Solar Trust Engages Citigroup and Deutsche Bank
- November 04, 2009
Solar Trust of America has engaged Citigroup Global Markets and Deutsche Bank Securities as advisers to assist in securing more than US$6bn in financing for the construction of multiple solar thermal power plants to be build in California and Nevada. The company expects to begin construction of the first of its planned plants in 2010, and to close its first US$1bn project financing in the fourth quarter of 2010.
Citigroup will advise the company on raising debt, including tapping the DOE Loan Guarantee Program, while Deutsche Bank will focus on assisting the company tap equity investors. The company is also working with UBS on an overall corporate financing plan.
Solar Trust has signed 20-year power purchase agreements with Southern California Edison for two 242MW parabolic trough solar thermal power plants in Blythe and Palen, California, with the option to build a third in Ridgecrest. These facilities are expected to reach commercial operation in 2013 and 2014. Solar Trust also has in place a memorandum of understanding with Nevada Energy for the development and construction of at least one 242MW plant in Nevada's Amargosa Valley.
While these are the most advanced projects, the company has four others that it says are in advanced stages of development, and plans a total roll out of 15 plants in the Southwestern US. The company's goal is to begin construction of two plants every year, with construction taking three years to complete. The projects are to be augmented by 50,000 pound molten salt storage pits that allow the facilities to continue to generate energy 7-1/2 hours after the sun goes down.
The company's current demonstration project in Kramer Junction uses sufficient technological improvements to allow the company to tap the DOE Loan Guarantee Program for new technologies, which is significantly more beneficial than the newest DOE loan guarantee solicitation for commercial technology. The principal difference is that the former allows project sponsors to tap the Federal Financing Bank rather than commercial banks, providing long-term debt at significantly lower rates than would be available elsewhere. While each deal with the Federal Financing Bank is different and there are no statutory guidelines for lending spreads, the FFB is said to have offered loans at less than 100bp over comparable US Treasuries.
Solar Trust itself has the internal capability to put US$150m in equity into each plant, which will have price tags of US$1bn-$1.2bn. The company expects to seek bridge loans to grants in lieu of tax credits for the projects, and plans to seek tax equity investors to monetise additional tax benefits in the next two to three years, as the appetite for tax equity improves.
The plants have been sited on US-owned land administered by the Bureau of Land Management and are poised to benefit from the recent federal effort to fast-track BLM permitting of solar plants.
Solar Trust of America chairman and chief executive officer Uwe T Schmidt says that the projects will benefit from the company's in-house EPC capabilities through Ferrostaal, as well as its supply chain management and industrial solutions expertise. He adds that the company expects to retain 20%-25% equity stakes in each project, and will use the company's own operations and maintaining and engineering groups.
Solar Trust expects additional revenues from carbon credits to be produced by the projects.
