RE Royalties Ltd. is a specialty finance company created in 2016 that creates stable long-term cash flow streams by utilizing a royalty financing model to provide loans to, and acquires revenue-based royalties from, renewable and clean energy projects and companies globally.
The company’s mission is to provide innovative financing for climate change solutions. RE Royalties is a publicly traded company on the TSX Venture Exchange under the symbol "RE", and the first to pioneer the royalty-financing model for renewable energy projects.
Was it a lightbulb moment or gradual moment to start RE Royalties?
I would describe it more as a waterfall! Bernard and I hit it off personally right away and when he told me about his idea, it was like opening the floodgates for both of us. By the time we finished our first coffee here is what we knew:
- We could both see the massive growth in demand and the equally massive reduction in cost in the renewable sector. Solar and wind costs were dropping exponentially across the globe. We knew the market was extremely large.
- We both had enough experience raising capital to know that small to mid-cap companies were poorly served by the traditional finance community. We knew that there was an opportunity to be a first mover in a broad market niche.
- We both had spent considerable time over our careers looking at various investment products and recognized that there was a tremendous demand for investments that could generate steady growth and long-term yield. We knew we could create cash flow and predictable earnings, right out of the gate.
- We both wanted to create a legacy of reducing fossil fuel consumption. We knew that helping entrepreneurs find capital was the fastest way to generate change.
We now had a vision, and the outline of a plan. The next step was to begin to think about executing. This is where our third co-founder, and current Chair of our Board of Directors, Marchand Snyman was mission critical. Marchand had worked with Bernard for several years and had extensive experience in public company formation, corporate governance, and corporate finance. Together as a team, we made the decision to use a corporate structure that followed the transparency, governance, reporting, and compliance of a publicly traded and regulated company. This transparent platform was key for attracting both clients, and investors.
How did you get your first three customers?
Our first clients were directly related to our individual experiences:
- Client 1 was a former competitor of mine with a project in B.C. that I knew both technically and commercially;
- Client 2 was based in Europe, but the Chairman of that entity was known to both Marchand and Bernard from their mining backgrounds.
Our client referrals grew quickly from this early start without any advertising. We found that word of mouth from our clients, and from service providers such as lawyers, accountants and engineers drove a tremendous amount of business our way, and we continue to benefit from that constant flow of opportunity. One surprising outcome was that our fund-raising efforts also drove a substantial amount of new business to us. I cannot begin to count the number of meetings with prospective investors that started with us introducing our business and ended with the investor introducing us to a new potential client!
Have you raised any money? How much?
We have been in business for over four years and have pursued several financing strategies. Our initial fund raising was completed through friends and family with some assistance from a professional exempt market dealer. Our second financing included accredited investors and some family offices and at this time we also arranged some convertible debt. In late 2018 we went public on the TSX Venture platform and simultaneously completed our third round of financing using both accredited investors as well as a direct retail investor approach using a group called Frontfundr. We have raised approximately CDN $25 Million so far and began paying a dividend to our shareholders one year ago. We are constantly looking at new ways, such as green bonds, to raise funds to feed our growth.
Who is your target demographic?
Our investment mandate is restricted to renewable energy and our current portfolio includes wind, solar and run-of-river hydro generation. We are also excited about other areas in the renewable space such as energy storage, building energy efficiency and waste to energy, although we have not yet completed any investments in these areas. We have a global mandate, although we are focused on OECD countries. To date, we have completed transactions in British Columbia, Ontario, Nova Scotia, Texas, and Eastern Europe. Our target market is clients who are small to mid-cap renewable energy owners/operators, who have operating renewable energy projects, and who need our help to continue growing.
What is the funniest/most strange customer request you’ve had?
