SolarCity Next Bond Offering May Reach $200 Million: CFO

SolarCity Corp. (SCTY), the first U.S. company to offer bonds backed by rooftop solar panels, plans to sell as much as $200 million of additional notes as soon as the second quarter, its chief financial officer said.

The company expects subsequent bond offerings as often as every quarter, Chief Financial Officer Bob Kelly said today in a telephone interview. SolarCity, based in San Mateo, California, sold $54.4 million in bonds Nov. 13 in a transaction that closed today.

Investors are recognizing that selling electricity from solar systems is a stable, long-term source of revenue, Kelly said. That makes the company’s contracts to sell power well-suited for securitization.

“We’re continually educating the financial world on the quality and predictability of the 20-year contracts, where the sunshine is free,” Kelly said.

The solar bonds are rated BBB+ by Standard & Poor’s, the third-lowest investment grade. They have a 4.8 interest rate and will mature in December 2026.

The shares rose 4.6 percent to $48.02 at the close in New York and have quadrupled this year.

SolarCity installs rooftop solar systems for customers who typically pay little to nothing up front and sign long-term contracts to buy the power. As the company wins more clients, it makes sense to package the deals into securities, Kelly said.

“This market is built for frequent issuers at size,” he said. “People make their energy payments. At the end of the day, you have a very high-quality, low-risk payment. Those are great characteristics in the securitization market.”

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