SolarCity’s latest US$70 million share offering is ‘evolutionary step’

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US installer SolarCity has announced pricing details of its second securitisation, which investment banking firm Roth Capital has described as an “evolutionary step on the path to lower-cost financing”.

SolarCity is offering US$70.2 million in ‘Solar Asset Backed Notes’ through its subsidiary, SolarCity LMC Series II. The notes will therefore be secured entirely by cashflow from PV, consisting of a pool of PV system assets, related leases and power purchase agreements (PPAs) as well as ancillary rights and agreements.

Notes for the latest round were priced on 2 April with the sale expected to close by 10 April, subject to conditions. Credit Suisse is sole agent and bookrunner on the securitisation.

Yield payable on the latest deal is set at 4.59%, in contrast to the previous US$54 million deal where interest was 4.8%. The anticipated repayment date for the US$70.2 million has been announced as April 2022, for a term of eight years, versus the previous round, where repayment will take place over 13 years.

Roth Capital commented that investors may have originally expected a deal exceeding US$100 million, the deal was limited by cash grant assets held by SolarCity and was also oversubscribed. The banking firm said that in a flash note on the deal that SolarCity, having altered the values of several key variables, is gauging the market to assess demand for its asset-backed securitisation (ASB) products. These variables include the advance rate, maturity and underlying asset profiles of the deals.

Roth Capital also noted that the new deal includes 6,596 PV systems, of which 87% are residential, while the prior deal consisted of 71% residential systems out of 5,033. This was among several “interesting differences” between the two deals, according to Roth, while weighted average electricity price in both offerings “appears similar” at US$0.15 per kilowatt.

According to Roth, the majority of the next ABS deal offered by SolarCity will most likely comprise of tax equity. Roth put a price target of US$80 on shares, having made a valuation of SolarCity based on a discounted cash flow model, before highlighting some of the risks that the company could face. These include SolarCity’s reliance on key management talent including the co-founders, Lyndon Rive and Peter Rive, an IRS audit currently taking place and its reliance on net metering programmes. The note did however describe curtailment of net metering programmes as “unexpected”.

The company previously raised US$54 million through a securitisation which was launched in November 2013. Shayle Kann of GTM Research explained to PV Tech at the time of the previous deal why he felt it “broke down barriers” for the US market. 

Also announced this week was news that PV system designer and manufacturer SunPower has raised US$42 million in non-recourse debt in order to finance the company’s residential lease programme. Hannon Armstrong Sustainable Infrastructure Capital (HASI) will provide the financing.

According to SunPower, the deal will allow it to leverage existing lease programme assets and expand the programme as well as increasing cash position and improving its balance sheet. SunPower chief financial officer Chuck Boynton called the deal with HANI an “innovative partnership”.

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