Last week, MidAmerican Energy Holdings issued $850 million in bonds to support the 550-megawatt Topaz Solar Farm that the company bought from First Solar Inc., which is developing the project.
It’s among the first time such a large photovoltaic project has issued bonds—and it’s been popular.
“There have been a couple others that have gone the bond route, but with DOE support,” said Fitch Primary Analyst Cynthia Howells. This is likely the first that has issued bonds without a loan guarantee.
The bonds were granted BBB+ status from Fitch Ratings, Inc.
“This is the first public rating that Fitch has done [for PV],” Howells said.
The company did grant a parabolic trough project with a rating within the A class, but it was a private rating and received higher ratings because of the project sponsors.
Fitch granted the rating for a number of reasons, including the power-purchase agreement First Solar developed with Pacific Gas & Electric as well as First Solar’s history of project completion.
However, if anything happened, and First Solar was unable to complete the project, Fitch anticipated that enough other contractors exist that could overtake the project if needed.
As one of the first times in the U.S. that the company behind a utility-scale solar project has issued bonds, the Topaz Solar Farm bonds may be a bellwether as other solar projects seek sources of low-interest rate financing.
And investors have shown a lot of interest in the offering. One investment manager told The Wall Street Journal last week that 60 of its accounts ordered a total of $1.3 billion in project bonds, with the majority, roughly 90 percent, coming from insurance companies.
That type of reaction spurred MidAmerican to up the original amount of bonds offered from $700 million to $850 million. And the company is likely to issue a second round of bonds to support financing the project in the future. In issuing its rating on the bonds, Fitch also considered the future round of bonds that MidAmerican could offer, Howells said.
The bonds, which will reach maturity on Sept. 30, 2039, will yield a 5.75 percent return rate. They will start paying out on March 30, 2012, and will continue to pay out on a semi-annual basis as the project is built and starts operating.