Goldman Sachs makes a $500 million bet on solar

The fund will result in the installation of 110 megawatts of rooftop panel by SolarCity, the country's largest residental solar installer.

By MSN Money Partner May 16, 2013 4:43PM

By Todd Woody

 

Elon Musk's electric car and rocket ship ventures may score the headlines, but SolarCity (SCTY), his rooftop photovoltaic company, is proving the market leader of a booming business.


On Thursday, the Silicon Valley firm further consolidated its position as the nation's largest residential solar installer -- with the announcement that Goldman Sachs (GS) will finance $500 million in leases for SolarCity's customers.

The fund will result in the installation of 110 megawatts (MW) of rooftop solar panels, or 44% of the 250 MW SolarCity expects to install this year. Musk serves as chairman of SolarCity, which was founded by his cousins Lyndon Rive and Peter Rive, and holds more than a quarter of its shares.

About 90% of SolarCity's customers opt to lease a rooftop photovoltaic array rather than fork over the five-figure sums needed to purchase solar panels. That means SolarCity's business is dependent on raising tax equity funds to finance those leases. Financial heavy-hitters like Goldman, US Bancorp (USB) and Credit Suisse (CS) have created such funds because they get a 30% federal tax credit on every solar system leased. (And depending on how the fund is structured, they may also receive a steady flow of cash from homeowners' lease payments.)


For Goldman, the fund represents a bet that so-called distributed photovoltaic power will trump big solar thermal power plants in the desert. (Back during the great solar gold rush of '07, Goldman filed lease claims on 165,000 acres of federal land, to build solar power plants in the desert of the U.S. Southwest)


The Goldman cash pool is the largest such tax equity fund yet. SolarCity has now raised more than $2 billion to finance rooftop solar leases, and the deal underscores the fact that the company is as much a financial play as a renewable energy company.


For instance, SolarCity is now moving to package its leases into asset-backed securities that it can take to the capital markets. "We have a pretty good portfolio, which we can talk to the [credit] agencies about," SolarCity chief financial officer Robert Kelly said during the company's first-quarter earnings call on Monday. "I think you'll hear some pretty good news over the next couple of months regarding tax equity aggregation and long-term financing."


SolarCity's customers tend to have top credit ratings, but the company said it intends to use the Goldman fund to sign up those with less sterling scores. "The Goldman lease financing will make affordable solar electricity available to more types of homeowners and organizations," Jimmy Chuang, SolarCity's vice president of structured finance, said in a statement. "We expect to be able to expand our offering to a broader customer base by lowering the credit requirements even further in future financings."


The company said the Goldman fund will also allow it to reel in more schools, municipalities and organizations that don't carry credit ratings.

 

Click here to sign up for the Quartz Daily Brief and start your day with the latest intelligence on the new global economy.

 

More from Quartz

2Comments
May 17, 2013 6:34AM
avatar
Installation is the post-move. We needed big money to step up to the plate with manufacturing jobs. You know... so people can have roofs to install panels on and income to pay for them. Leave it to GS to go after the component they can manipulate.
May 17, 2013 4:47AM
avatar
This is quite a shock that Goldman has this much involvement in Solar. Ditto for Tesla and his folks. Seems Tesla might be around for a while.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

113
113 rated 1
268
268 rated 2
422
422 rated 3
632
632 rated 4
512
512 rated 5
518
518 rated 6
682
682 rated 7
523
523 rated 8
343
343 rated 9
124
124 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.