Utilizing USDA Loan Guarantees for Community Solar or Utility-Scale Solar Projects. Midwest Solar Expo May 23, 2017

Transcription

1 Utilizing USDA Loan Guarantees for Community Solar or Utility-Scale Solar Projects Midwest Solar Expo May 23, 2017

2 Presented by Ron Omann Energy Coordinator Rural Energy for America Program

3 Rural Business-Cooperative Service Purpose Program designed to help eligible applicants reduce energy costs and consumption and help meet the Nation s critical energy needs. Funding provided for the purchase and installation of: 1. Energy Efficiency Improvements (EEI) 2. Renewable Energy Systems (RES)

4 Rural Business-Cooperative Service Financial Assistance Grant 25% of Project (500K max) Highly Competitive Guaranteed Loan Not Direct Financing Funds Available

5 Applications Funded Percentage Program Trends Minnesota Funded Grant Projects REAP Applications Submitted v. Awarded

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7 Rural Business-Cooperative Service Improve Profits for Your Rural Small Business, Farm or Ranch with REAP Energy Efficiency Lighting Renewable Energy Solar Heating Cooling Ventilation Fans Automated Controls Insulation Wind Small Hydroelectric Anaerobic Digesters Biomass Geothermal Wave/Ocean Power

8 Eligible Applicants Rural Business-Cooperative Service Agricultural Producer Rural Small Business Individual or entity that receives 51 percent or more of their gross income from agricultural production crops, livestock, aquaculture, forestry operations, nurseries, dairies For-profit small business - as defined by the Small Business Administration (SBA) Rural area or non-metro community of < 50,000

9 Rural

10 Rural Business-Cooperative Service Small US Small Business Administration Size Standards New Solar Company = Solar Electric Power Generation = 250 Employees Start-up LLC + Affiliates need to be below size standard

11 Rural Business-Cooperative Service Business (1) A private for-profit entity, including a sole proprietorship, partnership, and corporation; (2) A cooperative (including a cooperative qualified under section 501(c)(12) of the Internal Revenue Code); (3) An electric utility (including a Tribal or governmental electric utility) that provides service to rural consumers and must operate independent of direct government control; and (4) Tribal corporations or other Tribal business entities (as described in paragraph (4)(i) and (ii) of this definition). The Agency shall determine the Small Business status of such Tribal entity without regard to the resources of the Tribal government. (i) Chartered under Section 17 of the Indian Reorganization Act (25 U.S.C. 477), or (ii) Other Tribal business entities that have similar structures and relationships with their Tribal governments as determined by the Agency.

12 Rural Business-Cooperative Service Community Solar Eligibility Must be an eligible applicant and have an eligible project Applicant must own and control the system Applicant must determine system type and negotiate & enter contracts Subscribers not subject to eligibility requirements as long as they are purchasing power or credits under agreement and not owning/leasing equipment

13 Rural Business-Cooperative Service REAP Guaranteed Loan Assistance Up to 75% of Eligible Project Costs Minimum Loan Amount Maximum Loan Amount $5,000 Total eligible project costs > $6,667 $25 million Total eligible project costs > $33.4 million

14 100% REAP Loan Guarantee Percentages by Loan Size 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% < $600k $600k - $5 million $5 - $10 million $10 - $25 million Guaranteed Unguaranteed

15 Loan Requirements Rural Business-Cooperative Service Interest Rate Negotiated between borrower and lender Terms Routinely years MN 25 years due to PPA Equity None Required Payments No Balloon Payments Personal Guarantees Not required for passive investors

16 Rural Business-Cooperative Service Application Timeline When can we apply for funds? During pre-construction planning and design Applications can be accepted after project completion

17 Rural Business-Cooperative Service Contact the USDA Rural Development State Energy Coordinator: Submit applications any time of year. How to Apply

18 Ron Omann Energy Coordinator Rural Development Office: (651)

19 Renewable Energy Lending USDA Guaranteed Lending 2016 Live Oak Banking Company. All rights reserved. Member FDIC

20 Live Oak Bank A Unique Approach to Lending Chartered in 2008, Live Oak took a new approach to lending Focus on specific industries where we could become experts and add value National footprint, but targeted lending to low number of industry verticals Vertical strategy staffs each lending group with folks focused only on one field Manage risk Provide superior customer service Educate the industry and learn ourselves 20

21 Government Guaranteed Lending Live Oak is well-versed in SBA lending 2 nd largest SBA lender in country We will fund over $1.5B this year across 12 industries Moving into USDA guaranteed lending was a natural step Similar underwriting standards Robust secondary market With some marked differences State-by-state implementation Larger, more complex projects Rural eligibility 21

22 USDA REAP and Live Oak s Solar Lending Utility-scale projects nationwide Largest REAP lender in the country Deployed $100 million+ in calendar 2016; expect to triple that this year Have worked with a wide range of developers, offtakers, technologies, state regulatory environments and sites 22

23 USDA REAP and Live Oak s Solar Lending ADVANTAGES Openness to technology, developer and system variations Allows us to meet customer need and stay at leading edge of industry development Ability to do a wide range of projects National footprint Substantial funding for REAP and B&I unlimited runway Suits a range of sizes from <1 to mw More flexible terms Long term and amortization Non-traditional collateral 23

24 USDA REAP and Live Oak s Solar Lending CHALLENGES State-by-state implementation Multi-state bundles Differences between REAP and B&I From regs to forms Federal budget uncertainty Rural requirement Limits C&I possibilities 24

25 2016 Live Oak Banking Company. All rights reserved. Member FDIC

26 Cypress Creek Renewables Info Solar developer with a local solar focus. Founded in GW+ of development pipeline 1 GW of operating projects generating a total of 1.3 million MWh/yr in 8 states Development and operating assets located in both traditional utility off-take markets and community solar markets. Cover a wide range of asset sizes from 500KW(DC) to 110 MW (DC).

27 Working with USDA programs USDA loan programs offer a valuable way for more lenders to participate on the finance side of renewable energy projects. Due Diligence process and items needed for USDA generally line up well with typical DD items needed for investors and lenders in the solar finance space.

28 Working with USDA programs Timing/Process Applicants should engage with USDA at early stages of process as the financing structure begins to take shape. Timing of approvals can vary based on bandwidth of local USDA offices and ability of borrower/lender to provide all information needed.

29 Working with USDA programs Benefits: Having more lenders participating in solar finance is impactful. Working with community or smaller regional banks can be advantageous. Decision-makers are often closer to the projects and become vested in providing decisions quickly and working thru any issues that occur.

30 Working with USDA programs Closing and Servicing: USDA has a limited number of additional items needed at a financial closing that exceed a traditional commercial transaction. However, they are all very manageable. Once the loan is closed the interaction with the USDA is limited from the borrower side as most of the on-going relationship is handled by the lender receiving insurance/guarantee coverage.

31 Rural Business-Cooperative Service Blue Lake Solar Project 3.7 MW Solar Array $3.5 Million REAP Loan 80% Guarantee Community Solar - MCES, Rosemont, Chanhassen, Waconia Standard Inverted Lease Structure - Large Insurance Company Tax Credit Investor 25 year PPA = 25 year term Key Dates: Application July 8, 2016 Obligation August 24, 2016 Guaranteed Issued March 24, 2017

32 Rural Business-Cooperative Service Empire Solar Project 6.4 MW $5 Million REAP Guarantee 80% $1.3 Million B&I Guarantee 80% Offtakers: MCES, Rosemont, Lakeville, Burnsville & Empire Township 25-year PPA = 25-year term Similar structure to Blue Lake