Across the Atlantic, Solar ABS Still in the Dark

Solar ABS across the Atlantic remains unlit despite having a rapidly growing solar industry to support it, said panelists speaking at last week’s Information Management Network’s Global ABS renewable energy session.

Demand for the stable, twenty year cashflows that solar assets would produce isn’t the problem; the hurdle is getting deals, from a relatively nascent industry, structured and rated.

It’s a similar issue Solar ABS on the U.S. side has had to contend with. But Europe puts out approximately 70 gigawatts of solar photovoltaic (PV) capacity, according to Justin Passfield, chief executive at Maypole Energy.

By contrast, Passfield said that the U.S. only generates approximately 7.7 gigawatts.

Maypole, a U.K. based company, specializes in creating bespoke investment opportunities to bring renewable energy to life through solar PV installations on commercial buildings and in the residential market.

Passfield said that leading the pack in Europe is Germany which puts out about 32 gigawatts; next is Italy with 17 gigawatts and France takes third, generating approximately 3.5 gigawatts of solar PV.

Emma Hallgren senior associate of infrastructure at AGFE said one of the challenges still facing the market is widening the investor base for a “still relatively new asset class.”

The financings that come across today are more similar to corporate M&A transactions, said Hallgren, which are more appealing to pure equity investors.

The second challenge facing the industry is a lack of a track record, which makes it “hard to see how rating will be applied to renewables,” said Hallgren.

John Gibson a partner at PriceWaterHouseCoopers said that the “ratings agencies struggle with the fact that there isn’t a lot of historical performance data.”

There is also some question over how financial incentives introduced by the European governments to help increase the installation and generation of renewable energy will be treated going forward as budget-stressed European governments look to slash these incentives for solar and wind projects.

However panelists noted that the biggest challenge facing Solar PV growth was the lack of construction finance for projects. “The development of solar energy is constrained by the lack of capital, [but] given the strong environmental focus in Europe, solar should continue to develop,” said Gibson.