By Ucilia Wang
Renewable Energy World
SolarCity has signed a backup service agreement that should pave the way for it to issue securities backed by its solar assets in the future.
The company announced the agreement on Thursday but didn’t name the company, except to say that the company is an “AA- rated [double A minus] financial institution.” Lining up backup services is an important step for developing a market for solar-backed securities, said Nat Kreamer, CEO of Clean Power Finance, when I caught up with him last fall. Like SolarCity, Clean Power Finance also raises funds to finance installations and markets leases in which homeowners, instead of owning the solar panels on their rooftops, pay a monthly fee for the solar electricity from the panels.
A backup service provider would take over the billing, maintenance and other tasks if solar service companies such as SolarCity or Sunrun lost their ability to perform them. Backup service agreements are common in businesses that offer asset-backed securities, such as mortgages and auto loans, because they reduce investment risks. Banks and other investment institutions could require that backup service agreements are in place before they would fork over money or lower captial costs for borrowers. Credit rating agencies also want this type of agreement in place.
