On Friday, I attended the first inaugural New Sunshine Bond Conference. Over 200 attendees participated representing some of the top investors, developers and service providers. (Pretty impressive considering the declining attendance at other conferences in an over supply of clean tech conferences.) Solar City’s recent IPO, ABB’s 57% premium on its PowerOne acquisition, and solar stocks rebounding in the last couple of week definitely provided some much needed “New Sunshine” and positive energy.
And there’s even more good news for the downstream, according to Bank of America’s Head of Energy and Power. He expects the US residential and commercial and industrial segment to install 2GW in 2013 resulting in $8B in new capital structures and concluded that ”the demise of upstream players and the ensuing drop in cost of installation is creating a downstream installation and financing boom, creating very attractive returns for capital structures.”
I was honored to be a panelist with the 3 top rating agencies (Kroll, S&P and Moody’s) Since the conference theme was solving for securitization, this panel session was the most anticipated of the conference and attracted a standing room audience.
Key takeaways from the panel:
- The Rating Agencies’ general attitude and tone has become more positive about the challenge of assessing default risk and willingness to consider/ identify acceptable proxy data. Additionally, there’s a general agreement that solar as an asset class will be actively securitized.
- A general consensus about assessing payment risk as an interruption risk rather than a pure default risk and therefore credit enhancement tools such as reserve funds or cash capturing mechanisms would be effective.
- The importance of Issuer/originators to be able to articulate and quantify the value proposition of their product (loan/lease) and how consumer payment behavior is positively affected (reduces default risk).
- More work/analysis needed around customer payment behavior and response to energy prices, technology innovation, change in home ownership, etc. is need in order to fine tune credit enhancement levels.
- A general consensus that the various industry initiatives to create document and data definition standardization, as well as developing data bases on customer and equipment performance, are all very helpful in moving the development of securitization forward.
- A consensus that the industry is effectively addressing the O&M and back up servicing concerns.
The prospect of attractive returns brought a lot of new investors and financiers to this conference, a good sign for the much need capital required for Solar to become an asset class.
Solar securitization is brewing and a lot of smart people, organizations and committee are forming to not talk but put into play the building blocks to allow for securitization. The prospect of attractive returns brought a lot of new investors and financiers to this conference, a good sign for the much need capital required for Solar to become an asset class.