residential solar finance 101: accessing capital markets ... · residential solar finance 101:...

Residential Solar Finance 101: Accessing Capital Markets to Grow Your Business

APEC 2014 Mike Pope, CFO

March 2014

2 PROPRIETARY CLEAN POWER FINANCE © 2013 |

Overview

Solar is Booming Residential Solar is a Huge Market Opportunity People Are Going Solar Industry Grew 20% in 2013: US Economy Grew 1.9%(1)

Large Opportunity for New Market Entrants Access New Deal Flow Gain Insight into A Large, Evolving Market

Financing Is Driving the Solar Market Financing Allows Consumer Access to Residential Solar Investors Like This Asset Class, Investing Significant Capital

Clean Power Finance Enables Financing Connects Supply and Demand Through Scalable, Online Platform Flexible, Unbranded Model Attracts New Players

CLEAN POWER FINANCE © 2014 | (1) Source: Greentech Media Q3 2013 SMI Report

Presenter

Presentation Notes

The last point is about new opportunities for non-traditional participants (i.e. non-solar companies)

3 CLEAN POWER FINANCE © 2014 |

Residential Solar in the U.S.

CLEAN POWER FINANCE © 2014 |


What Is Residential Solar?

Solar PV panels convert the sun’s photons into direct current (DC) electricity.

The inverter turns DC into alternating current (AC) for use in the home.

Solar power is used first. If there’s not enough (or at night), grid power supplements.

Extra, unused AC power is sent back to the grid to be used by other local consumers.

Presenter

Presentation Notes

Basics of how residential solar works.


Snapshot: Residential Solar in the U.S.

More than 360,000 homes across the country have solar systems(1)

Someone installs a residential solar system in the U.S. every 4 minutes. (2)

(1) (2) Source: Greentech Media Q3 2013 SMI Report


Trend 1: Financing Is a Key Market Driver

Barriers to Adoption: • High up front cost • Maintenance concerns • Customer confusion

Consumer Benefits: • Little/no money down • Professional services

for O&M • Lower electric bills

FINANCE PRODUCTS Solar Leases and Power Purchase Agreements

(PPAs)

Residential is the fastest-growing segment in the U.S. solar market.(1)

People Overwhelmingly Go Solar To Save Money

(1) Source: Greentech Media Q3 2013 SMI Report


Residential Solar – and Financing - Are Going Mass Market

Source: Greentech Media 3Q 2013 SMI Report

More U.S. Homes With Solar Installed

Increased Use Of Solar Financing % Financed Solar Homes Installed

300K

200K

100K

400K

500K

2010 2011 2012 2013 2014E 2015E 2016E

2010 2011 2012 2013

CLEAN POWER FINANCE © 2014 | CLEAN POWER FINANCE

© 2014 |

Presenter

Presentation Notes

“Q3. Nearly 31,000 individual residential installations were completed in the third quarter, bringing the cumulative total in the U.S. to 360,280.” I wonder if the chart above is solar homes installed each year? That’s what the title suggests to me. I will try to clarify with GTM.


The Next Wave of Consumer Financing

ELECTRICITY FINANCING $6 Billion

Annual Market (E)

AUTO FINANCING $90 Billion

Annual Market

EDUCATION FINANCING $26 Billion

Annual Market

MORTGAGE FINANCING $2 Trillion

Annual Market

Investors Like Residential Solar

An Attractive Asset Class

Relatively High Returns with Relatively Low Risk

Capital Providers Include Banks, Electric

Utilities, Corporates

CLEAN POWER FINANCE © 2014 | CLEAN POWER FINANCE

© 2014 |

Sources: Securities Industry and Financial Markets Association (SIFMA), Greentech Media Research, US Census 2011, GTMR, Clean Power Finance

Presenter

Presentation Notes

Single family, detached homes 2011 in 31 U.S. states with net metering programs and retail residential electric rates higher than $.10/kWh - 56,255,825 (Census 2011) US Solar installation count, residential 1Q13 - 300,880 (GTMR) Penetration - .48%


Trend 2: Investors Realizing High Risk-Adjusted Returns; An Increasingly Compelling and Credible Asset Class

Consumers Overwhelmingly Pay Their Electric Bills

Prime Mortgage

Student Loan

Credit Card

10yr T-Note 10yr "A" Muni

10yr "A" Corp.

10yr "BBB" Corp.

Prime Auto

0%

2%

4%

6%

8%

10%

12%

0.00% 0.20% 0.40% 0.60% 0.80% 1.00%

Annu

al U

nlev

ered

Yie

ld

Annual Unlevered

Cash Yield(1)

Annual Default Rate

Residential Solar 2013

Source: Kilowatt Financial (1) Pricing Is for Prime Consumers


Clean Power Finance



Clean Power Finance’s Platform Enables Financing

Financial Services and Software

for the Solar Industry

Solar Professionals Grow Their Businesses by Offering Compelling Solar Finance Products

to Homeowners

Investors Ability to Efficiently Manage Risk and Invest in A Residential Solar

Portfolio

Manufacturers Distributors

Installers

Utilities Corporates

Financial Institutions

Major Fund Investors Top Investors

Presenter

Presentation Notes

Kilowatt is not yet public. This is a very public forum, not an investor event where NDAs are assumed. I do not recommend using KWF. Dan Pillemer is talking to us about a press release announcing KWF’s investment of a quarter billion dollars through the CPF Market. We can take out Morgan Stanley, but we should be sure about adding KWF.


How It Works

Verified Professionals Designs System Generates Proposal Selects Financing

Options Sells Consumer

Investor Locks Price Reserves Capital

Underwrites Consumer Confirms Deal Meets

Product Parameters

Ongoing Operations Underwriting Origination and

Construction


How It Works

Consumer Accepted


Construction

Verified Professionals Completes

Construction Agrees to Warranties

Investor Pays Installer Takes Ownership of

Completed System

Underwrites the System (Reviews Construction Documentation

Transacts Purchase


How It Works

Consumer Accepted


Construction

Transaction Completed

Manages Assets for Investors Monitors Systems Manages Maintenance

Arranges Billing & Payment Collections

Customer Service

Verified Professionals Services Warranties On-Call Maintenance

Investor Earns Returns


Market Opportunities



Comcast Partners with NRG

Trend 3: New Business Ventures Capitalizing On Increasing Consumer Engagement With Electricity

Google Buys Nest for $3.2BN

Energy Software Company Opower Files for IPO

Integrys Energy Services Invests in Solar Through CPF

• Home automation company • Designs and manufactures

smart thermostats & smoke detectors

• Emphasizes user experience

• New industries partnering with energy companies

• Cable providers, alarm

companies, etc. • Bring customer acquisition

expertise to retail electricity

• Software-as-a-Service company • Helps utilities promote energy

efficiency • Provides customers with

personalized ways to save energy & money.

• CPF connects supply and demand • Unbranded platform enables

traditional businesses to access residential solar opportunity

• Electricians, roofers, utilities


Key Takeaways

Trend 1: Financing Is A Key Driver of Growth In US Solar Market, Particularly Residential Sector

Trend 2: Favorable Returns with Managed Risk Are Attracting Major New Solar Investors from Variety of Industries

Trend 3: New Business Opportunities Proliferate as Consumers Use New Technologies to Engage with Electric Power

CLEAN POWER FINANCE © 2014 | (1) Source: Greentech Media Q3 2013 SMI Report

The CPF Market Connects Industries For Win-Win Outcomes

Thank You

Mike Pope CFO [email protected]

mailto:[email protected]

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