How Royalty Investing Is Fuelling Growth in Renewable Energy
Sustainability With the renewable energy sector experiencing exponential growth, opportunities to finance projects and earn money on royalties have become a realistic investment.
One of the biggest challenges for any company wanting to scale up its operations is finding adequate funding. This is especially true in the renewable energy sector, and the primary reason Bernard Tan and Peter Leighton founded RE Royalties (RER) two years ago.
“We saw an opportunity to develop an innovative financing solution through royalties, which wasn’t commonplace in the renewable energy sector, but had proven successful in other industries,” says Tan, the company’s co-founder and CEO. “Investors can feel good about where they’re putting their money and get a good return while helping the clean energy economy grow.”
According to Tan, the renewable energy market is growing exponentially, with more than $280 billion invested in the sector last year. There are a lot of smaller clean energy companies that don’t get the love of Wall Street or Bay Street and are not typically served by more traditional financing. “These companies don’t have a lot of options when it comes to financing, and the options they have can be expensive and inflexible,” says Tan. “Instead of diluting the equity of a company or selling assets, we instead provide financing and then collect a royalty on their revenues.” This, in effect, makes it simple for everyone to invest directly in renewable energy projects, worldwide.
Everyone can have a piece of the pie
Investing in the renewable energy sector has historically been difficult for individual investors because much of the investment is coming from large institutional funds. “We’ve been able to provide an investment opportunity for the ‘little guy’,” says Leighton, co-founder and COO of RER. “Someone could invest a thousand dollars and contribute to the renewable energy sector while having an investment that is safe with strong returns.”
The company is currently undertaking a public listing on the TSX Venture Exchange along with concurrent financing in order to grow its royalty portfolio.
Leighton explains that RER chooses operating projects and that royalties are based on gross revenues rather than profit. This insulates the investment to a large extent because royalties are still collected even if there are operational issues with the project.
As the renewable energy sector continues to mature, there will be significant opportunity for royalty investing, while contributing to a cleaner environment.