SolarCity, the San Mateo-based company that is one of the country's largest residential solar energy system providers, is proving that you don't need a federal loan guarantee to find financing for major projects.
SolarCity Corp. had seen its hopes for a U.S. loan guarantee evaporate in the political fallout from the widely publicized Solyndra LLC bankruptcy. But the company said this week it was able to obtain financing from Bank of America Merrill Lynch.
The Bank of America financing will allow SolarCity to move ahead on its five-year, $1-billion "SolarStrong" rooftop project for military housing. As part of the project, SolarCity plans to partner with privatized military housing developers to install, own and operate rooftop installations and provide solar electricity for Armed Forces families at lower costs than traditional utility power.
SolarCity officials said they hope that the project will provide power to as many as 120,000 military housing units, adding that they would be creating the largest residential solar photovoltaic project in American history. They added the effort was groundbreaking in other ways as well.
"This is the first project of this kind of scale to be financed without a federal loan guarantee. We would not be able to do this without Bank of America Merrill Lynch," said Lyndon Rive, SolarCity’s chief executive officer.
Rive said that the deal was also a sign that lenders were becoming more comfortable with the idea of making major financing available for large-scale solar projects.
"Last year, this would not have been possible without the backup of a federal loan guarantee," Rive said.
Jonathan Plowe, head of new energy and infrastructure solutions at BofA Merrill, said two things tipped the scales in favor of SolarCity.
"Until a few months ago, there were no large-scale debt financing tools available for distributed solar projects," Plowe said. "But we have been able to develop a business model that can work without a loan guarantee.
The other factor, Plowe said, was BofA Merrill's confidence in SolarCity as a well-run company.
"We have spent a tremendous amount of time learning about their business," Plowe said. "SolarCity is clearly a leader in this space and we have gotten to know this project very well over the last several months."
Before the financing agreement with BofA Merrill, the Energy Department had offered SolarCity a conditional guarantee in September for 80% of a $344-million loan to support SolarCity’s military housing project. But that came during the same week that Fremont-based Solyndra filed for bankruptcy after it had received $535 million in guarantees from the same program.
In an atmosphere of increased scrutiny after the Solyndra debacle, it became apparent that SolarCity's loan guarantee paperwork wouldn't be completed before the program expired. Now, under the terms of the new agreement, Bank of America will provide up to $350 million in financing.
SolarStrong Installations have already begun at military housing units at Joint Base Pearl Harbor-Hickam in Hawaii. SolarCity said the program will expand into states such as California, where electricity rates are higher than other parts of the U.S.
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-- Ronald D. White
Photo: Workmen install solar panels at a SolarCity project at Hickham Communities at Joint Base Pearl Harbor-Hickam. Credit: Lend Lease.