In a watershed moment, Standard & Poor's recently gave a BBB+ rating to bonds backed by solar power contracts that are expected to raise $54.4 million for SolarCity, an installer of residential and commercial solar panels. The yield rate is expected to be 4.8%, a relatively high rate in the current market, commensurate with the untested nature of the security.
Although the rating is a low investment grade designation, it is strong enough to validate this important new source of financing for renewables, which comes at a key time as federal tax credits, which have largely sustained renewable energy expansion, are tapering off or ending. According to the New York Times, SolarCity overcame potential investment risk concerns by shortening the time frame for the bonds, including extra collateral, and creating a special reserve account to cover equipment failures. S.&P. analysts predict brisk growth for this asset class.
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