Developer Inks Financing with First Solar Revenue Put


Originally posted on SparkSpread.

A U.S. developer recently closed financing for a 30 MW (ac) portfolio of solar projects in Virginia with what is thought to be the industry’s first solar revenue put.

The deal, which was executed by developer Coronal Energy and a AA- rated insurance company, was structured by kWh Analytics, a solar risk management outfit.

The multi-year revenue put guarantees up to 95% of forecasted P50 energy production at the Coronal Energy portfolio, which is also financed with tax equity provided by an unnamed bank.

By providing an “all risk” insurance policy, which covers losses due to factors including adverse weather and panel failure, the kWh Analytics revenue put has the potential to reduce the debt service coverage ratio (DSCR) required by project finance lenders to 1.10x or 1.15x from a more typical 1.30x.

The lower DSCR could cut the overall cost of solar projects by as much as $0.05/per watt, equivalent to half the $.10/per watt increase expected as a result of the imposition of tariffs on solar panels imported in the U.S.

“In the solar business, risk is cost. In fact, the cost of capital is the single largest cost to a solar power plant. Using data, we at kWh Analytics reduce risk. Lower risk means lower cost means more solar,” Richard Matsui, founder and ceo of kWh Analytics, said in a statement.

Indeed, in the fourth quarter, seven lenders issued term sheets at 1.10x or 1.15x DSCR on the P50 revenue of projects, assuming that kWh Analytics revenue put is in the structure, he notes.

San Francisco-based kWh Analytics is able to asses and price solar project risk via a proprietary database of historical performance data, accounting for some 20% of the U.S. market.

The transaction with Coronal Energy, which closed on Dec. 22, covers the Essex project (20 MW), which is contracted to Dominion Energy; and the Martin and Palmer projects (10 MW, total), which sell power to Central Virginia Electric Cooperative.

“Our work with the kWh Analytics team enabled the portfolio to move smoothly across the finance finish line and on to producing clean, low-cost energy for our utility customers,” Ed Feo, Coronal Energy’s president, commented.