News on Securitization: Rooftop assets securitization deal highlights substantial scope in renewable energy securitization

November 29, 2013

SolarCity, a company in the solar energy sector, recently completed a securitization of rooftop solar energy equipment, paving the way for innovative deals in the renewable energy sector coming up in time to come.

Rooftop solar equipment have cashflows spreads over 8 to 15 years, and it is important to find devices of take-out financing that match the financial cashflows with the energy potential of the equipment. Using traditional loan-financing devices, it is difficult to achieve this matching. However, securitization allows this matching comfortably. Thus, where theoretically, securitization is ideally suited for solar equipment financing, there has not been much in practice to show-case the implementation of this method of financing.

The SolarCity transaction uses the future flows device to raise approximate $ 54.42 million funding against assets having a value of $ 87.8 million[1]. This is about 40% overcollateralization, but considering that the defaults in solar power consumer sector may be as high as 25%, the level is not difficult to understand.

The sale of the Notes, with an interest rate of 4.8%, due in 2026, was recently reported completed[2].  The company, it is reported, was quite happy with investor interest.