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SolarCity Creates over $300M in Funds for Solar Projects


Provider of clean energy SolarCity Corporation SCTY has created funds to develop more residential solar projects in the U.S. worth over $300 million. These funds were created in collaboration with Credit Suisse Group AG CS.

Reason for Fund Creation

Financing of solar projects allows homeowners, and small- and medium-sized businesses to install solar panels with no upfront cost and eventually pay less for electricity than their present utility bills. In addition, solar projects help reduce emission levels — one of the major drawbacks of using fossil fuels for power generation, especially coal.

Note that the U.S. administration has vowed for CO2 reduction of 28% by 2025 and 32% by 2030 from the 2005 levels. The plan sets carbon pollution reduction goals for power plants and requires states to implement plans to meet these goals. Increasingly stringent regulations on emission control led to the creation of opportunities in the renewable energy space.



Funds Created Earlier

SolarCity has been successfully raising funds for its projects. In September, the company created funds, worth $347 million, in association with leading global bank Citigroup Inc. C. Of these, $284 million will be used for residential solar projects across the nation, while the remaining $63 million will be utilized for small- and medium-sized businesses (SMB) across California. (Read more: SolarCity Creates Fund to Promote Green Energy Projects).

In the same month, SolarCity again created funds, worth $305 million, in its second cash equity transaction from Quantum Strategic Partners Ltd., which was advised by Soros Fund Management LLC. The funds provided equity investment in a portfolio of residential, commercial and industrial solar projects.

Investment in rooftop and other small-scale solar projects is expected to generate funds of $3.4 trillion over the next 25 years, according to Bloomberg New Energy Finance's New Energy Outlook 2016 report released this June. SolarCity has already raised funds for such solar projects and expects to continue doing so. Moreover, being a leading rooftop solar installer in the country, the company is expected to benefit from such investments.

Extension in Tax Credit

The extension of solar tax credit last year will drive further growth in solar projects in the U.S. The legislation allows solar companies to continue claiming federal investment tax credits ("ITC") at 30% of the price of solar systems installed by businesses or homeowners. The ITC, which would have previously expired at 2016 end, will now continue through 2019.

Scope for Solar in U.S.

Global utilization of renewable energy is on the rise, thanks to its environment-friendly nature as well as growing awareness of its benefits. An U.S. Energy Information Administration (“EIA”) report indicates continued growth in utility-scale solar power capacity, which will average almost 13.3 gigawatt (“GW”) in the 2016–2017 period. Despite the rapid uptake though, solar will still constitute just 1% of the total U.S. utility-scale generation in 2017, indicating immense room for growth.

Per a current report from the EIA, solar will witness the highest demand among all other sources of clean energy. The report also forecasts solar generation to increase to 246 GW in 2040 from the 2015 level of 25 GW.

These trends are likely to benefit U.S.-based solar companies like SolarCity and SunPower Corp. SPWR immensely, going forward.

Zacks Rank

SolarCity currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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