A bank has laid out terms for a loan to finance a contracted
solar project with a novel production hedge developed by
kWh Analytics, offering a debt service
coverage ratio of 1.1 times.
The term sheet is the first to be provided by a lender for a
project with the hedge, called a solar revenue put, which the
risk management and data firm has been promoting for several
The 80 MW project is located in the southeastern U.S. and
has a power purchase agreement with a utility company. The
identity of the sponsor, the lender and the name and precise
location of the project could not immediately be
The 1.1 times DSCR is "unprecedented" in solar project
finance, says Richard Matsui, founder and ceo
of kWh Analytics in San Francisco.
The average DSCR for solar debt in the first nine months of
this year was 1.44 times, according to a survey conducted by
the analytics shop (
A lower DSCR translates into a higher leverage ratio, which
boosts the levered return for the sponsor.
The solar revenue put—which is structured as an
insurance policy and underwritten and distributed through kWh
Analytics’ licensed insurance brokerage
subsidiary, Kudos Insurance
Services—guarantees 95% of the P50 case
energy production of the solar project for 10 years.
"It could allow you to finance something you
wouldn’t be able to come up with your equity check
for otherwise," PJ Deschenes, a partner at
boutique investment bank Greentech Capital
Advisors told PFR in August. "The question
is, what are you giving away to realize that?"
Matsui says the premiums are more than offset by the
potential increase in returns as a result of the greater
The unidentified solar project is one of two supported by
the Kudos put that were going through banks’
credit committees in August. kWh Analytics has more than a
dozen live deals at various stages.
"Our intent is to keep these deals moving forward," says
Matsui. "We’re hoping to get one signed before the
end of the year."