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What SolarCity Wants: Raising Money From Investors It Couldn't Reach Before

Jan 15 2014, 7:21am CST | by , in News

What SolarCity Wants: Raising Money From Investors It Couldn't Reach Before
Photo Credit: Forbes
 
 

To broaden its fundraising base and support its growth, SolarCity said Wednesday it will tap new types of investors by launching an online investing tool developed a company it bought last month.

The California solar company paid an undisclosed amount for Common Assets, which was founded only 18 months ago and hand’t started running its investment portal before being acquired.  SolarCity plans to roll out by the end of June a website where individual, corporate and institutional investors could browse opportunities to invest in SolarCity’s projects.

Common Assets got its start with funding from the private equity firm, U.S. Renewables Group, and Tim Newell and John Witchel, Common Assets’ CEO and chief architect, respectively.

The investments that pour in through the new website will mostly likely be translated into debt securities, said Newell, who is now SolarCity’s vice president of financial products. He declined to disclose much information about the offerings, yields and other information, citing a need to get regulatory approval before he could discuss financial products. Witchel, now SolarCity’s senior technology architect for financial products, was the chief technology officer of Prosper Marketplace, a online peer-to-peer lending site founded in California in 2005.

Expanding its investor base is crucial SolarCity’s longevity. SolarCity, the biggest residential solar installer in the country, has grown to its current size thanks in large part to its ability to raise lots of funds. The company has helped to make popular a financing model in which money it raised pay for the expensive upfront cost of installing solar panels on residential and commercial rooftops, and the investors earn returns from monthly payments made by home and business owners.

In the past, SolarCity raised multimillion-dollar funds from banks such as U.S. Bancorp and Bank of America, and from corporate investors such as Google and Pacific Gas & Electric. SolarCity, which was founded in 2006 and went public in 2012, completed the country’s first securitization of rooftop solar assets last year. The company sold $54.23 million worth of notes with a 4.8% interest rate that are scheduled to mature in December 2026.

Newell and his team set out to build a site that would match investors with project developers, and he worked on lining up SolarCity as a customer. U.S. Renewables Group was SolarCity’s financial advisor for a project at military housing, and Newell led that effort for U.S. Renewables.

“When it came time for us to get ready to launch the product, (SolarCity CEO) Lyndon Rive sat down and said, ‘I’m sorry, Tim, I don’t want to be your partner, I want to acquire you and your company,’” Newell said.

While SolarCity started off doing residential and commercial installations, it also has branched into utility-scale project development and a home energy retrofit­­ referral business. Expanding into other types of energy services requires a lot of capital. SolarCity also has been buying companies to boost its marketing efforts and cut installation time. It bought Paramount Solar to improve its sales in the residential market and Zep Solar for its solar panel mounting equipment that SolarCity says shortens the time it takes to complete a project.

As public acceptance for solar increases thanks in part to federal and state incentives to cut solar installation costs, SolarCity also is competing with more companies that want a share of the growing market. The company’s chief rivals include Vivint, Verengo, SunPower and more regional players such as Roof Diagnostics and Trinity Solar Power, both in New Jersey.

SolarCity’s new effort to raise money from a wider range of investors also pits it against companies that try to match investors with renewable energy projects. California’s based Mosaic, for example, makes it possible for individual and institutional investors to loan money to projects of their choice. Individuals could invest via Mosaic by putting up as little as $25.

Although Newell declined to describe the range of investment amounts SolarCity is looking for through the online investment tool, he said the goal is to have, overtime, financial products that would appeal to a variety of investors, such as individuals, private equity firms, mutual funds and community banks.

“What SolarCity is seeing is people want to support clean energy, and customers see the benefits of that for their own homes. But they also want to participate in other ways,” Newell said.

Source: Forbes

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