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By Beate Sonerud
is issuing US$200m of asset-linked retail
bonds, with maturities ranging from 1-7 years and interest rates
from 2-4%. Wells
Fargo is the banking partner. While the bonds are
expects the bonds to be buy and hold, and not traded in the
The bond is issued for small-scale investors, with
investment starting at US$1000, giving this bond issuance a
crowdfunding aspect. Choosing such a different structure allows
SolarCity to diversify their investor base – the company stresses
that small-scale investors are a complement, not
substitute, for large-scale institutional investors. While
this is the first public offering of solar bonds in the US, in the
UK, such small-scale retail and mini-bonds in the solar and wind
sectors have been popular for some time.
is the largest installer of residential solar in the US, and this
is not the first time they are pioneering in the green bond space.
In November last year, SolarCity was the first US company to issue asset-backed
securities for solar. Since then, it has issued another two rounds
of ABS backed by power-purchase agreements from their customers.
All of these issuances have been private placement offerings.
SolarCity’s securitisation offerings have shown a steady decline in coupon, providing the
company with cheaper funding. The company’s first issuance was rated BBB+ with coupon at
4.80% – right off the bat achieving investment grade rating with
no credit enhancement. In April this year, the second issuance, US$70.2m, was also
rated BBB+, but achieved a better coupon at 4.60%. In July 2014,
the third issuance, for US$201.5m, achieved a lower coupon still.
The upper tranche of this issuance achieved rating of BBB+, and a
coupon of 4.026%, with the lower BB tranche getting 5.45%,
providing an overall coupon of 4.32%.
In September, SolarCity also issued US$500m of 5-year
convertible bonds, with a 1.625% coupon. We like the wide range of
different structures of green bonds they are using.
In terms of the green credentials, we consider SolarCity a
pure-play company aligned with a climate economy, although
it’s worth noting that their bonds are not labelled green bonds.
We do think there is room for labelling also for solar companies
like SolarCity, mostly because it would make it easier for
investors to identify the company’s bond issuances as green.
Although easy investor identification is less relevant for this
specific retail bond, it is something to consider for future
issuances. It is also a much simpler process to label solar than
non-pure play companies – check out our solar standards for details
of what we’d expect from a labelled solar bond.
We look forward to see what SolarCity will do next as a green
bonds pioneer. The company seems to just be getting started, as SolarCity states that: “(…) this is the
first of fairly continuous offerings”. Great stuff!
——— Beate Sonerud is a policy analyst
at the Climate
Bonds Initiative, an “investor-focused” not-for-profit
promoting long-term debt models to fund a rapid, global
transition to a low-carbon economy.