Can SolarCity Reach Financing Target for This Year?

During the early part of this week, the solar energy provider SolarCity Corp. (NASDAQ: SCTY) entered into 2 financing transactions amounting to approximately $338 million. Bank of America Merrill Lynch (BofAML) analysts expect that the commercial solar deal worth $150 million  and the tax equity fund totaling $188 million suggest that SolarCity is on track to achieve its 2016 financing target.

The solar energy corporation managed to secure a contract with Credit Suisse amounting to $150 million. The financial services firm will aid the energy giant to deploy commercial renewable power systems at government institutions, businesses, and schools  around the country.

In addition to this, SolarCity Corp. was also able to close the 2nd financing of tax equity investment program with the Bank of America Merrill Lynch and another investor. This financing program will aid the renewable energy provider get through the expenses and installations of solar projects amounting to $188 million and will allow homeowners to pay a lower cost for renewable energy.

These two transactions have helped SolarCity to complete the first quarter of its financing target for this year. The solar energy provider managed to raise up to $300 million in tax equity on a year-to-date basis, and approximately $400 million in non-recourse debt. While market players are concerned regarding the solar energy giant’s access to capital markets, the BofAML believes that the corporation has been successful.

Furthermore, the investment banking firm also predicts that SolarCity has enough capacity in its non-recourse debt and tax equity to finance the installations of solar panels for the first three quarters of the current year. Market experts also asset that although the energy giant has a lot of work to do in order to meet its solar installation plan for 2016, given the pace of financing alternatives, the funding scheme of SolarCity appears to be positive. The BofAML opines that the company can raise about $2.2 billion for the current year.

The sell-side firm also believes that the solar energy provider will be able to raise $1.9 billion by means of non-recourse debt and tax equity in order for the company to fund its 1,250 megawatts guidance for this year. BofAML stated that approximately $1.2 billion could be raised through the remaining tax equity capacity, while the remaining balance will be funded through other sources. Analysts further added that SolarCity should consider the $150 million non-recourse debt payment, which is due this 2016 while financing the company’s budget.

Although the sell-side firm indicates that the energy giant should opt for a non-recourse debt and tax equity strategy for financing, BofAML is also under the belief that these two means wouldn’t be sufficient for SolarCity. In addition, the research firmn also pointed out that the renewable energy developer should also find other funding alternaties for its costs and other related fees.

The firm has maintained its Buy rating for the SCTY stock, but market analysts at BofAML said that the management of the solar energy company should execute cash and growth-related strategies effectively. Given these recent developments, it appears like SolarCity Corp. is well on track to reach its financing target for this year.

Leave a Reply

Get Pre-Market Alerts!

Get Pre-Market Analysts' Upgrades, Downgrades, Earnings & Initiations with our FREE daily email newsletter.