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Solar industry disruptor Solar City has achieved a $201.5 securitization through a rarely-used, and potentially challenging, financial model.

Clean Power

Solar City Achieves $201.5 Million Securitization

Solar industry disruptor Solar City has achieved a $201.5 securitization through a rarely-used, and potentially challenging, financial model.

The thriving  solar tech company Solar City has secured a financing round of $201.5 million. That’s a lot of money but it’s not too surprising considering that the company succeeded in securing rounds of $54 million in November of 2013 and $70 million in April 2014.


The latest and largest financing round is two bundles – one of $160 million at 4.026% and one of $41.5 million at 5.45% interest.

The official press release stated:

The notes will be secured by and payable solely from the cash flow generated by a pool of photovoltaic systems that will be owned by SolarCity LMC Series III, LLC and the interest of SolarCity LMC Series III, LLC as lessor of the photovoltaic systems and related leases and power purchase agreements and ancillary rights and agreements under a master lease agreement, including rent and other payments to be made by the lessee, and in other ancillary master lease documents.

That Solar City is experimenting with different financial arrangements is not peculiar considering how it has disrupted the solar industry. Though challenging, it’s strategy could pay off:

Guy LeBas, a fixed-income strategist with Janney Capital Investments, said such offerings at the corporate level are still rare. One reason, according to LeBas, is that investment banks usually serve as intermediaries in debt issuance. These big financial institutions can help with price setting, marketing, and navigating the regulatory landscape. He added that it’s “very hard” to raise a big amount of money with offers directly to investors.

The mortgage-backed security might be an example of a similar type of security, though Solar City doesn’t own homes; it owns solar PV systems. Though mortgage-backed securities were part of the huge economic meltdown that began in 2008, they actually date back to 1857 with the farm railroad mortgage bonds.

An NREL document noted the potential for securitization to help the solar industry,

Institutional investors, such as pension and insurance funds, will typically allocate about 5% of their assets for “alternative investments,” such as a renewable energy project investment.  Courting these entities will therefore require solar to transcend the “alternative” category and offer itself as a bankable, standardized, and transparent investment product. Institutional investors allocate as much as 40% of their assets to these types of investments, which, by some estimates, could amount to some $37 trillion at the outset of 2014 3,4.

Solar City has a market cap of about $6.6 billion and is trading around the 71-dollar mark. It was just over eleven dollars in December of 2012.

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