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US rooftop solar makes SA’s Investec the go-to bank

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A South African bank is among the most go-to?funding source for any US rooftop solar industry just a couple of years after entering the marketplace.

Investec Plc arranged $880 million in the red financing for rooftop solar developers and financiers in 2016. That’s expenditures from the $1.5 billion bank debt raised in 2009, according to Bloomberg New Energy Finance.

Financing for rooftop solar is underpinned by a large number of small contracts with consumers. As you move the debt is linked with strong individual credit scoring, banks have favored big solar farms mainly because they generally contracts with investment-grade utilities. Investec has filled the gap by centering on the coverage industry’s unique financing needs, said Ralph Cho, the bank’s co-head of power & infrastructure in the Americas.

“We’re not only a plain vanilla solar lender,” the brand new York-based Cho, 44, said in the interview. “We do more intricate deals that sometimes take commodity risk or construction risk.”

The bank began in Johannesburg in 1974, and Fifteen years later was listed in your local local stock game. It moved into the UK in 1992 and listed there several years later. It focuses today on asset management and wealth management for prime net-worth clients, with an concentrate on the?UK, South Africa and Australia.

Investec hired Cho and fellow co-head Michael Pantelogianis in 2013. They worked previously at German bank WestLB, where they helped finance several landmark power and also deals such as largest US wind farm, the $1.9 billion Shepherds Flat project in Oregon. Additionally they raised about $4 billion for ethanol projects, another energy sector that did not get ample attention from banks.

“We felt we’re able to replicate the ethanol template we used back at WestLB for residential solar,” said Pantelogianis, 46. Investec typically puts together a proposal to anchor the financing, and improves the rest from “targeted banks active with consumer finance and power-project finance.”

The bank’s first rooftop deal, in 2014, was arranging $195 million in credit facilities for Sunrun Inc., the second-biggest US installer. Investec’s second deal didn’t come for more than a year, another financing for Sunrun. Its clients also include Vivint Solar Inc. and Spruce Finance Inc.

Investec gained share of the market as rooftop installers and financiers began looking increasingly at bank debt to invest in growth. Bankers had initially expected the cover industry to go to the securitization market, where investors fully understand consumer credit risk and long-term contracts with homeowners.

There have been several deals for rooftop solar asset-backed securities. Solar companies have raised $882 million inside the ABS market via the end of 2016, including $321 million within the first 1 / 2 of 2016 and none within the better half, based on New Energy Finance.

“The ABS publication rack very chicken or even the egg: investors want more deals, but won’t perform work until they arrive,” said Nat Kreamer, Spruce Finance’s San Francisco-based boss. Spruce, a Kleiner Perkins Caufield & Byers LLC-backed provider of consumer financing for residential solar and home efficiency projects, raised about $225 million in a very two of?Investec-led deals last year.

‘Good Niche’

Investec has “carved an effective niche on this space,” said Thomas Plagemann, chief commercial officer at Lehi, Utah-based Vivint Solar. “The Investec guys said, ‘I understand these structures,’ they understand solar, and said, ‘I might get my head across the consumer finance piece.'” Vivint raised $313 million in August by using a Investec-led deal.

When?Sunrun?hired Investec, the objective was that the bank would essentially provide the installer which includes a plastic card, until many of its consumer contracts may very well be packaged into new securities or medium-term business financing loans, Cho said. Now, Investec can give medium-term debt that competes with all the ABS market.

“There’s a little bit more to learn than only credit score,” Edward Fenster, chairman at San Francisco-based Sunrun, said in an interview. “Deal execution is undoubtedly an art.”

? 2017 Bloomberg

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