CP case study: SolarShare

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CP Case study: SolarShare
Speaker: Mike Brigham, Chair, Toronto Renewable Energy Co-operative (TREC)

Part of the 2010 Community Power Finance Forum at MaRS:
http://www.marsdd.com/communitypower

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CP case study: SolarShare

  1. 1. Mike Brigham<br />SolarShare Project Manager &<br />Chair, Toronto Renewable Energy Co-Operative (TREC)<br />May 10, 2010<br />
  2. 2. What is it?<br /><ul><li>A project of The Toronto Renewable Energy Co-Operative
  3. 3. Community-owned large (250kW) rooftop solar PV projects
  4. 4. Multiple projects, at about $1.5 million each
  5. 5. Target ROIto investors: 5% on debt and 8% on equity
  6. 6. Debt to equity ratio: 70/30</li></li></ul><li>Just to clear up any confusion...<br /><ul><li>Large scale projects
  7. 7. Owned by a co-op with many investors
  8. 8. For profit
  9. 9. Assists home owners with their MicroFIT system purchases
  10. 10. Non-profit</li></li></ul><li>Goals<br />Maximize the education and engagement of the Ontario public about the benefits of RE and specifically, community-power <br />Demonstrate that RE can provide competitive and attractive investment opportunities (5% and 8%)<br />Build PV capacity ourselves: Minimum of 2 projects in 2010 and 4 more in 2011<br />Build PV capacity with others: Make our projects replicable and assist other organizations to develop at least 2 projects in 2011 and 4 in 2012<br />
  11. 11. Financing <br /> Concepts<br /><ul><li>“Solar is Sexy” + stable 8% ROI possible = fundraising success
  12. 12. Debt portion is the challenge:
  13. 13. 70% Debt ratio for a $1.5 million project = $1.05 million
  14. 14. RE Co-ops are not financeable in their early years</li></ul>Where to get the debt financing?<br />
  15. 15. Debt Financing <br /> Solution<br />Raise the money privately<br /><ul><li>Offer 4 year bonds at 5% and give bond holders security.
  16. 16. Is 70% debt with 4 year terms possible to raise privately? </li></ul>Not sure yet.<br /><ul><li>Fallback: 5% bonds with 1-2 year terms, long enough to get bank financing
  17. 17. Future interest rate hikes a concern: </li></ul>plan for a fast debt pay-down strategy?<br />
  18. 18. Recent <br /> Thoughts<br />For unsecured investments (formerly “equity”), bonds might be preferable to shares:<br /><ul><li>Bonds might be easier to make RRSP eligible </li></ul>(felt to be a major selling point)<br />
  19. 19. Debt Financing <br /> Solution<br />Investors have 3 investment options:<br /><ul><li>4 year bonds at 5%, fully secured,
  20. 20. 20 year bonds with targets of 8%, unsecured,
  21. 21. Some combination of both</li></li></ul><li>New<br /> Opportunity<br />A large retailer wants to partner with a community-power organization:<br /><ul><li>10 trial projects, then 150+ later (Capex of $200+ million)
  22. 22. Benefits:
  23. 23. Lower system costs possible = better ROI
  24. 24. Would enable new RE co-ops all over Ontario</li></li></ul><li>New Opportunity<br /> Structure<br />How to structure the ownership:<br /><ul><li>Structure: Partnership, LP, Corporation or Joint Venture?
  25. 25. JV the best solution!
  26. 26. Co-ops must have direct ownership in project (FSCO)
  27. 27. Decision making:
  28. 28. partners must have equal say despite minority share position (consensus)</li></li></ul><li>New Opportunity<br /> Structure (1)<br />
  29. 29. New Opportunity<br /> Structure (2)<br />25% of 30% = 7.5% of total project cost.<br />Is this really a community project?<br />
  30. 30. Remaining <br /> questions<br /><ul><li>How much private debt financing can actually be raised?
  31. 31. Is RRSP eligibility possible?
  32. 32. Which is preferable:
  33. 33. Small part of many projects or large portion of a few?
  34. 34. How much value added can community groups bring to corporate entities? (Can we compete with those offering 15% roof leases? )
  35. 35. What percentage of project financing makes a “community project”?</li></li></ul><li>

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