Solar Securitization Deals Picking Up, Poised to Top 2014 Record

  • About $235 million of solar ABS deals closed so far this year
  • SolarCity, Sunrun only companies to arrange solar ABS deals

SolarCity Corp., the biggest U.S. rooftop solar company, has raised more in the asset-backed securities market this year than the industry completed in all of 2015, and developers are poised to exceed the record set in 2014.

SolarCity sold $235 million of solar-power bonds in two deals this year, according to a report Monday by Marathon Capital LLC. That’s more than the $234 million total for last year, when the company was joined by Sunrun Inc. SolarCity raised in 2014 about $272 million in debt backed by long-term receivables from rooftop leases and installment financing.

The numbers show growing interest from developers in tapping the ABS market, and increasing appetite from investors, said Ted Brandt, chief executive officer of Marathon, a Bannockburn, Illinois-based energy and infrastructure adviser. 

“It’s highly likely that issuances will grow this year,” he said in an interview Monday. “There are a number of existing and new issuers that are very actively pursuing securitization strategies.”

SolarCity Corp. has arranged all but one of the solar securitizations to date, including the first such deal, a $54.4 million issue in 2013. Sunrun, a San Francisco-based developer, priced its first securitization last year, worth $111 million.

Marathon expects more companies to follow suit. Vivint Solar Inc., Sunnova Energy Corp., Sungevity Inc. and Spruce Finance Inc. “have also demonstrated ability to deploy megawatts at scale,” according to the report. SunPower Corp. Chief Executive Officer Tom Werner said in the fourth quarter that he would consider doing so this year.

“The universe of distributed solar financiers who can steadily deploy a large volume of solar systems is growing but still relatively small,” according to the report. “Securitization first movers SolarCity and Sunrun both have proven ability to deploy over 35 megawatts -- the approximate minimum securitization size -- every quarter.”

In these deals, the underlying assets are unsecured, typically have limited operating histories and rely on consumers’ FICO scores to evaluate risk. They are “a novel asset class that is still evolving and is facing growing pains,” according to the report.

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