German solar group Conergy launched a $100 million funding program on Tuesday to provide financing for large-scale construction projects in the United States.
Backed by Conergys main shareholder, Kawa Capital Management, the Conergy Fund I will use its initial target volume of $100 million to finance solar power plants and qualified commercial projects with renewable energy capabilities between 500 kW and 25 MW.
Conergy said it had entered the asset ownership business and planned to significantly expand its projects business in the United States and Canada in the coming years.
The new fund will finance large-scale power plant construction in the high-growth U.S. market. An unnamed Fortune 500 bank in the U.S. will provide 100% of the initial debt, equity and any tax equity financing for the solar projects.
The fund streamlines the financing process by managing financial analysis, credit rating, administration and finance, billing and collection of power purchase agreements (PPAs) on behalf of the project, the company said.
"The fund is ideal for mid-to-large size organizations such as municipalities, school districts, utility companies and investment-grade corporations because the savings achieved last for decades," said Anthony Fotopoulos, CEO of Conergy Americas. "Not only are these entities reducing energy consumption, but the fixed energy prices secured through the PPAs are significantly lower than market prices for conventional grid power, providing additional savings to the end-user."
Access to competitive financing that can monetize local and federal incentives is a key barrier to the widespread adoption of photovolatics via PPAs only about 40% of commercial buildings or power plants are able to secure this financing, the company said in a statement. "The fund bridges this gap by removing the funding barrier that has historically hampered organizations from installing photovoltaic systems on their facilities," it added.
"The Conergy Fund I program is the first step in a long relationship with Kawa. We already have five projects in the United States utilizing the fund and expect to develop and acquire projects in other growth markets in 2014," said Fotopoulos, adding that the fund would serve as a blueprint for future financial vehicle in other markets.
Fotopoulos described the fund as "a milestone in expanding our large-scale projects business in the dynamically growing North American market," adding that solely with the financial resources the fund provides, the company could realize around 50 MW of power plants.
Fotopoulos said the fund provided a vital solution for the U.S. market, where third-party financing is increasingly important.
"Reaching grid parity opens up our market to a variety of new opportunities, and we’ve developed suitable business models at an early stage so we can use the Conergy Fund I to expand our business in the future," he said.
"Decentralized consumption using PPAs is the future of the U.S. electricity market. Today, around 70% of solar power installations on private homes are already third-party financed. For commercial power plants this figure is more than 40% in California alone, and these numbers continue to rise. We can serve exactly this segment with our fund."
Conergy and its partners also provide project development and engineering, procurement and construction (EPC) services, including engineering, design, and subsequent operations and maintenance management as part of the funding arrangement.
Kawa Capital Management acquired Conergy in August 2013. Conergy said its expertise in providing complete solar energy solutions and Kawa’s established financial and management strategies were the groundwork for the Conergy Fund I program, adding that it would serve as the foundation for future financial solutions in the U.S. electricity market.