Outdated to begin with and obliterated by hurricanes Irma and Maria last year, Puerto Rico’s energy grid is in tatters. As the U.S.-owned Caribbean island works to restore power from coast-to-coast, regulators are contemplating upgrades wherever possible, including a bevy of solar projects, the biggest of which is Greenbriar Capital Corp.’s (TSX-Venture:GRB) (OTC:GEBRF) Montalva Solar facility. At 100 megawatts, the project is the biggest utility-scale photovoltaic (PV) project currently being considered by Puerto Rico’s Financial Oversight and Management Board (FOMB).
Vancouver-based Greenbriar is a diversified company, developing renewable energy projects as well as technology projects in blockchain and smart glass, in addition to being a landowner in California.
But the story of how this solar project came to fruition is one of beauty. In 2013, after the CEO of Greenbriar sold a previous company for $420 million, after starting it with $250 thousand in 2002, he was permitted on the sale to transfer a $1.9-billion solar contract in Puerto Rico to Greenbriar, for no upfront costs. This value cannot be found in the financial statements, yet a court ordered valuator found the net present value to Greenbriar to be $191 million U.S. if the project does not get built.
The U.S. Congress established the FOMB to recommend and expedite critical energy and infrastructure projects, such as the eight PV projects spread across the island under review that could provide the commonwealth with resilient and safe power. All told, over 280 megawatts of projects are being evaluated.
The FOMB has designated Montalva as a "critical project" for Puerto Rico.
Montalva is to be developed on the southwest portion of Puerto Rico between the municipalities of Guanica, Lajas and Barrio de Montalva. The location is perfect for a solar farm given that the area has the highest exposure to the sun’s rays anywhere on the island, according to documents of the FOMB.
The project isn’t simply hypothesis; Greenbriar and its predecessor have been on the island for over a decade and owned a 35-year, $1.9-billion solar electrical generation contract for six years. After considerable investment by Greenbriar, the project was mothballed and an ensuing lawsuit commenced as the contract wasn’t being honored while Puerto Rico was neck-deep in a credit crisis prior to the hurricane disasters. As mentioned above, a court-ordered damage report valued Montalva at $191 million U.S., monies Greenbriar is fighting for if the contract isn’t honored.
Designation as a "critical project" means that Montalva is being moved along to the next stage of the process and shared with all appropriate government agencies to review.
The next stage of that process happens to be obtaining the necessary project level financing. On that front, Greenbriar earlier this month executed a $50 million mandate arrangement with a dedicated renewable energy and infrastructure fund specializing in key mezzanine capital investments. That same fund, which was named in last night’s press release as Pegasus Renewable Energy and Sustainable Infrastructure Credit Advisors LP ("RESIC"), executed an additional $265-Million U.S. mandate for the Company's 100 MW AC Montalva Solar Project. Together with the previously disclosed $50 million mandate with Pegasus, the total under LOI is now $315 million, which covers the entire forecast project cost.
The RESIC finance team for this $265-million LOI is led by Thomas Emmons. Tom is an experienced financier in the US renewable energy business and has been involved in financing over $20 billion in wind and solar projects in the US since 2008.
Montalva is expected to cost about $305 million from project level financing. With last night’s game changing announcement, the stage is now set for this massive project to move forward, something that hopefully happens in the next 12 months. Should the project get the green light for construction, a $1 share price will likely be long in the rear-view mirror.
Greenbriar management, led by founder and CEO Jeff Ciachurski, apparently turned to a familiar and reliable source saying that the "finance team includes individuals that provided a similar type of key essential equity - mezzanine financing for Greenbriar's predecessor, Western Wind Energy Corp. and its $313-Million U.S. Windstar project in the amount of $55 Million U.S."
Western Wind Energy became part of Canada’s Brookfield Renewable Energy Partners LP (NYSE:BEP)(TSX:BEP.UN) in 2013 after a lengthy $163 million hostile takeover battle.
Just to get an idea on how this management team has differentiated itself from other publicly traded companies, Mr. Ciachurski and his family have loaned Greenbriar over $1.5 million since 2013. Not only that, but Mr. Ciachurski has not taken a Greenbriar salary since its inception on 2009 and he has funded all the corporate office expenses. All this solidifies our interest in this arguably undervalued diversified services company that appears to be putting shareholders first, something not seen all that often.
With financing just completed, and some Congressional support, Montalva may finally be moving forward towards its goal of giving the island the power sources it so desperately needs. If the FOMB approves any or all of the projects, they could be fast-tracked, a decision that should instantly inject value into GRB, a company carrying an arguable small market capitalization of $20.7 million ($16.2 million U.S.).