Our clients are generally under served by traditional financing organizations because they are not big enough or they do not need to borrow enough money to get the bank’s interest. This seems counter intuitive, but the best example I can give is when a typical retail customer walks into a bank. If that customer wants to get a $500,000 mortgage, the bank is all over them, offering low interest rates and attractive incentives. If that same customer wants to borrow $5,000 the usual response is “put in on your credit card” … and pay that credit card level of interest! Our clients are in a similar situation with a need to borrow relatively small amounts, in the range of between CDN $1 Million and CDN $5 Million. Their business simply does not generate enough long-term revenue for traditional financing institutions to show interest, and that is what creates our market opportunity.
Did you have any experience/expertise in the area?
Between myself, Bernard and Marchand, we have a tremendous amount of experience and expertise in the financing, renewable energy, commercial deal structuring, and corporate management areas and we apply this expertise on a “horses for courses” basis depending on the situation. Bernard and I are front and center during every client and every shareholder interaction and we both draw on our individual expertise. Our clients who are renewable energy developers love the fact that I have the scars of having been a developer and that I understand their needs and their pain, but they also love the fact that Bernard brings an outside perspective from the mining industry and has a financial creativity that is unusual in the renewable space. Similarly, our shareholders love the fact that Bernard is incredibly financially literate and can use his accounting background to help them understand how we can protect their investment and offer secure cash flows in return. However, they also appreciate the fact that they can rely on my experience developing and building renewable assets, and my understanding of what it takes to make money in the renewable space.
Marchand uses his experience to help guide the company and ensure top quality corporate governance and transparency in his role as Chair of our Board of Directors. He also uses his substantial commercial structuring experience to help guide our investments as Chair of our Investment Committee. Our experience combined delivers: corporate discipline; financial creativity and commercial focus; hands-on “been there, done that” experience; and a desire to help entrepreneurs to deliver on their promise to reduce global fossil fuel emissions.
Where did you meet your co-founder/founding team?
Bernard and I were the only two full time employees for the first year, and we used a variety of consulting and part time resources who we knew from our previous lives. Our third full time employee was introduced to us by one of our fund raisers. I remember our first interview with Bryce. He was a recently graduated engineer who was working on his Chartered Financial Analyst designation and we were very impressed with his knowledge base and his energy. We started to talk potential compensation and told him that the good news was that we could offer him the CEO or COO pay package. His eyes lit up, and then we told him the bad news; the CEO and COO package at the time was minimum wage! To his credit Bryce took the job and his hire is one of the best hires I have ever experienced. He is now a Chartered Financial Analyst and VP of Investments and has become an integral part of our team. And yes, he is no longer earning minimum wage!
Since the company first started in 2016, we have added a few more team members to RE Royalties. Luqman Khan joined us as our Chief Financial Officer and Talia Beckett-Davis joined us as the Vice President of Communications. Shane Grovue joined us to help leverage sustainable finance and ESG integration and evaluate investments in clean energy. Alistair Howard joined us to help get our renewable energy projects off the ground quickly! This is the third start up I have been involved in, and the first couple of hires are incredibly important. A small team needs to hire to fill knowledge/experience gaps and as a start-up you need to hire people with a passion for the business. Most importantly though is team fit. A small team needs to be able to communicate well, deal with stress (both deadlines and unexpected crisis) in a positive manner, and to take on all work. It really must be “one for all and all for one”.
Our team strongly believes in giving back through volunteering, donating to charitable causes, or attending community-led charitable events. Over the past year, we have volunteered and donated at Union Gospel Mission, Covenant House and Vancouver General Hospital. This is central to our team building and bringing together our shareholders values at RE Royalties.
What motivated you to start your own business?
I am passionate about reducing fossil fuel emissions and I am passionate about helping other entrepreneurs reach their goals of delivering more renewable energy. I also have a long history of pursuing competitive sport in a team environment and for me the best of all worlds is the opportunity to start up a new business with likeminded co-founders. This allows me to pursue my passions in a team environment while also having significant control in the day to day running of the business.
What were your family and friends first thoughts on your company?
