The solar panel provider Sunrun is preparing a $647.6 million asset-backed security that pools loans tied to residential solar leases and power purchase agreements.
“A solar power purchase agreement (PPA) is a financial agreement where a developer arranges for the design, permitting, financing and installation of a solar energy system on a customer’s property at little to no cost,” according to the Solar Energy Industries Association.
The Sunrun Jupiter Issuer 2022-1 ABS is “collateralized by the pool of 42,307 leases and PPAs associated with residential solar photovoltaic installations (PV systems), some of which have energy-storage equipment,” Kroll Bond Rating Agency wrote in an April 20 pre-sale report.
The trust has a $365 million tranche and a $154.3 million tranche both rated ‘A-’; and a $126.3 million tranche rated ‘BB-’’ by KBRA analysts. The architects of the pre-sale report are Usman Khan, senior director; Ali Pasha, senior analyst; Cecil Smart Jr., senior managing director; and Steven Broccoli, CFA, associate director.
The ABS’ portfolio includes assets in Washington, D.C., Puerto Rico and 19 U.S. states.
Credit Suisse Securities (USA) LLC is the structuring agent, while the tax loss insurers are PartnerRE Ireland Insurance DAC, Subscribing Lloyd’s Syndicates and Fidelis Underwriting Limited. Computershare Trust Company, N.A., is the transaction transition manager, indenture trustee and custodian.
Sunrun, based in San Francisco, provides solar energy systems often through PPAs and solar leases. KBRA analysts said that Sunrun is “experienced and capable,” having worked in the residential solar market since 2007; however, the residential solar systems are a newer asset class, and the business model for solar developers is evolving.
Last year, Sunrun had another ABS, Sunrun Demeter Issuer 2021-2. There are a few differences between the current trust being offered and the previous one. For instance, the weighted average FICO of the underlying customers of the residential solar photovoltaic installation systems is 738, which is nine points lower than the previous transaction. In addition the current transaction has a higher weighted average initial term of 298 months versus only 279 in the previous asset-backed security.
