High startup capital costs have long been the bane of major rooftop solar-energy developers like San Mateo, California-based SolarCity. Currently, the industry receives a 30 percent federal investment tax credit, but with that credit scheduled to fall to 10 percent at the end of 2016, solar companies are scrambling to find other sources of financing. SolarCity’s deal—a 144A offering of $54 million in notes paying 4.8 percent—was the first to tap the capital markets through a securitization.
The securitization is built around a group of 20-year leases of solar equipment to more than 5,000 SolarCity residential, commercial and governmental customers; rating agencies assessed how likely those customers are to meet their future rent obligations. Standard & Poor’s gave the notes a BBB+(sf) rating, making rooftop solar one of the first new asset classes to achieve an investment grade rating in the asset-backed securities market since 2008.
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