AES Distributed Energy is testing the waters for financing commercial solar projects in the securitization market.

The notes will be issued via Aurora Master Funding, LLC. Morgan Stanley, which finances AES Distributed Energy via its MS Solar Solutions subsidiary, is the structuring agent, bookrunner, and initial purchaser.

The transaction is secured by equity interests in 15 limited-purpose solar power distributed energy companies, 12 of which are commercial, industrial, or small utility, and three of which are residential. They collectively own a portfolio of 1,548 leases and power purchase agreements located in six U.S. states and the U.S. Virgin Islands.

The commercial and industrial companies earn revenue through power purchase agreements with 12 corporate entities on 97 project sites, according to Kroll Bond Rating Agency, which is rating the deal. In addition, several of them earn revenue from environmental attribute payments in the form of solar renewable energy certificates and performance based incentives.

The residential companies earn revenue through 1,451 lease agreements with homeowners, the terms of which include a fixed fee independent of energy generation.

Kroll Bond Rating Agency assigns preliminary ratings to two classes of notes totaling $100 million: $92. 5 million of class A notes are rated ‘BBB’ and $7.5 million of class B notes are rated ‘B’. All of the notes have an anticipated repayment date of December 2025 and a final maturity date of December 2045.

Interest and principal on the notes will be paid from lease payments from underlying customers of the photo voltaic systems. However, this cash flow will be net of operations and maintenance expenses, taxes, administrative and insurance expenses

To date, there have been five public solar ABS deals worth a total of $560.5 million, four of which came from solar energy equipment supplier SolarCity. The other came from SunRun, which also finances and installs solar panels on homes.

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