Key Equipment Finance sale-leaseback financing of $5.1 million funds Hobart and William Smith Colleges solar farm

new york college solar farm

Key Equipment Finance, one of the nation’s largest bank-held equipment finance companies and an affiliate of KeyCorp, provided $5.1 million in financing to Wayne, PA.-based Dynamic Energy Solutions, LLC for a 2.55 MWdc solar farm near Geneva, N.Y. producing energy for Hobart and William Smith Colleges (HWS).

Dynamic Energy used sale-leaseback financing for the project, which includes a Power Purchase Agreement and allows monetization of the tax benefits, inclusive of the investment tax credit and depreciation. In this solar tax lease structure, Dynamic Energy owns and operates the system and sells the power to HWS. Dynamic Energy is a full-service solar energy provider with an in-house team of professional engineers, project managers and master electricians.

“By using a solar tax lease, Dynamic Energy is leveraging the tax benefits and available grants to make solar energy possible for HWS,” said Doug Beebe, vice president of energy finance for Key Equipment Finance’s Energy Solutions team, which provides leases tailored to the energy market. “The students who benefit from the energy produced by this solar farm may also learn about the important role financing plays in making these sustainable practices a reality, since HWS uses the solar project as a clean energy learning lab.”

RELATED: New York to fund $1.4 billion in renewable energy (22 large-scale solar projects)

HWS leases the land off Gates Road in the Town of Seneca for the 10-acre solar farm, which was completed in 2017 and features 7,800 solar panels. The project is being combined with a second solar farm completed in 2016 to generate about 5 megawatts of electricity, which provides about 50% of the educational institution’s electric needs.

The combined solar farms represent one of the largest state-supported solar installations for a New York college or university.

“These sites are not only generating a significant amount of the colleges’ electricity,” said Thomas Drennen, professor of economics and environmental studies and chair of the entrepreneurial studies program at HWS, “but will also provide experiential learning and curricular opportunities for HWS students.”

The project was supported by a grant from the New York State Research and Development Authority (NYSERDA), a statewide solar incentive program under Governor Andrew M. Cuomo to increase the number of solar electric systems across the state and meet the mandate for half of the state’s electricity to come from renewable energy sources by 2030. It also complements “Finger Lakes Forward,” the region’s economic blueprint aimed at attracting a talented workforce, growing business and driving innovation.

— Solar Builder magazine

Why sale leasebacks? How this PPA solution gets commercial solar projects financed

solar panels and money

An increasing number of solar developers are realizing they can use sale-leaseback financing to take advantage of tax incentives for solar installations, and in turn, reduce costs, conserve cash, increase profitability and enhance their brands.

Reducing energy costs is a major consideration for many businesses and government entities because they know that lower energy costs translate into improved profitability and cash flow, and investments in sustainability can add significant value to assets.

Developers such as Community Energy and Monolith Solar are using sale leasebacks to finance projects that include a power purchase agreement (PPA), allowing monetization of the tax benefits, inclusive of the investment tax credit and depreciation. In this structure, solar developers own and operate the system and sell the power to a third party.

The features of a smart sale-leaseback project include:

  • Strong credit all around (developers, PPA offtakers, installers)
  • Positive project cash flow
  • Experienced engineering, procurement and construction management teams
  • Tier 1 components
  • Strong site control
  • Solid PPA
  • Strong incentives
  • Quality operations and management plan/partner

Smart sale-leaseback programs allow developers to finance distributed solar projects that otherwise may not be financeable, as this financing structure scales down nicely, following industry trends of lower costs per watt.

Conserve cash, gain flexibility

Solar developers benefit from financing solar equipment acquisitions by preserving cash and credit lines for other uses. Here are some of the other benefits of financing solar capital expenditures:

  • Potential tax benefits. Equipment financing may provide tax advantages by monetizing the Investment Tax Credit, utilizing Modified Accelerated Cost Recovery System (MACRS) and bonus depreciation benefits.
  • Stimulus benefits. Additional savings opportunities may be available through solar renewable energy credits and grants.
  • Flexibility. Whether it’s a tax or non-tax lease, payments can be structured to match budget requirements, with terms aligned with the solar equipment’s useful life.
  • Reduced capital outlay. By bundling solar equipment with other costs, including design, engineering, development and installation, businesses can acquire what they need with no money down and one fixed monthly payment. In most cases, 100 percent financing can be provided.
  • Be known as a green leader. A solar system is not only a wise financial investment but also supports environmental values. Financing allows organizations to demonstrate commitments to promoting clean energy and reducing their carbon footprint.