“You are doing what?”, followed by “here he goes again”. Most of my friends and family are somewhat used to my having a relatively high-risk tolerance when it comes to work so a new business was not that surprising. I think a lot of people wondered what I was doing teaming up with a guy from the mining industry!
What motivates you when things go wrong? What is the end goal?
There is generally a lesson to be learned out of everything that goes wrong. We are fortunate that so far, nothing has really gone wrong. The closest thing that could have gone “wrong” was on our very first transaction where two weeks prior to closing, Bernard’s second child came early, and I had an unfortunate accident on my bike, which required me to stay horizontal for about a month. Despite that challenge, we were still able to complete our first transaction and we told ourselves that if we could have done that with both our hands tied behind our backs, anything would be possible! This has remained true to this day.
Do you have any advice for someone just starting out?
Do the right thing … all the time, every time. Communicate your passion for why you are doing what you are doing. We found that our early investors wanted to support us because they believed that we were doing something important and that we were going about it in the right way. Finally, do not act like you know everything. Be humble and listen to advice. Many of our early investors are very successful entrepreneurs and we learned a ton from them. The fact that we were open to advice also made them more likely to want to invest. Never forget that at the start, investors are investing in you and what they think you can become.
What is stopping you being 3x the size you are now?
Our single biggest challenge has been access to capital. Our business does not easily fit into a traditional financing “box” and this has made it difficult for us to access enough capital to fuel an accelerated 3X growth curve. Our current, slow, and steady approach to growth has enabled us to continue closing new royalty financings and has also enabled us to reward our shareholders with a quarterly dividend.
How do you protect yourself from competition?
Our clients and our investors both have choice, so we tend to look at competition from both a client perspective and from an investor perspective. There are not any competing royalty financing groups focused on the renewable energy sector, meaning that we have little competition from a client perspective. The renewables market is so big on a global scale, that we believe that there is lots of room for competitors and in fact we would encourage some competition because we believe that would help us solve the capital access issue I discussed earlier.
The investment world is highly competitive, and we differentiate our offering by offering investors reliable yield, growth, low risk, and an opportunity to reduce global carbon emissions. We believe that there are very few other investment products that can compete with us in terms of financial returns and environmental impact.
What are the top 3-5 apps your business could not run without?
It is not very sexy nor is it really an app, but the one thing our business could not run without is Excel! We do a lot of modelling and spreadsheet thinking to create our tailored financial solutions for our clients. The creativity, flexibility and “be-spoke” approach to tailoring solutions is what really differentiates our client offerings. The other program that we have embraced during the pandemic has been Microsoft Teams. This has really enabled us to keep our business rolling, despite the forced physical distancing. Team meetings, client meetings and investor meetings have all worked seamlessly using Teams. We even have a weekly Friday afternoon virtual social hour just to kick off the weekend and to stay in touch on a social basis.
What are your favorite books/podcasts?
We are all voracious readers of anything to do with Responsible or Impact Investing and Renewable Energy. Articles or podcasts on industry trends, corporate news, and technology are all shared amongst our team.
What are the next products you’re working on? Are there any releases you can tell us about?
New Products We are continuing to expand our product offering to ensure that our products evolve as the renewable energy industry evolves. Battery storage, EV refueling, and building energy efficiency are all areas of the renewable energy world that we continue to monitor to see if we can create an attractive offering.
Where do you see the company in 5 years?
We expect to see continued growth over the next five years. As we increase the size and capital strength of the company, we expect that our client market will also expand. We firmly believe that royalty financing will eventually become part of the permanent overall capital stack for all renewable energy owner/operators, much like mining royalty financing has become a standard tool for all players in the mining industry.
Would you ever sell?
We have fiduciary responsibility to our shareholders, so the question of choosing whether to sell the company is not our decision. Any legitimate offer to purchase the company would first need to be reviewed by an independent committee of our Board of Directors and then any recommendation would need to be presented to shareholders, and shareholders would ultimately decide on a course of action.