Question: Are any of the developers on the panel finding it hard to get capital right now?

Michael Silvestrini (Greenskies): No. Right now it feels as though there’s a lot of capital for this type of product. It’s tried-and-true technology, so a lot of the previous hurdles we’ve had to overcome in order to get financing have moved. Also, it really comes down to the quality of the portfolio; we really focus on a pristine client base and ideal credit-based project development. For that reason we’ve had a lot of success in being able to garner the cash we need in order to be able to develop the projects.
    I look around the [solar] space, though, and I’m finding that not everyone is able to obtain that type of portfolio, and that creates challenges. Anyone who’s been part of a large distributed generation closing knows that when you have such a mixed bag of odds and ends, it gets more complicated, the cost goes up, etc. So people are going to have to figure out those challenges as well to be able to expand on the availability of capital.

 

Paul Nahi (Enphase): Lyndon [at Solar City] recently came out with a loan product that’s very exciting. My question is: With the advent of loans, do you still think there’s going to be a shortage of capital? Or is it more ‘tax equity’ capital to which you are referring? 
 Lyndon Rive (Solar City): I’m referring to all capital needs. It also varies dramatically from company to company. For example, if you are running a business in 2015 and you’re expecting 30 per cent growth in 2016, then it’s not so dramatic. But I would think that most of us are planning for 100 per cent growth in 2016. [Audience applauds]. When any company goes through 100 per cent growth, they are going to see constraints in their ability to do that; one of the biggest constraints is going to be working capital.

 

Question: Lyndon, how much capital do you have raise per year?

Lyndon Rive: In 2015, we’re going to have to raise at least $3 billion in order to finance all of our assets.

Question: What is the capital structure of your company, i.e., what is the percentage of debt vs. tax equity?

Lyndon Rive: I would say tax equity normally comes in around 30–40 per cent; it depends on the funds and the cash flows. Debt comes in about 30–35 per cent and the rest is equity.

Question: Ryan Creamer, what is your capital structure by percentage?

Ryan Creamer (sPower): Today it’s pretty simple for us because we base it on balance sheet funding, so it’s 100 per cent and then we tie that in with our tax equity partners for the different projects.

Question: OK, it’s 100 per cent for you, but what’s the percentage of equity vs. tax equity is it at the project level?

Ryan Creamer: It’s probably in the neighborhood of 55/45 per cent equity vs. tax equity, respectively.

 

Question: Michael Silvestrini, what about the capital structure at your company?    
Michael Silvestrini: Our capital stack is very similar to what Lyndon just described. About a year ago it was delineated by one-third/one-third/one-third [tax equity/debt equity/equity]. That has since shifted around with the changing of terms and the improvement of both tax equity and debt equity terms and conditions, so you’re starting to get better than 33 per cent for those two categories. But obviously the goal is to reduce the equity — the most expensive component of the financing.

 

Question: Stacey Kusters…for a big utility like NV Energy, what is the capital structure?

Stacey Kusters (NV Energy): There is no tax equity, but it’s around 52/48 per cent, debt vs. equity, respectively.          

Paul Nahi: Exactly. We don’t do projects or installations. Rather, we are a technology company; we provide the technology to make the installation easier simpler and more effective. We provide the technology that increases the return on those assets. Naturally we rely on tremendous partners to actually do the installation and handle the financing.

 

Question: Shifting gears…are you seeing any effect on your business from the U.S. import duties on solar modules?

Ryan Creamer: Absolutely. When you look at the utility sector, as we’re going out and building projects, we spend a lot of time with green field developers, helping them bring their projects to fruition. When you look at the way developers look at price points going forward, everybody is speculating. I’ve heard people say we’re going to get to a [dollar] per watt, and I hope that we do. But when you look at the impacts…you will probably spend an additional $15 million to $20 million this year on panels due to a tariff. I think it’s wasted money. It’s affecting the rate payers and the tax payers, but it’s not helping anybody.

Michael Silvestrini: Yes, it will have an effect. And it’s tragic because on one hand we’re working on systems improvements (such as building the racks that we put string inverters on in our warehouse and then driving them out to sites and making a strategic delivery sequence in order to shave off two-tenths of a penny [off the price]. On the flip side we lose $0.20 per watt on a tariff. It’s the opposite of the trajectory of the industry, and it makes it challenging for us to wean ourselves off the incentives.
     It’s difficult to try to justify the logic behind the tariffs, and it’s forcing companies operating in the space to take risks that they might not otherwise take.

 

Question: We’ll take a question from the audience: “Listening to all the concerns about 2016 and the ITC ‘cliff,’ how do the panelists feel about Sen. Harry Reid’s stated goal of getting the ITC extended?

Lyndon Rive: In my opinion, the ‘right thing to do’ is to tax pollution. That’s probably the best policy you could implement [raucous applause]. Those who are polluting are extremely influential, and that’s a big lift. But if you’re not going to tax those who pollute, then the alternative is to incentivize those who don’t pollute.
     The idea that we’re going to have a reduction in something that’s solving the world’s biggest problem is mind-blowing to me. We have the technology, and we have the solutions. We should extend the ITC until we can tax pollution, but if you can’t tax pollution then extend the ITC in perpetuity.

 SPI 2015 is set to take place Sept. 14–17 in Anaheim, Calif.     

 

 

1.    One of the highlights of the annual SPI 2014 conference was a roundtable discussion that included some well-respected names in the solar industry, including Paul Nahi, CEO of Enphase; Michael Silvestrini, president, Greenskies; Lyndon Rive, co-founder and CEO of Solar City, Stacey Kusters, vice president, renewable energy and & origination, NV Energy; and Ryan Creamer, CEO of sPower. Keith Martin, partner with Chadbourne & Parke, served as moderator.