By Luis Garcia

Time may be on TPG's side in its acquisition of Altus Power, as more clarity about President Trump's clean-energy policies down the road may lift the value of renewable-power assets depressed by fears he might revoke tax credits for the sector.

The buyout firm agreed to buy Altus in a deal valuing the Stamford, Conn.-based solar-power provider at about $2.2 billion, including debt. On Thursday, TPG said it made the deal through its TPG Rise Climate strategy, which backs businesses that help reduce carbon emissions.

Share prices of publicly traded renewable-energy companies have mostly fallen this year, reflecting concerns among stock investors that the new Trump administration may repeal tax credits that fueled the sector's expansion for decades, industry analysts said.

Altus shares have dropped as much as 19% since the start of the year before TPG announced its deal, prompting a 27% gain on Thursday. Share prices of peers Sunrun and Sunnova Energy International have both declined since Trump won back the White House, plunging 50% and 68%, respectively, since election day.

"Uncertainty around policy is causing the market to value companies as if it's a certainty that all policy support is going away," said Jon Windham, who leads equity research for alternative energy and environmental services at investment bank UBS. "I think that's one of the things that would have attracted TPG to Altus."

Rising demand for electricity is putting pressure on renewable-energy companies to avoid losing market share by expanding, according to industry analysts. But depressed share prices make growth more difficult for publicly traded solar-power companies, and their prospects can worsen further if tax credits disappear, as the credits can cover up to 30% of the cost of new projects, the analysts said.

Solar companies raised $3 billion in public-equity markets last year, 59% less than in 2023, according to Mercom Capital Group, a communications and research company.

"At this stock level, the cost of equity is so expensive that it's difficult for them to raise equity capital," Windham said, referring to the practice of issuing new shares to finance growth.

As an equity investor, TPG can provide capital for Altus to expand while benefiting from revenue the company's existing projects generate, which can guarantee the buyout firm a minimum return on the investment, Windham said. Altus said it would be in a better position to expand as a private company under TPG's ownership.

Scott Lebovitz, a Goldman Sachs veteran who recently joined TPG as managing partner and head of infrastructure for the Rise Climate group, has said Altus's expansion and ability to provide renewable power at "commercial scale" makes it an attractive business. TPG declined to comment for this article.

"There's an installed base of assets that has cash flows tied to it. That's not at risk to future policy changes," Windham said of Altus's solar projects with supply agreements with power consumers. Such projects, however, don't appeal as much to growth-minded stock investors, he added.

"Public-equity investors don't put much value on just fixed, contracted cash flows. It's not a bond market. It's an equity market. They are looking for growth," Windham said. "There might be just a mismatch between what the company's worth in private hands and what it's worth in the public market."

The value of Altus might rise under TPG's ownership if tax credits for solar power survive in some form, Windham said. He cited congressional budget actions, expected in the coming months, in which lawmakers might make changes in some clean-energy tax credits to free up government revenue for other purposes.

"There's this time-horizon arbitrage in which the public-equity markets are pretty fearful of policy changes under the Trump administration, whereas longer-term equity investors could look at this and be like, 'You know what? Maybe there's some concern about policy in the next three or four months but if I look out five or six years, policy might come back and be more supportive,'" Windham said.

Write to Luis Garcia at luis.garcia@wsj.com

(END) Dow Jones Newswires

February 10, 2025 06:30 ET (11:30 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.