SolarCity Advances on First Solar-Bond Sale, Upgrade

SolarCity Corp., the second-largest U.S. solar company by market value, climbed the most in three days after selling the first bonds backed by revenue from rooftop solar projects.

SolarCity jumped 4.3 percent to $56.23 at the close in New York, the most since Nov. 11.

The $54.4 million in bonds have a 4.8 percent interest rate and will mature in December 2026, San Mateo, California-based SolarCity said in a statement yesterday after the close of regular trading.

The asset-backed securities will be paid with the cash flow from the company’s solar leases and power-purchase agreements, in a “first-of-its-kind deal,” said Stefan Linder, a New York-based analyst for Bloomberg New Energy Finance. The deal is a sign that mainstream investors are recognizing that solar power provides reliable, long-term income.

“This is really the first time we’ve seen asset-backed financing for a distributed-solar company,” Linder said in a telephone interview today. “Securitization offers a great way to lock in low-cost, long-term debt. This is important. SolarCity, like everyone else, knows that interest rates have nowhere to go but upward.”

SolarCity installs rooftop solar panels, typically at little or no cost to customers. The company owns the systems and its residential and commercial clients sign long-term agreements to buy the power.

More Bonds

The company may be planning to issue more solar-backed bonds, said Ben Kallo, a San Francisco-based analyst for Robert W. Baird & Co., who upgraded SolarCity today to the equivalent of a buy with a 12-month price target of $71.

“We expect additional securitizations to occur as SCTY continues to install PV systems,” Kallo said in a research note. Securities backed by revenue from solar panels “could merit a lower cost of capital as investors become increasingly comfortable with the financing product.”

First Solar Inc. is the largest U.S. solar company.

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