ArcStar Energy
646.402.5076
www.arcstarenergy.com
New financing mechanism: Solar-backed securities
by Ucilia Wang, contributor, RenewableEnergyWorld.com
December 30, 2011 - The idea of creating solar-backed securities has
generated strong interest among US project developers who want to access
more capital to grow their business. The idea also is sprouting up in India,
which is only at the beginning of building a market for solar energy.
Project developer Welspun Energy told Bloomberg that it has been talking to
an Indian bank that wants to create securities backed by Welspun's first
solar power plant. Welspun Energy is part of Welspun Group, an Indian
conglomerate that has built its fortunes in businesses such as textiles and
pipes. Buyers of the securities would get payments from the revenues
generated by the project.
Creating securities backed by assets or debt isn't a new financial
instrument -- we have all heard about mortgage-backed securities and the
havoc they can create when lenders don't do a good job of screening home
loan applicants. But solar is not nearly as old and established as the
housing market, so a tough challenge is to convince financial institutions,
rating agencies and any organization that can guarantee securities that
solar is an investment that will provide good, long-term returns without
high default rates.
The discussion between Welspun and this bank, which it wouldn't name, is
interesting because the Indian solar market is so new that the country's
solar energy production should reach 141MW by the end of 2011, according to
GTM Research. That number, of course, is tiny compared to the gigawatts of
solar power installed each year in Germany or Italy. India's national solar
program began only last year, and the government has held two auctions so
far, the most recent took place this month. A few states in India, such as
Gujarat, also run their own solar incentive programs.
Welspun only completed its first project -- a 15MW farm in Gujarat financed
by ICICI Bank -- under the national solar program in October. So the project
has hardly had time to generate performance data to show how well it may
perform long-term.
Solar-backed securities present a new way for developers to raise funds and
for banks to monetize their solar investments. Lining up project financing
has always been a huge stumbling block for developers in most solar markets,
particularly because the global economy hasn't recovered as quickly as
anticipated. In fact, the financing challenge partly contributed to a
lower-than-expected demand for solar energy equipment this year in Europe,
which has been grappling with the sovereign debt crisis.
US solar companies are keenly interested in raising money by selling
asset-backed securities to institutional investors such as pension funds.
SunRun and SolarCity are two companies that have discussed their plans to do
so in a CNN piece and a Forbes story this year, and the market could see the
first issuance of these securities in 2012.
This article was originally published in the Renewable Energy World network
by www.RenewableEnergyWorld.com, and is reprinted here with permission.
Editors' Choice
Sent via BlackBerry from T-Mobile
No comments:
Post a Comment