Canadian Solar successfully raised JPY6.3 billion (US$58 million) from a diversified mix of Japanese and Korean institutional investors in its inaugural offering of equity backed securities, Canadian Solar Securitized Green Equity Trust 1. Proceeds from the offering were originally deployed to acquire Canadian Solar’s 34MWp operating solar portfolio, comprising the 23.8MWp Smart Solar Yamaguchi-Aio Solar Power Plant and the 10.2MWp CSJ Kamikitagun Rokunohemachi Solar Power Plant. Canadian Solar recognized revenue from sale of the plants in the third and fourth quarter of 2018.
The two projects have existing debts that have been raised through a non-recourse project bond structure developed using financial securitization techniques. The securitization of the equity portion of the capital structure brings the whole-business securitization concept one step further and culminates into a total securitization of solar assets. The investment period matures in September 2037 and the securities have been rated as Green 1, the highest Environmental, Social and Governance (ESG) investment tier by the Japan Credit Rating Agency, Ltd (JCRA). The underlying solar power plants have each further received the investment grade rating of “A” from JCRA for its non-recourse project bonds.
Electricity generation from the CSJ Kamikitagun Rokunohemachi Solar Power Plant and the Smart Solar Yamaguchi Aio Solar Power Plant is purchased by Tohoku Electric Power Co., Inc. and Chugoku Electric Power Company under 20 years feed-in-tariff (FIT) contracts at the rates of JPY36(US$0.33) and JPY40(US$0.37) per kWh, respectively. Canadian Solar’s asset management arm, Canadian Solar Asset Management K.K., has been appointed as the Asset Manager to manage the securitized portfolio. Canadian Solar O&M Japan also provides Operations and Maintenance (O&M) services for the remaining duration of the 20 years FIT period. The two solar power plants utilize MaxPower modules supplied by Canadian Solar and began commercial operations in late 2016.
“We are delighted to originate this ground-breaking transaction and to take solar securitization to the next level. We are proud of our continuous achievements to drive Environmental, Social and Governance (ESG) investment growth in Japan. Since 2017, our Japanese asset management arm has rapidly expanded to manage over JPY 60 Billion (US$540 million) of ESG investment platforms, including the TSE-listed Canadian Solar Infrastructure Fund (TSE: 9284),” commented Dr. Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar. “We plan to grow our ESG investor base to provide further avenue for institutional and retail investors who are increasingly looking to diversify their portfolios into supporting clean energy transition and secure an investment opportunity in solar assets backed by attractive long-term yields.”
Goldman Sachs Japan Co., Ltd, acted as sole structuring agent and sole placement agent for the transaction.
The securities have been assigned the Green 1 rating in accordance with the ICMA’s Green Bond Principles and Japan’sMinistry of the Environment’sGreen Bond Guidelines. The Green 1 rating is the investment criteria for asset that demonstrates the best in class performance in environmental impact, disclosure transparency and sustainability. The portfolio is expected to produce 38,580 MWh of clean solar energy annually, or sufficient to reduce 25,441 tons of carbon dioxide emissions.