DSD Renewables has raised $155 million in debt financing for its first commercial and industrial solar asset-backed securitization that will help the company accelerate the deployment of renewable energy, including a significant community solar initiative.
Solar asset-backed securities (ABS) represent a growing opportunity to package resources made by renewable energy developers into packages that investors can use to finance new projects. DSD’s ABS portfolio consists of nearly 56% onsite solar and 44% community solar, including commercial and industrial developments and distributed generation projects.
The transaction was structured and underwritten by Credit Suisse Securities. DSD has solar energy projects in 11 states.
The company wants to use the deal to help educate investors on commercial and industrial solar, especially community solar. DSD says it worked closely with organizations and investors to better understand community solar revenue structures and to appropriately address risk through data and other information.
The company says the process will help it improve its next issuances and help standardize bringing community solar assets to the debt capital market.
Community solar big piece of the financing
“We have established a path to market for a substantial inclusion of community solar, which will enable access to clean, affordable energy for a larger pool of customers,” says Jamie Huston, DSD’s chief investment officer.
Community solar is a growing initiative to help grow renewable energy use as well as the affordable implementation of developments. It is widely targeted to lower-income and disadvantaged areas and can help increase grid reliability.
Earlier this month a project in Oregon called Skyward Community Solar said it was fully subscribed, with Microsoft, Nike, and Common Energy all taking part. Microsoft is the corporate subscriber to the project, a piece that is allowed under Oregon energy transition rules, and at least 10% is dedicated to of the project’s energy will be dedicated to low- and medium-income users.
The Inflation Reduction Act, which includes nearly $370 billion for energy programs, also includes increased incentives for developments that take place in disadvantaged areas, with bonuses of up to 20%. Overall, community solar projects have accounted for 5.3 gigawatts of installed energy capacity in the United States through the third quarter of 2022, according to the Solar Energy Industries Association.
DSD says it will use proceeds from the transaction to increase project development, assess acquisitions, and pay down debt. DSD has now raised more than $1.5 billion to accelerate solar project development, and the company says it plans to issue asset-backed securities every six to 12 months.
To date, DSD has raised over $1.5 billion in funding to support its growth and accelerate solar project deployment. DSD intends to issue asset-backed securities every six to twelve months.
“As a first-time issuer within a newer asset class, it was critical that we considered all relevant risk and strategized with agencies, consultants, and our bankers to ensure an optimal outcome,” says Ian Manchester, DSD’s vice president of structured finance. “With our first securitization under our belt, we look forward to future issuances which will continue to drive commercial solar adoption and widen access to community solar projects.”