News for 'NGLPF' - (=DJ Morgan Stanley Tax-Equity Exit Leaves Developer In The Cold)
By Yuliya Chernova
Of DOW JONES CLEAN TECHNOLOGY INSIGHT
NEW YORK (Dow Jones)--At least one solar-project developer has had to find new tax-equity support as a result of Morgan Stanley (MS) dropping out of this type of financing for renewable energy projects, Clean Technology Insight has learned.
SolarCity Inc. signed an agreement with Morgan Stanley in April 2008 in which the bank agreed to finance the solar developer's projects for 2008 and 2009, said Lyndon Rive, SolarCity's chief executive, in an interview.
Under the deal, there was an option for either party to reconsider the relationship in 2009 under certain conditions, Rive said. "Morgan Stanley decided not to continue," Rive said.
The bank eliminated most of its structured products group, which included its renewable-energy tax-equity project financing team, in late fall of 2008. Aaron Lubowitz, who was the managing director for the group, is now with another firm.
There are still a couple of people at the bank who manage the existing portfolio of renewable-energy assets in which Morgan Stanley invested, but they don't make any new investments, according to a person familiar with the situat ion.
Morgan Stanley was one of the more active suppliers of tax equity to solar projects, even as many other banks focused more on wind and other renewable-energy projects. But the bank provided only about $80 million to solar projects through September 2008, according to another person familiar with the situation, less than its announced commitments.
Morgan Stanley spokeswoman Jennifer Sala declined to comment on the amount of commitments the bank has made.
SolarCity's Rive said it is typical for deals such as the one it had with Morgan Stanley - in which the financier agrees to provide continuous capital for projects as they are developed - to include wording specifying that only the first year's commitment is solid, while each year terms can be renegotiated.
SolarCity just received tax-equity financing from U.S. Bancorp (USB) and Greystone Renewable Energy Ventures LLC for its 2009 projects. Rive said that he views each tax-equity deal as solid for the first year, but doesn't rely on long-term commitments, because the market is so "volatile" now.
Morgan Stanley agreed in 2007 to provide $190 million to solar projects owned by SunPower Corp. (SPWRA). The agreement ran through 2008, said Helen Kendrick, the solar company's spokeswoman. She declined to say whether SunPower got all of the money promised under the deal.
The bank also agreed to supply $200 million to projects owned by privately held Recurrent Energy Inc., which was supposed to get half of that amount in 2009. Arno Harris, chief executive of Recurrent, declined to comment on whether Morgan Stanley continues to finance the company's solar projects.
The bank also financed some wind and geothermal projects, including a 106.5 megawatt Glacier 1 project by NaturEner USA LLC and the Glacier 2 project that the developer expects to construct in 2009, according to an earlier Clean Technology Insight story.
The bank also committed to provide $100 million for Nevada Geothermal Power Inc. (NGLPF), $60 million for biomass plants by Bull Moose Energy, and continuous financing for energy-efficiency and renewables company Distributed Energy Systems Corp. (DESCQ), according to the developers.
Sala declined to comment on the financing of specific deals.
The solar industry is facing a severe dearth of tax-equity financing at the moment, because few banks want to invest in solar power due to the small size of the deals. In addition, several stopped investing in tax-equity deals during the economic crisis, including Lehman Brothers Holdings Inc. (LEHMQ), while others faced reduced taxable incomes and didn't need to offset as much, so they were less interested in tax equity.
Morgan Stanley has its own project development group, MS Solar Solutions Corp., which has so far installed one project for a low-income housing development. Barry Cinnamon, CEO of Akeena Solar Inc. (AKNS), which is the exclusive supplier of solar systems for Morgan Stanley's own solar projects for low-income housing developments, said the bank also plans to own solar projects in new-construction buildings.
This initiative was launched by Morgan Stanley's commodities group, said Sala, and is separate from the tax-equity group. Sala declined to discuss where MS Solar Solutions will get its tax-equity financing.
(Dow Jones Clean Technology Insight covers news about public and private clean-technology and alternative-energy companies.)
-By Yuliya Chernova, Dow Jones Clean Technology Insight
“Those who don't know history are destined to repeat it.”
Edmund Burke (British Statesman and Philosopher, 1729-1797
