Banks Wade Carefully into Solar Merchant Waters

Originally posted on Power Finance & Risk.

Lenders financing solar projects are beginning to give credit to uncontracted revenues and novel hedging products amid intense competition in the bank market, with certain caveats.

According to a new database called Solar Lendscape, launched by risk management and data firm kWh Analytics, as many as 10 lenders are already valuing a merchant tail that goes beyond solar projects’ contracted revenues.

Ares Credit, Brookfield, CIT Group, ING Capital, Investec, Live Oak Bank, MMA Energy Capital, North American Development Bank, Open Energy Group and Prudential all attribute some value to uncontracted future cash flows in certain cases, according to the data.

The directory—the brainchild of kWh Analytics ceo Richard Matsui—also highlights more than 20 lenders that are prepared to give credit to the solar revenue put, an insurance product underwritten and distributed by kWh Analytics’ own licensed insurance brokerage subsidiary, Kudos Insurance Services, and backed by investment grade insurance carriers.

Coronal Energy used the product when it secured tax equity from PNC Bank for a 30 MW solar portfolio in Virginia early this year ( PFR, 1/30).

Despite an increased awareness of post-contracted cash flow risks, project finance bankers are reticent to give them too much credit.

Ralph Cho, co-head of North American power at Investec, described the steps banks would take when sizing debt based on merchant revenues when he spoke on a panel at the 15th Renewable Energy Finance Forum in New York.

Lenders modelling amortization scheduled would eschew the traditional 1.25 times debt service coverage ratio for uninsured utility-scale solar in favor of higher DSCRs of 2 to 2.5 times, he said.

Financiers would also assume a downside scenario in their projections—usually incorporating higher-than-expected operating costs.

In addition, they would use conservative capacity price estimates, taking the low-end of the range of values forecast.

Investec, according to Lendscape, is open to valuing both merchant tails and kWh Analytics’ Solar Revenue Put.

Lenders Want Solar Deals

Originally posted on SolarWakeup for June 26, 2018.

Lenders Want Solar Deals. The great team at kWh analytics is sharing some data about lenders interested and active in solar. Catching me off guard was the sheer number, almost 50 banks, that made it into the ‘solar lendscape’ which explains the competitive cost of capital that is being found by project owners. One of the topics that we don’t talk much about is the installation methods in the underwriting process. While BNEF has the tier 1 list for modules, who ensures that the right products are being installed to install the systems on the ground or on the roof? The IEs are barely scratching the surface on that and given the 30-year lifespans being modeled, there should be a complete system analysis.

kWh Analytics Launches Searchable Solar Financing Database

Originally posted on SolarWakeup.

Leading solar risk management firm kWh Analytics has launched Solar Lendscape, a searchable database designed to connect project developers with financing solutions.

The Solar Lendscape catalogs the solar industry’s most active lenders, including their check sizes, target market segments, and product type. This list will be updated regularly.

kWH Analytics is also offering to provide introductions to any of the lenders on the list if project developers need it. Interested developers should send an email with details of the project to

The database can be found here.

An analysis of the data indicates the number of active solar lenders has increased nearly 25-fold over the past 11 years, according to kWh Analytics.

solar lendscape


Alternative Energy: A Maturing Renewables Industry

Originally posted in Credit Suisse Alternative Energy Report, authored by Michael Weinstein, Maheep Mandloi, Khanh Nguyen.

“We attended the Renewable Energy Finance Forum Wall Street (REFF) this week in New York. The event was attended by lenders, tax equity providers, and major renewable developers.

More Discussions Around Shorter PPAs and Merchant Risk: Over the past year, we have been observing more discussions regarding shorter PPAs (10-15 years) among tax equity and debt providers, especially as 20-year wind and solar contracts are now below $20/MWh (wind) and <$25/MWh (solar) and cheaper than other technologies/merchant markets. Many investors are now more comfortable with merchant power risk, though most still need insurance products to cover unhedgable long term weather and basis risk.
Debt coverage ratios improving: Debt coverage ratio for large scale solar projects has come down from 1.3x last year to 1.25x without any insurance, and to 1.1x for P50 insurance (which guarantees energy production).”

Data Begins Insuring Output for Solar Systems in Virginia

Originally posted in The Energy Fix.

A new, data-driven, service backing two large solar systems in Virginia promises to ensure systems deliver at least 95% of their projected output.

The service is a “solar put.” It was developed by kWh Analytics in Silicon Valley for Coronal Energy and its clients Dominion Energy and the Central Virginia Electric Cooperative.

Solar developers can buy solar puts on their systems to persuade banks and other institutions to help finance the siting, permitting, construction and deployment costs.

The actual insurance product is housed at Swiss Re, the giant wholesale re-insurance company based in Zurich, Switzerland. With at least 95% of a system’s output ensured, the risk of a system underperforming for weather or any technical or equipment mishaps shifts from the developer to Swiss Re and its AA- credit rating.

This way, said Richard Matsui, founder and CEO of kWh Analytics, “banks can provide better financing terms to the solar developer and help the developer get more money out of their asset.”

In what has been the solar-challenged Southeast U.S., solar puts are poised to help developers overcome the still somewhat stubborn culture favoring monopoly utilities’ preference for natural gas and nuclear generation and early financing hurdles which are now further complicated by tariffs on steel and solar panels imposed by the Trump administration. At the same time, solar suddenly is in a position to help fill the void created by the failed construction of two nuclear reactors in South Carolina and utilities’ struggles to maintain the viability of their nuclear fleets.

Matsui conceived the idea of a solar put in early 2017. He and his colleagues began collecting data on how large solar systems were performing anywhere they could capture it.

“Every asset class has a third-party repository on how that asset class performs,” Matsui said. “Without that repository, it is very hard for investors to understand and trust how those assets are performing.”

Solar puts helped develop the 10 MW Martin Palmer Solar Center for the Central Virginia Electric Cooperative. CREDIT: Central Virginia Electric Cooperative

As 2017 came to close, kWh said it had collected data on how about 20% of the solar systems in the U.S. are performing from roughly 100 different solar system owners and equipment suppliers. “We are the only guys in the industry with this actuarial perspective so we set out to convince insurance companies how solar works,” Matsui said.

In making sales calls and speaking at various solar power conferences, Matsui said he kept running into Ed Feo, president of Coronal Energy. Feo said he grasped the concept quickly and deployed for Power Purchase Agreements to sell the output of its 10 MW Martin Palmer Solar Center to the Central Virginia Electric Cooperative (commissioned May 22) and power from its 20 MW Essex Solar Center to Dominion Energy in Eastern Virginia.

“Broadly speaking,” said Matsui, “insurance pricing is somewhat analogous to other more familiar forms of insurance, e.g. car insurance.

“When insuring a car, the insurance company needs to know the age of the driver, how many years they’ve had a license, past driving history, etc. The insurance company can’t tell you the formula. But they can tell you what factors go into pricing and what they’re going to insure.”

“Our pricing formula is structured accordingly,” Matsui explained. “We use physics modeling and our data repository of solar project data.” This includes location, hardware, installer and past performance.

This slide captures the essence of a solar put. CREDIT kWh Analytics

















At the recent Solar Power Southeast conference in Atlanta, Matsui said kWh serves “50% of the tax equity market with four of the top seven investors.” They include Google and clients of US Bank and PNC Bank.

Tax equity is money that for-profit companies are willing spend in buying solar systems and the tax credits that come with them to offset their tax liability.