SolarCity, Bank Of America Setup A New Tax Equity Fund

SolarCity, Bank Of America Setup A New Tax Equity Fund
By BrokenSphere (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

SolarCity is always looking to raise funds to install residential rooftops solar systems. On Thursday, the residential solar installer announced a new investment financing plan to attract smaller investors. It has partnered with Bank of America to create a $200 million tax equity fund that will allow smaller investors such as community banks to fund its residential installations.

SolarCity plans to bring down the cost

SolarCity CEO Lyndon Rive said in a statement that the move was aimed at infusing fresh capital in the rapidly growing rooftop solar sector. It will also help bring down the cost of that capital. Rive said the new tax equity fund will attract more investors which, in turn, will intensify competition. That will reduce the cost for the company.

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The tax equity funds allow companies to claim 30% federal tax credit. According to Reuters, they generate returns between 8% and 10%. The new fund will allow smaller investors to put in $20 million to $25 million, which is much smaller than had been required. Bank of America will invest whatever capital is required to reach $200 million, said SolarCity. Bank of America will be the administrator of the new fund.

SolarCity to deploy this fund over the next year

Lyndon Rive said the company will deploy that $200 million fund over the next 12 months. The small and mid-size investors will not have to pay the conventional transaction fees to participate, which could sometimes reach $1 million. They can participate in project deployment funds by paying only tens of thousands of dollars in transaction fees.

The San Mateo-based company raised $400 million from Bank of America in December. In February, search engine giant Google committed to invest $300 million in SolarCity’s newly created fund. The company has also received financing from Credit Suisse and JPMorgan to install rooftop solar. SolarCity bears the hefty upfront cost of installing panels, and recovers that amount (plus profits) through low monthly payments for 20 years.

SolarCity shares fell 2.13% to $60.57 at 11:30 AM EDT on Friday.



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