +100%.
“The analysts look at the potential environmental benefits against any possible negative impacts,” Charlet says. “It is no surprise that an investment like this in renewable energy generation has a very positive ESG performance.”
“When we are building our portfolio of investments, we pay attention to the geography as well as the sector a deal is based in to ensure the correct level of diversification at fund level. We are approached by many renewables developers, because that is where capital is needed at the moment. But with this project, we did not hesitate given how important it is in terms of energy transition.” This project contributes to the European and new Italian 2030 climate targets.
The deal was completed in the third quarter of 2024 and is due to run until 2031. The first drawdown was in August, and there have been several more since then as the project has progressed. Charlet concludes “Since the closing, the pipeline (already quite well advanced) has progressed well: we’ve seen that some projects have been fully permitted and some plants entered into their construction phase, increasing the value of the collateral.”
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