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SOLAR FLARE: WAPA Customers Deemed Credit Worthy For $100M Solar Bond Sell Off


The solar industry’s sixth securitization to date, due for launch by Colorado-based AES Distributed Energy, will be worth $100 million, backed against the company’s portfolio of solar generation assets, one of them in the Virgin Islands.

It the first solar asset-backed security deal to be leveraged by a utility company, in this case the Virgin Islands Water and Power Authority.

The offering follows four securitizations to date by SolarCity and one for Sunrun in what is becoming an emerging trend for the PV industry as solar becomes a more attractive proposition for the mainstream investment community.

The statistical rating organization Kroll Bond Rating Agency (KBRA) put the $100 million tag on the sale of a mixture of Class A and Class B notes. It will be split into $92.5 million in Class A notes and the remaining US$7.5 million in Class B notes. The analysis is executed on the filing which AES made last week. KBRA rated the Class A tranche at BBB and the Class B tranche at B.

AES platform Aurora Master Funding is issuing the notes, with Morgan Stanley acting as structuring advisor, sole bookrunner and initial purchaser. AES DE is also partnered with a Morgan Stanley subsidiary, MS Solar Solutions Corp, for developing solar assets and with further divisions of Morgan Stanley for ownership and operation of assets.

AES is backing the deal through 15 of its distributed energy companies, classified as “project companies”. This consists of 12 commercial and industrial, municipal and small utility (CIMU) project companies, and a further 3 residential project companies.

The commercial and industrial segment breaks down to 1,548 assets across six states and the Virgin Islands, on 97 project sites, with assets earning revenues through PPAs, as well as through performance-based incentives (PBIs) and Solar Renewable Energy Certificates (SRECs), which are applicable in states with renewable portfolio standards (RPS) legislation. In the residential segment meanwhile, AES DE has 1,451 lease agreements with homeowners who pay out fixed fees.

Technical due diligence was carried out by engineering firm Black & Veatch.

“KBRA believes the portfolio’s strong performance is a reflection of the Company’s operational strategy and technical expertise,” the report said.

The growth of the U.S. residential solar sector is being increasingly nurtured by just five leading installers, with Elon Musk-backed SolarCity out in front, supplying 34% of the market in the first half of the year.

The latest U.S. PV Leaderboard Q3 2015 from GTM Research has found that the same five solar companies have claimed the bulk of the market for the past three quarters, competing amongst themselves to increase market share.

In 2014 SolarCity also claimed 34% of the market share, and the company’s consolidation in 2015 is no mean feat considering the strides made by its nearest competitors – Vivint Solar and Sunrun – this year.

According to the Leaderboard, Vivint has accounted for 12% of all residential installations in the U.S. so far this year, with Sunrun following in third place on 3%. NRG Home Solar and Sungevity are fourth and fifth respectively, each with around a 2% market share.

Prior to AES’s announcement, the five solar securitizations in the U.S. amounted to $560.5 million.

In 2015, the Virgin Islands Water and Power Authority began converting its electric generating stations to use propane instead of residual and diesel fuel oils. WAPA aims to cut its imported fuel costs by 30%.

  • In recent years, generating fuel surcharges have driven the average price of electricity paid by Virgin Islands consumers as high as 50 cents per kilowatt hour, five times the national average.
  • The Virgin Islands’ first large-scale solar project, the 451-kilowatt Cyril E. King International Airport photovoltaic array on St. Thomas, went into operation in fall 2011 and provides 15% of the airport’s electricity; a 4-megawatt solar facility is being built on St. Croix.
  • The Virgin Islands’ largest solar project, the 5 megawatt Estate Donoe facility on St. Thomas, opened in February 2015, four months after the 4 megawatt Spanish Town Estate plant opened on St. Croix.
  • The Virgin Islands was a pilot project of the international Energy Development in Island Nations (EDIN) program, which encouraged efficiency and the use of renewable energy resources to cut fossil fuel use by 60% by 2025. The program has transitioned to a community-focused campaign, ViEnergy.

Estate Donoe

     Estate Donoe facility in St. Thomas

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The Author

John McCarthy

John McCarthy

John McCarthy is primarily known for his investigative reporting on the U.S. Virgin Islands. A series of reports beginning in the 1990's revealed that there was everything from coliform bacteria to Cryptosporidium in locally-bottled St. Croix drinking water, according to a then-unpublished University of the Virgin Islands sampling. Another report, following Hurricane Hugo in 1989, cited a Federal Emergency Management Agency (FEMA) confidential overview that said that over 40 percent of the U.S. Virgin Islands public lives below the poverty line. The Virgin Islands Free Press is the only Caribbean news source to regularly incorporate the findings of U.S. Freedom of Information Act requests. John's articles have appeared in the BVI Beacon, St. Croix Avis, San Juan Star and Virgin Islands Daily News. He is the former news director of WSVI-TV Channel 8 on St. Croix.

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