The deal marks the largest debt financing in the US distributed generation (DG) sector since Sunrun’s $425mn credit facility was announced in Jan’22
The financing comprises a $105mn revolving credit facility with a $50mn accordion and a $130mn loan facility with a $75mn accordion. Both facilities have a tenure of five years and were provided by a consortium of leaders led by MUFG, with participation from Wells Fargo, Export Development Canada, and Wilmington Trust. Navisun co-develops, acquires, finances, and operates distributed and small utility-scale solar and storage projects, ranging from ~1-30 MW. Its portfolio is primarily located in Massachusetts, a state that offers several incentives to residential, commercial, and industrial consumers of renewable energy, such as income tax credits for up to 15% of the system’s cost and deduction of renewable asset value while calculating property tax. Navisun is backed by OMERS Infrastructure since Nov’21.
Enerdatics understands that in 2022, project developers altered their financing strategies and targeted equity capital over debt and bond issuances, driven by increases in the cost of debt capital due to rising interest rates, supply chain bottlenecks, and high commodity prices. However, Enerdatics observes that since Oct’22, there has been a surge in debt issuances for DG assets in the country, with ~$1bn of transactions closed. Recent deals include Altus Power’s $341mn financing from lenders including KeyBank, Bank of America, and Citibank and DSD Renewables’s $155mn loan secured from Credit Suisse. Enerdatics believes that recent declines in shipping and freight costs have contributed to the uptick in debt funding, despite the consistently high-interest rates.
As per recent research, container spot prices between Asia and US’s East Coast increased from pre-pandemic levels of $1,500-2,000 for a Forty Foot Equivalent Unit (FEU), to over $20,000/FEU in Oct’21. Additionally, Russia’s invasion of Ukraine and a resurgence of the COVID-19 pandemic in 2022 kept shipping prices elevated for the better part of the year, impacting developers’ appetite for ordering equipment from South East Asian countries. However, freight costs have been falling steadily since mid-2022, as persistently high levels of inflation and fears of economic recession have suppressed appetite for consumer goods, which in turn have led to an easing of shipping bottlenecks. As per a Germany-based consultancy, freight costs currently represent ~4% of the solar module’s total cost, declining from a peak of 20% seen during 2021 and 2022. For the rest of 2023, Enerdatics expects stability in shipping costs and interest rates to spur additional debt financings for solar projects, as developers and financiers rush to finalize equipment orders amid the 24-month moratorium on import tariffs for panels from South East Asia, announced in May’22.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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