Climate and Clean Tech | May 13, 2021

Orion Energy Partners’ $1.1 billion fund taps investor appetite for energy transition

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, May 13 – Orion’s Energy Credit Opportunities Fund III is the latest entrant into an increasingly crowded market for funds looking to finance and profit from the global shift to a low-carbon economy that will touch every sector and asset class.

Orion will focus on tailored debt financing for middle market companies in renewable fuels, energy efficiency, water, waste, transportation infrastructure and other areas. It expects to invest between $40 million and $200 million in up to 17 companies.

Firms like Orion, Tikehau Capital and EnCap join better known names such as BlackRock and TPG Rise in capitalizing on investor demand for such transition or decarbonization funds.

When it raised its Fund II four years ago, institutional investors questioned the investment opportunities, Orion’s Nazar Massouh told ImpactAlpha. “The change that we’ve noticed between Fund II and Fund III is massive,” he says.

The New York State Teachers’ Retirement System, Florida Retirement System Pension Plan, and Australia’s Aware Super are among the investors in the fund. 

Flexible debt

Orion’s niche is partnering with entrepreneur-owned businesses that are looking to grow without diluting their control by providing flexible debt and expertise.

“There is an enormous number of private owner-operator businesses that require capital between $20 million and $100 million,” says Massouh, who started his career at NRG Energy developing and structuring financing for power plant projects. “The creative part is around how principle and interest payments are structured, the operating metrics we hold them to… very little about our deals is generic.”

As part of a new $50 million debt facility provided to biofuel producer Lakeview Energy, Orion helped negotiate permits and secure an offtake agreement with a hand sanitizer producer.