Developed Model for Using Securitization Financing of Portfolios of Small Commercial and Residential Leases and Power Purchase Agreements

Edwin Feo, managing partner of USRG Renewable Finance, has developed a model for using securitization financing of portfolios of small commercial and residential leases and power purchase agreements.

The use of the third party provider model for PV energy systems has grown over the past few years. However, the financing market for non-investment grade customers has been restricted to a handful of tax equity investors with a relatively short term investment horizon.  The USRGRF program is designed to provide long term—twenty year—debt financing of portfolios of non-investment grade customers using the principles of structured finance developed in other asset classes.  USRGRF’s capital markets solution for financing of portfolios of PV assets will result in a deeper pool of capital, tradable securities, and a lower cost of capital—which will result in better pricing to PV customers. 

More About the Model and Finance Structure

The USRGRF model creates a way to finance small PV solar systems by using a separate entity to own the systems subject to leases or PPAs with home or small commercial owner.  By creating pools of PPAs and leases in a structured finance vehicle, long-term notes can be raised against the value of that portfolio.  With a large enough portfolio, which may be aggregated among multiple PV integrators, and using statistical analysis of the expected default rate, the securities will be structured to utilize different tranches of debt (some of which may benefit from federal loan guarantees) and equity to optimize the cost of long term capital.