Income Investments

by Sean Kidney The Massachusetts AA+ green bond I mentioned last week got a lot of coverage on release this week – even the WSJ ran the story. But there was a twist: it seems the State had to scale back the total $1.1bn GO offering to $670m on tepid demand, but the green bond bit was 30% oversubscribed. For all you prospective issuers out there: the green bonds also lured as many as 9 new institutional investors for Massachusetts bonds. One buyer went so far as to say “We think more municipalities should do the same." So perhaps...

Sean Kidney Where did all the CREBs and QCEBs go? Mystery solved. The US has for a long time used tax credits to promote the development of oil and gas and other industries. With tax credits the bond issuer still pays a coupon, but their payment is subsidized, effectively lowering the rate of interest paid. The Obama administration brought in a big program of credits for renewable energy bonds. The plan was that States, large local governments, tribal governments and public power bodies would issue bonds to finance energy efficiency or renewable energy. The US ...

By Beate Sonerud SolarCity (NASD:SCTY) is issuing US$200m of asset-linked retail bonds, with maturities ranging from 1-7 years and interest rates from 2-4%. Wells Fargo is the banking partner. While the bonds are registered,SolarCity expects the bonds to be buy and hold, and not traded in the secondary markets. The bond is issued for small-scale investors, with investment starting at US$1000, giving this bond issuance a crowdfunding aspect. Choosing such a different structure allows SolarCity to diversify their investor base – the company stresses that small-scale investors are a complement, not substitute, for large-scale institutional investors. While...

by Tom Konrad Ph.D., CFA Note: This article was first published on GreenTechMedia on Noveber 27th. In the last six months, YieldCos have fallen from stock market darlings to pariahs.  YieldCos are companies that buy clean energy projects such as solar and wind farms, and use the majority of free cash flow from these projects to pay dividends to investors. Many are listed subsidiaries or carve-outs of large developers of clean energy projects. Last year, investors repeatedly punished leading solar developers and manufacturer First Solar and SunPower for their reluctance to launch YieldCos. When...

by Tom Konrad Ph.D., CFA When SunPower (SPWR) and First Solar's (FSLR) YieldCo, 8point3 Energy Partners (CAFD), went public two years ago, I used the financial nerd joke in 8point3's ticker symbol as a launching point to explain what "cash available for distribution," or CAFD, means. In that article, I cautioned against the risks of using a short-term cash flow measure for long-term investing decisions. That risk is becoming more and more real for investors in 8point3 because the YieldCo is using  short-term, interest-only financing to fund its long-term investments. All of 8point3's debt matures in 2020, and refinancing that debt will...

by the Climate Bonds Team German green debt instrument raises €550m ($621m) for wind energy and gains Climate Bonds Certification. German wind company Nordex (NRDXF) is the first Schuldschein issuer to label its issue as green. The green issue is verified under the Climate Bonds Standard and sector specific Wind Standard. Assets include wind power manufacturing and infrastructure around the world. Nordex employed DNV GL to verify the green Schuldschein against the Climate Bonds Standard. The deal was split across four tranches with 3, 5, 7 and 10 year tenors. The joint underwriters were...

By Bridget Boulle and Rozalia Walencik Last week BBB-rated Vornado Realty (NYSE:VNO) became the second US real estate investment trust to issue a corporate green bond, following the Regency Centres (NYSE:REG) bond late last month. The 5 year, $450 million bond was structured by Bank of America Merrill Lynch. Pricing was in line with non-green bonds. Investors included asset managers, pension funds, insurance companies and governments, of which some were regular investors and others had a specific green interest. Some non-US investors also came in. According to the prospectus, the proceeds will be used to fund buildings and retrofits...

Tom Konrad CFA The silver lining of all market declines is the chance to buy stock in quality companies at attractive prices.  That opportunity has been notably absent over the last two years, which is why my focus has shifted to smaller and smaller companies in search of reasonable valuations over that time.  Although I still don't believe the market is cheap by any measure other than comparing it to a couple months ago, the volatility is starting to bring some individual bargains, especially on heavy selling days.  For instance, I've started to acquire some of...

By Harris Roen There is a new and growing interest in the world of alternative energy investing, the search for high-quality dividend yield among green investments. To this end, the Roen Financial Report has created a Green Dividend Yield Portfolio, a select group of high-yield alternative energy stocks. Together, this selection of companies can produce a steady stream of income for the alternative energy investor. A New Source for Dividend Yield The Green Dividend Yield Portfolio is a collection of high-yield stocks that are in the alternative energy business. Companies that fall...

by James Montgomery 2014 is predicted to be a breakout year for solar financing, as the industry eagerly pursues finance innovations. Many of these methods aren't really new to other industries, but they are potentially game-changing when applied in the solar industry.

Tom Konrad CFA Disclosure: I am long PW and HASI. In a rational world, the sunniest places would have the warmest reception for solar technology and investment.  While solar is having its day in the sun in Hawaii, state incentives make the economics of photovolatics equally attractive in Vermont, a state not known for its sunny skies.  And while California is famous for its rapid deployment of solar, the economics are at least as good in Washington state, New York, New Hampshire, and chilly Maine. It’s not only the economics of solar which can counter-intuitively get better...

by Sean Kidney Tesla issues $600m, 5yr EV convertible bond Tesla Motors’ inaugural bond issue has been, as you’d expect, electrifying (just had to say that). The US electric sports car manufacturer has just issued a 5 year, $600m convertible bond in a fundraising program which has seen it raise approximately $1bn through shares and convertible bonds. Coupon is 1.5-2%; conversion premium is 35%; bookrunners were JPMorgan, Goldman Sachs, Morgan Stanley. Tesla had planned to raise $450m through convertible bonds, but this was raised to $600m after strong demand from investors. That demand allowed Tesla to drop what was going to be a 2-2.5% coupon down to...

by the Climate Bonds Team A record year with green bond issuance of USD 81bn, up 92% on 2015 figures The Trends A maturing of the green bonds market, diversification across issuers, products and use of proceeds are the main trends identified in our Green Bonds Highlights 2016 summary. The Big Numbers 92% – growth on 2015 making 2016 the most prolific year to date USD 11.8bn – November issuance, the largest month on record 24 – number of countries with green bond issuers 27% – proportion of Chinese issuers 241 – number of labelled green bonds issued (median size USD133.7m) >90 – number of new issuers >50 – number...

by the Climate Bonds Team Last month Toyota closed their second green bond for a whopping $1.25bn. Standard auto loans backed the issuance with proceeds to be used for electric and hybrid car loans; that means it’s more like a corporate green bond, where proceeds from a bond backed by existing (non-green) assets are directed green loans still to be made. Sunrun issued $111m of solar ABS, and a small unlabelled energy efficiency ABS was also issued by Renew Financial and Citi for $12.58m. Sunrun and Citi/Renew Financial are examples of ABS where the assets backing the issuance...