Wednesday, October 21, 2009

SolarCity Raises $100 Million for 2009

New York Times/Tom Woody

The credit crunch has walloped the residential solar industry, making it hard for installers like SolarCity to tap investor funds to finance rooftop arrays for their customers.

But in a sign that the recessionary clouds are parting a bit, SolarCity on Tuesday said that U.S. Bancorp has agreed to finance $100 million worth of solar installations in 2009.

That’s double the money the bank committed to provide SolarCity in June when the original deal – but not the financial details – was announced.

SolarCity, based in the Silicon Valley suburb of Foster City, offers customers the option of leasing their rooftop panels and thus avoiding the five-figure cost of buying a solar system.

The company retains ownership of the solar array and thus qualifies for a 30 percent federal tax credit against its cost. Since most startups have no use for such tax credits, they give them to investors in exchange for financing installations.

Still, most such tax equity partnerships have collapsed along with the Wall Street banks that often funded them. In fact, U.S. Bancorp stepped in after Morgan Stanley pulled the plug on a financing arrangement with SolarCity earlier this year.

“For all of this year, tax equity has been the No. 1 constraint in financing for the entire solar industry,” said Lyndon Rive, SolarCity’s chief executive. “In the third quarter of last year, there were about 20 active banks and insurance companies making tax equity investments. They all fell off a cliff and now there’s three or four.”

Despite the $100 million infusion, Mr. Rive said raising money for tax equity partnerships remains difficult. “The investors have been more selective and strict and they’re doing a tremendous amount of due diligence,” he said.

Mr. Rive noted, however, that the federal stimulus package has helped lure back some investors by giving them the option of receiving a government cash grant in lieu of the tax credit.

Mr. Rive said the the influx of financing has helped the company to hire 112 people — mainly solar panel installers — over the past four months, and the company now has a workforce of about 450 employees.

Other solar installers have found investors in recent months as well. San Francisco’s SunRun raised $18 million in a round of funding in July, and last week, Sungevity, based in Berkeley, Calif., announced that it had secured $6 million in its latest round of financing.

With solar panel prices plummeting this year due to over-production and more attractive federal incentives available to homeowners, financing remains the key hurdle for many customers, said Danny Kennedy, Sungevity’s president.

Mr. Kennedy has recently hired SolarCity’s former chief financial officer to develop a financing program for his company.

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