SolarShare bonds in Ontario providing 5 percent returns

SolarShare bonds in Ontario provide 5 percent returnsImagine a low-risk bond with a return of 5 percent. Now imagine that bond supporting the development of local solar projects. That’s what TREC Renewable Energy Cooperative did when it created SolarShare Community bonds.

The return rates of the $1,000 (Canadian) bonds are made possible because of Ontario’s feed-in tariff (FiT). The FiT has created a low-risk environment, which means higher payments for photovoltaics and equipment made in the province.

“When you secure a feed-in tariff, it’s a 20-year power-purchase agreement,” said TREC spokesperson Rebecca Black. “The SolarShare bond is really unique and really ground breaking in a number of ways.”

Bonds dividends are paid out biannually over the bond’s five-year life. At 5 percent interest, each bond will yield $250 (Canadian) more than its original value.

The bonds, which were first offered in May 2011, are only available to residents and local businesses, according to Black.

“We’re getting new members every day,” she said.

The idea is to keep the money in the province, rather than allow it to trickle to absentee project developers and owners and investors.

“At this point, the bonds are still going through the province’s approval process and, while they’re available, access is limited,” Black said. “We’re in the legal position to sell bonds, but only one at a time.”

At this point a person can only own one such bond, but that should change soon, according to Black.

The bonds should be approved in January 2012, allowing people to buy multiple bonds.

“If you buy multiple bonds, you can put them in a registered retirement portfolio,” she said.

The term starts the day after the bond is purchased.

“After the five-year term, [the bondholder] can either cash it out or roll it over into a new bond,” Black said.

The project already is supporting 18 community solar projects producing more than 600 kilowatts in the province.

“A lot of things had been on hold for the last four or five months,” Black said.

That was partly because of political uncertainty due to pending elections.

“The conservatives had said they were going to end the FiT,” she said.

However, they did not achieve the majority needed to repeal the FiT, according to Black.

“The path has been cleared for us to [move forward],” Black said.

The bonds were developed to support various types of solar installations.

“One of the things we are looking at is to do a joint venture with others,” she said.

That could include developing a project with businesses or commercial developers and using the bonds to finance it.

“There’s flexibility within that model to make it work,” Black said.

Image courtesy of SolarShare.