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Investors showing interest in Canada’s nascent renewable-energy market

Solar power panels on green field with blue sky.

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Investors grabbed at a record solar-bond issue as renewable-energy production grows in Canada.

Connor, Clark & Lunn Infrastructure and Samsung Renewable Energy Inc. wrapped up the country's largest renewable-energy financing for a single project – a $633-million solar-bond transaction linked to the Kingston Solar Project in Ontario.

This will refinance existing debt for Canada's biggest operating solar project, which covers more than 600 football fields worth of unused farmland with nearly half a million solar panels that can power 17,000 Ontario homes. The deal follows another major solar-bond issue by the group this year showing the emerging appetite for renewable-energy debt from yield-hungry investors. Together, CC&L and Samsung have brought more than $1.2-billion in solar bonds to the market this year.

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Although the market is nascent in Canada, investors have shown increased interest in renewable-energy financings, said Matt O'Brien, president of CC&L.

"Investors, whether institutional or individual, are looking for alternatives to traditional government bonds," Mr. O'Brien said. "Infrastructure bonds in general fit that description. They're long duration and the related cash flows are stable."

Infrastructure debt is usually backed by a long contract from a government and, in the case of Kingston Solar, that's a 20-year contract with Ontario's Independent Electricity System Operator. The coupon on the solar debt sits a little below 4 per cent.

The financing also underscores the strength of the Ontario renewable-energy market. But there will soon be fewer new projects to invest in, given that the province cancelled its plans to build more wind, solar and other projects late last month, saying it wanted to save money.

Alberta could be the next region to boost green-energy investment, particularly in the wind and solar realms, as the province looks to excise coal by 2030. The Alberta Electric System Operator (AESO) has seen a huge increase in applications for new renewable-energy projects in the past year. The grid planning and management organization has already collected 55 applications for renewable-energy projects – 23 of them for solar projects – compared with seven in all of 2015 and six in 2014.

While some of those applications could be withdrawn or drop off the project list, that's still a whopping 5,800 megawatts of renewable generation currently expressing interest in investing in Alberta, including 704 megawatts of solar power, according to AESO.

This comes amid a rise in other solar projects and investments around the world. Many countries detailed plans to increase clean-energy production at the Paris COP21 climate summit last year. And well-known business executives such as Bill Gates and Jeff Bezos have banded together in an organization called the Breakthrough Energy Coalition to invest in "early stage companies that have the potential of an energy future that produces near-zero carbon emissions."

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Entrepreneur Elon Musk pushed a pile of his own money into the latest more-than-$100-million (U.S.) bond issuance for his energy company, SolarCity Corp., which builds solar panels on houses and company roofs. SolarCity has been cutting costs and is set to be acquired by Mr. Musk's car company, Tesla Motors Inc., pending an uncertain shareholder vote next month.

In Canada, the Canada Pension Plan Investment Board has been bolstering its investment expertise in green energy, hiring renewable investment specialist Martin Laguerre earlier this year to research and invest in the sector as wind and solar power become increasingly prevalent.

Mr. O'Brien said the bond market for renewables is still developing, but added that some large pension plans and other investors are increasingly forming funds with a greater focus environmental, social and governance (ESG) factors. Investment partners in the Kingston Solar Project bond include Régime de rentes du Mouvement Desjardins, CAAT Pension Plan and iA Financial Group.

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