US solar financing on the brink of transformation

New York, 24 May 2012 – Financing of US solar projects is in the midst of
a transformation, with new business models, new investors, and new
financing vehicles gaining sway, according to new research by specialist
research firm Bloomberg New Energy Finance commissioned by Reznick Group.

US solar projects have historically been bankrolled by some combination of
energy sector players, banks, and the federal government, but the landscape
is rapidly changing. New business models are emerging with an emphasis on
third-party financing. New investors, including institutional players, are
entering. And new financing vehicles such as project bonds and other
securities are being assembled to tap the broader capital markets.

Bloomberg New Energy Finance, the leading provider of news, data, and
analysis on clean energy, water, power, and the carbon markets, has worked
with Reznick Group, a national accounting, tax, and business advisory firm,
to describe this ongoing evolution of US solar financing: where the market
is today, where it is heading, and what's behind this important transition.
The resulting report, “Re-imagining US solar financing", can be
downloaded at
http://about.bnef.com/2012/05/24/re-imagining-us-solar-financing-a-report-commissioned-by-reznick-group/.


The evolution towards a broader investor base will help maintain growth for
US solar deployment. Asset financing for US photovoltaic (PV) projects has
grown by a compound annual growth rate of 58% since 2004 and surged to a
record $21.1bn in 2011, fuelled by the one-year extension of the Department
of Treasury cash grant programme. Funding the next nine years of growth
(2012-20) for US PV deployment will require about $6.9bn annually on
average.

Two factors will drive the evolution. First, traditional players are
scaling back their participation. Constrained by regulatory requirements
and by the continent's financial crisis, eurozone banks are offering loans
of shorter duration and with slightly wider spreads. In the US, a key
Department of Energy loan guarantee programme lapsed in 2011 making less
low-priced capital available for large-scale projects.

Second, thanks to the continuing low-interest rate environment,
non-traditional investors are becoming more interested, lured by the
risk/return profiles of solar projects that employ well proven PV
technology. Motivated by attractive yields and the examples set by Chevron
and Google, US corporations are eyeing forays into tax equity. Pension
funds and insurance companies are willing to give solar projects a serious
look in the wake of the successful bond issuance for a solar project owned
by a Warren Buffett-backed utility. The past year has seen a crescendo of
conversations around financing vehicles that draw on the capital markets,
such as solar-backed securitisation, master limited partnerships (MLPs),
structures resembling real estate investment trusts (REITs) and publicly
listed solar ownership funds.

In parallel, new business models for deployment of solar have flourished,
including variations of third-party financing structures which enable
customers to enjoy the benefit of local systems at little or no upfront
cost. These models have the potential to broaden substantially the universe
of solar investors.

“Solar equipment prices have dropped by more than half since the start of
2011 but financing costs matter too,” said Michel Di Capua, Head of
Analysis, North America, at Bloomberg New Energy Finance in New York.
“New financing vehicles and new investors across the solar project
lifecycle – development, construction, commissioning, and then long-term
operation of assets – will cause the costs of equity, debt, and
potentially even tax equity to migrate down.”

Policy could accelerate the transformation. Investors surveyed as part of
this report seek stronger SREC programmes, new standards, more flexible tax
credits, and sanctioned high-liquidity investment vehicles such as solar
REITs.

“A greater understanding of project risk and return is driving new
investors into the solar PV market,” said Tim Kemper, Renewable Energy
Practice Leader at Reznick Group. “However, investors still need to pay
attention to tax and structuring issues as these are the factors that will
often determine the viability of a project.”

Ethan Zindler
Bloomberg New Energy Finance
+1 202 416 3466
ezindler@bloomberg.net

Kate Haranis
Rasky Baerlein
+1 617 391-9622
kharanis@rasky.com



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ABOUT REZNICK GROUP

Reznick Group is ranked among the top 20 accounting firms in the United
States, providing accounting, tax and business advisory services to clients
nationwide. In addition to other industries, Reznick Group offers a broad
array of accounting, tax and business advisory services specific to the
renewable energy sector - with services tailored to investors,
infrastructure developers and producers of renewable energy power. For more
information, visit: http://www.reznickgroup.com.



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