PV investors: Magic number for financing solar—$100 million pipeline

PV investors: Magic number for financing solar—$100 million pipelineYesterday, the PV America convention hosted a panel with some of the U.S.’ leading tax equity investors for solar and renewable energy to discuss one of the biggest hurdles to increasing the amount of solar in the U.S.—financing.

On hand for the discussion were: Barry Neal, senior vice president, head of Environmental Finance with Wells Fargo; Ed Sproull, vice president with De Lage Landen and John Eber, managing director, Energy Investments, J.P. Morgan Capital Corp.

In all, the companies were responsible for more than $16.2 billion in tax equity investments in renewables. The panel was moderated by Laura Ellen Jones, a partner with Hunton & Williams LLP.

“The biggest obstacle to solar installations today is financing,” said Solar Energy Industries Association CEO Rhone Resch in his introduction. “We have put together a fantastic panel to address some of the most burning questions about how we can overcome these obstacles to build a strong solar industry in America and continue to be the fastest growing industry in the United States.”

In all, there are now about 16 or 17 tax-equity investors in renewable energy, Eber said. Most of those are in solar or looking at it, and most are banks, he said. The experts on hand were looking to invest with companies or projects that have at least $100 million in investment potential.

That number is from the developer’s project pipeline, which both Sproull and Neal said they looked for. “I’d much prefer to see a pipeline with projects where a power-purchase agreement is in place.…Execution on the first is critical, but ultimately we need to see a pathway to deploy $100 million over a 3 year period.”

J.P Morgan is looking to invest in larger solar projects, about $100 million per project.

“Last year we did 10 deals,” Eber said. In all, the company invested about $1 billion in solar projects in 2010. “To us, a small deal is $60 million.”

When looking to invest in such projects, each company has a checklist. For instance, De Lage Landen is most focused on credit.

J.P. Morgan is looking for project sponsors with capital to invest.

“We like sponsors who have capital. Who are going to put capital into the deal along side of us, who are willing to take risks we’re looking to take and be subordinate through a lease or through a partnership flip structure,” Eber said. “Our first cut is always to find the right kind of partners for the deals, and after that, we start to drill down into the project itself.”

Wells Fargo is focused on building the partnership, according to Neal.

“It’s getting to know the sponsors, understanding their business plan, their execution capability. There’s no better way to see that than to see what the developer sponsor has done with similar projects,” Neal said. “Our focus is never on one-off projects. We look at what the pipeline is and what the prospects are for doing that first deal and then what’s after that. It may take some time.”

Pictured: Eber and Neal (L to R) from the PV America panel discussion on Tuesday, April 5.
 

 

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