10 questions to ask

In the acquisition of solar equipment, it’s important to weigh all available options. Here are 10 questions to consider:

Before
1. Do I need construction financing?
2. Does the installer have the experience, financial strength, qualified staff and bonding capacity to complete a successful project?
3. Does the project use Tier 1 components?
4. Is the PPA financeable?
5. Does the energy offtaker meet a finance company’s credit requirements, i.e. investment grade credit rating?
6. Do I have good site control?

During
7. What are the lease terms, including tenor, monthly lease payment and end-of-term options?
8. What are my other financial obligations for the equipment (such as insurance, taxes and maintenance) during the financing period?
9. Can I purchase the system during the lease term?

After
10. Can I return the equipment or renew the lease?

With answers to these questions, solar developers can effectively utilize solar equipment financing to conserve cash and build their balance sheets by leveraging PPA revenues and retaining the entire revenue stream, as opposed to selling off the PPA.

Choosing a Finance Partner

Seek out a financing partner who can accommodate businesses with customized payments to match budgetary requirements. Make sure the financing company has solar lease financing experience, understands solar project needs, takes the time to ask questions and listens to your responses.

Above all, look for a financing company with a track record in renewable energy and a willingness to customize leasing solutions to help solar developers finance their projects.

Doug Beebe and Luis Gutierrez are VPs of energy finance for the eastern and western United States, respectively, for Key Equipment Finance.

— Solar Builder magazine

16 community solar projects across Massachusetts being financed by Key Equipment Finance

solar community program

Key Equipment Finance, one of the nation’s largest bank-held equipment finance companies and an affiliate of KeyCorp, is boosting financing for 16 community solar projects across Massachusetts for Clean Energy Collective (CEC), the nation’s leading community solar solutions provider, and ENGIE, a global energy developer focusing on responsible growth and the challenges of the energy transition to a low-carbon economy.

Using financing from Key Equipment Finance, CEC and ENGIE will own and operate the community solar projects and sell the energy to utilities, creating savings on electric bills for the commercial, municipal, nonprofit and residential customers. The combined CEC and ENGIE projects are adding 22.1 megawatts of clean capacity, which is equivalent to fully offsetting energy for 3,700 residential homes.

“ENGIE and CEC are industry leaders using Key Equipment Finance’s financing solutions to bring a broad expansion of community solar to customers across Massachusetts,” said Luis Gutierrez, vice president of energy finance for Key Equipment Finance’s Energy Solutions team, which provides leases tailored to the energy market. “Customized financing plays a vital role in bringing the benefits of community solar to more customers, which contributes to Key’s broader sustainability goals.”

Community Solar Legal Primer: From project structure to consumer protection

Project details

The 16 community solar projects in Massachusetts are constructed and interconnected and will serve customers in the Eversource and National Grid utility territories. They include solar arrays in the towns of Sutton, Williamsburg, Orange, Goshen, Phillipston, Uxbridge, West Bridgewater, Kingston, North Adams, Clarksburg, and Wareham.

The economic benefits of these projects will be seen for years to come – including decades of property tax payments in each of the project towns, millions of dollars of construction investment through utilizing local electricians and other contracted specialists to maintain the arrays and the long-term savings, which area businesses and residential customers will receive throughout the duration of the community solar program.

“Key Equipment Finance’s partnership has allowed CEC to bring its RooflessSolar™ community solar options to more Massachusetts customers, giving them greater choice in how they meet their power needs,” said Tom Sweeney, CEC’s president of renewables. “Funding community solar projects can be a very complicated and capital-intensive process, and we are proud to be collaborating with Key Equipment Finance and ENGIE to ‘uncomplicate’ clean energy access and sustain the growing energy movement in Massachusetts.”

The 25-year lifespan of the systems will produce solar energy output equivalent to reducing 1 billion pounds of carbon dioxide, planting 1.5 million trees or eliminating 1.1 billion miles of driving.

— Solar Builder magazine