3 Financial Institutions That Are Banking Big on Solar
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I must confess my bias before I continue. A big proponent of renewable energy, I’m eagerly awaiting the installation of solar panels on my home in the coming weeks. A project, which will ease the burden of paying a large utility bill each month and will ease the anxiety I feel every time I notice the whirring electric meter attached to our house.
Chase's first time in the sun
With over 20,000 customers, Sunrun claims to be the nation’s leading home solar service provider, placing in service $1.5 million in home solar systems every day. The company has recently secured $630 million in financing, which will be used to support the purchase and installation of home solar projects across the U.S. One of the investors behind this is JPM Capital Corporation, a subsidiary of JPMorgan Chase (NYSE: JPM). This, Chase’s first foray into investing in residential solar, is not the first commitment they’ve made to renewable energy, though.
Since 2003, they have invested or arranged for over $6.7 billion in renewable energy projects. In 2010, Chase raised $1.2 billion (including $960 million of J.P. Morgan capital). This helped finance 23 facilities totaling 780 megawatts and four geothermal plants. Among their renewable energy portfolio are 13 solar sites including 12 solar photovoltaic projects and the largest solar energy project built in more than a decade (Nevada Solar One, 64 megawatt solar facility).
Wells Fargo: $40 billion in 15 years!
One of the biggest investors in renewable energy is Wells Fargo (NYSE: WFC). From 2005 to 2011, it contributed $11.7 billion to environmental business opportunities, and they have committed to provide an additional $30 billion in financing by 2020. In 2012, alone, they contributed over $6.4 billion to meeting that solar energy across 29 states. Cumulatively, this has helped to fund over 300 projects, which provided over 16 terawatt-hours of electricity in 2012. How much is 16 terawatts? It’s enough power to provide over 1.2 million homes with electricity for a year.
Two companies, which have benefited from Wells Fargo’s commitment to solar are Enphase Energy and SunPower. Enphase, which designs, develops, and sells microinverters for the solar industry, received a $50 million commitment in 2012. Wells Fargo and SunPower have partnered on several projects over the past few years, including a 1.1 megawatt system for the University of California at Merced, a 1 megawatt system for the Western Riverside County Regional Wastewater Authority, and a 7.5 megawatt project for the city of Phoenix.
One of the recent beneficiaries of this pledge is SunEdison (NYSE: SUNE), which recently secured $100 million in financing, which will help to fund 2.7 gigawatts of projects. SunEdison operates in two segments: Semiconductor Materials and Solar Energy solutions. Semiconductor revenue for 1Q 2013 totaled $230 million, representing 1% quarter-over-quarter growth. Reduced development spending in 2012, though, resulted in a $274 million decrease (58%) in revenue over the previous quarter. Things seem be picking up for the segment. They have 2.7 gigawatts of projects in the pipeline and a backlog of 925 megawatts.
Helping to give credit where credit's due
SolarCity (NASDAQ: SCTY) reached a lease financing agreement with Goldman Sachs (NYSE: GS) to fund more than $500 million in solar power projects, which should yield about 110 megawatts of generation for homeowners and businesses. In the largest financing agreement of its type to date, the company foresees this investment as affording them the opportunity to offer solar services to customers with lower credit scores. Jimmy Chuang, SolarCity’s VP of structured finance, said, “We expect to be able to expand our offering to a broader customer base by lowering the credit requirements even further in future financings."
Goldman Sachs has committed to invest $40 billion in renewable energy projects by the end of the decade. “We are excited about the opportunity in distributed solar, which has the potential to both lower energy costs and create jobs,” says Stuart Bernstein, global head of clean technology and renewables at Goldman Sachs.
Riding the Elon Musk popularity wave, SolarCity has seen shares rise over 224% over the past year. Additionally, it recently raised guidance for 2013 to 270 megawatts deployed, up from the mid-May guidance of 250 megawatts. This will result in it being net cash flow positive by 4Q 2013.
A Fool’s conclusion
Findings from a Bloomberg New Energy Finance Report state that annual investments in clean energy are expected to increase from $189 billion in 2012 to between $470 and $880 billion in 2030. It is becoming increasingly clear that investments in renewable energy, most noticeably solar, are becoming an increasing area of focus for large financial institutions. Investors should follow these developments as part of their due diligence in preparing to make their own investments in the renewable energy sector.
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Scott Levine has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Wells Fargo. The Motley Fool owns shares of JPMorgan Chase & Co. and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!