On 13 January 2021, Riverstone announced the signing of an agreement for REL to invest $25 million in Loanpal, LLC ("Loanpal"), the leading sustainable home improvement fintech provider used in over half of U.S. residential solar system sales. Riverstone Global Energy & Power Fund VI also participated in the transaction, investing $50 million for a total investment of $75 million from Riverstone affiliated investment vehicles.
Loanpal is a San Francisco based technology-enabled sustainable home improvement loan originator, providing a point-of-sale lending platform used by key residential contractors. Loanpal does not take funding risk, the company presells its originated loans via forward purchase agreements to large funds managed by asset managers including Blackstone and Goldman Sachs. The company's attractive unit economics and asset-light business model allow for rapid growth and the ability to scale faster than its competitors, while generating free cash flow by capitalising on upfront net cash payments on the flow of loan originations and avoiding costly SG&A and capital expenditures incurred by other portions of the value chain.
The investment supports broad decarbonisation, decentralisation of zero carbon energy generation, consumer reliability of diverse energy sources, and distributed and decentralised generation. Solar costs have plummeted in the last 10 years and are continuing to decline making residential solar a cost reducing value proposition for many U.S. regions. Additionally, the trend to encourage the greening of the economy - and especially in Sunbelt state legislatures - is expected to continue to support the category as seen with the recent extension of investment tax credits that support the sector. Loanpal provides a scalable solution allowing for large funds to generate exposure to quality green credit. Given the company's current market share and profitability underpinned by the growth rate of distributed residential generation and energy storage, we believe Loanpal is poised for growth from our attractive entry valuation. In addition, the company is well-positioned to expand lending volumes into home improvement/efficiency markets, which are likely to increase as global economies work towards decarbonisation goals.
Find out more on the Loanpal website.