Investors Keep Faith in Solar Post Trump Election – MMA Raises $500mm

If you measure the impact of the election on investor sentiment, take one look at the $500 million that MMA Energy Capital announced at 8am the morning after election day. On November 9th, MMA announced a new joint venture named “Renewable Energy Lending” with TSSP, a TPG platform. TSSP is a dedicated credit and special situations platform with over $18 billion of assets under management.

SolarWakeup spoke with MMA Energy Capital’s Bob Hopper about the transaction and to discuss the current state of renewable energy lending. MMA has been operating the lending platform for just under 2 years and has committed $325 million in that time including capital for development activities, construction lending and permanent debt. The majority of the capital has been deployed into construction lending, long known for being complicated and difficult to get for many developers.

The $500 million committed to ‘Renewable Energy Lending’ is split between $425 million from TSSP and $75 million from MMA according to the 8K filed by MMA’s parent, MMA Capital Management which trades on the NASDAQ:MMAC.

Just after the election, treasury yields have gone up significantly. The 10-year treasuries have increased by 20% since the election results. Bob Hopper doesn’t see the immediate impact to solar lending,”Construction lending has been consistent on pricing through the years as opposed to the volatile treasury and mortgage yields.”

The success of the platform is indicative of the comfort that lenders like MMA have within the solar market. Hopper and many in the leadership team come from solar development companies like Enfinity and SunEdison. “We are excited to enter into this partnership that will increase the capital we have available to provide construction and permanent financing for this very active marketplace.  Our deep pipeline of opportunities continues to grow and the opportunity to partner with additional institutional capital will enable us to meet the anticipated growth of our business. We are extremely pleased to have TSSP as a partner in this endeavor,” Bob Hopper, Managing Director of MMA Energy Capital stated.

By Yann Brandt; November 15th, 2016

Vivint Solar Raises $200million in Tax Equity, Installs 59MW in Q3


 By Yann Brandt; Vivint Solar announced today that it has raised $200 million in new tax equity, a day before announcing it’s 3rd quarter financial results. The $200 million were critical given the delay the company was having in raising new tax equity after a failed acquisition by Sunedison. Vivint Solar even went out of its way to negotiate a new compensation deal with Thomas Plagemann, the EVP of Capital Markets. Plagemann is entitled to 0.15% of tax equity raised as part of the bonus compensation. The $200 million will go a long way to and help finance 123MW for an estimated $480 million of system values.

In the 3rd quarter, Vivint Solar announced that it had booked and installed 59MW. The 59MW came from 8,266 systems for a cumulative amount of 93,138. The average system size was 7.1kW but the total installed amount was a 2MW decrease from the same quarter last year. You can likely blame the focus on the acquisition on the decreased sales and marketing efforts.

The quarter showed signs of improvements. The total system costs decreased to $2.85/watt from $2.94/watt last quarter and $3.12/watt in Q32015. Sales and marketing costs came in at $0.55/watt in the quarter in line with average costs over the past 10 quarters. The $0.55/watt is significantly lowed than competitor SolarCity, which disclosed sales and marketing costs of $0.71/watt in Q2 of this year. SolarCity will release financial information on November 9th after market close.

In other financial data, Vivint Solar estimated that retained value per share was $5.97 per share which reflects an almost 100% premium over its current trade price of $3.05 per share. The current contracts have remaining payment obligations of $2.48 billion which is pre-debt payments so the cost of capital on those non-recourse loans are quire important.

Q3 Presentation


Q3 Financials


Q3 Cost per Watt Methodology


Solar Investment Executives, what your New Year’s resolution should be!

By Haresh Patel

The next two years will be a bonanza for US solar investors aiming to capitalize on the 30% Investment Tax Credit. If you haven’t made your business New Years resolution here’s a recommendation.

10X your investments and grab market-share with the remaining 30% tax credit while also preparing for the hangover in 2017.

To achieve this goal, hiring alone is insufficient. There isn’t enough time or qualified people to hire. The executives that invest in tools and business processes to boost organizational productivity will dominate project acquisitions and, more importantly, maintain a lean cost structure that will be a must in 2017.

Time is of the essence

2 years may seem like a long time, but examining key investment milestones illustrates that solar investors only have a brief window to expand deal-flow before the ITC deadline.

Looking back to the 2011 expiration of the 1603 Treasury Grant we see that the real cutoff for solar investors actually came when banks stopped looking at projects, which hit about six months before the incentive expired. Therefore, while Dec 31, 2016 marks the COD deadline for the ITC, in order to syndicate financing, investors need all the critical elements of projects lined up by June 30, 2016. Performing diligence on the bare minimum aspects a project before it can be brought to a bank – conditional use permits, the off-take and interconnection agreements etc. – can take a month alone. Investors that need to bring in construction lenders or tax equity investors need even more time. This pushes back the time investors have to fill their deal pipelines even further, by a minimum of 1-2 months (April-May 30, 2016).

Second, the 2011 Treasury Grant expiration demonstrated that there will be severe financing bottlenecks as June 30, 2016 approaches. Banks will be inundated with so many potential projects it will give them the opportunity to pick and choose with discretion. Projects submitted later will face stiffer competition.

Hiring alone won’t solve your problem:

Solar investors that want to scale deal-flow by 10x, in time, solely by hiring more bodies should have done so yesterday. According to a study on hiring processes conducted by University of Chicago economists, filling vacancies in today’s economy takes between 5-12 weeks on average, depending on the size of the company. In the solar industry the available resource pool of high quality talent is small and competition is high. The next best option is to hire from outside the industry and train new employees, which adds another 6 months before they make a real impact. Meaning that onboarding a new group that is capable of boosting deal flow of a significant magnitude is not going to impact business until sometime between July-October 2015, at the earliest.

Putting it all together, a new team essentially has 7-10 months to fill a deal pipeline with 10x more viable projects.

This brief window emphasizes the need to maximize productivity. Investors need to invest in tools and processes that allow them to enhance origination and close deals quickly. Scaling a team by only adding bodies does not ensure success, the key to increasing deal-flow is maximizing the returns on the resources available.

Looking beyond the ITC

Solar investors that have had the foresight to begin scaling without addressing productivity may have limited success with top line growth, but they jeopardize their bottom lines. This will have severe consequences in 2017, when there will be an abrupt slowdown of investment opportunities. Companies with high cost structures will have an extremely difficult time achieving profitability. To compensate for shrinking incentives, solar investors need to learn how to consistently close more MW’s per employee. Implementing business processes that increase productivity today will insure a competitive business beyond the ITC.

Ultimately, solar investment is an execution play and the industry is maturing, which leaves a lot of room for business model improvements. Historical examples of successful execution oriented businesses demonstrate that winners often have the lowest cost structure. Dell Computer sold directly to customers to bypass middlemen, Amazon leveraged technology to keep a lean inventory and generate float, and Walmart is famous for extremely frugal corporate spending and, consequently, aggressive pricing to gain market-share. In solar, access to low cost of capital and a low cost structure will determine the winners. The industry is waiting for the companies with the best business model to emerge and dominate.

Haresh Patel is the CEO and co-founder of Mercatus Inc., a provider of cloud-based software solutions that simplify renewable energy investment.