US Solar (USF) provided the following update this morning:
Summary – no material impact expected and dividend set to commence as planned
- USF does not expect covid-19 to materially impact construction timelines or operating cashflows;
- USF’s acquired portfolio consists of 37 projects with total capacity of 383 MWDC. A further four projects totaling 61 MWDC are under exclusivity. All are on target to be operating by the end of 2020;
- More than 55% (by MWDC) of the acquired portfolio is fully operational and construction of the remainder is progressing to the expected timeline.
- All debt and tax equity financing required for construction and operations of the acquired 383 MWDC is in-place, and USF’s acquisition of the further 61 MWDC is subject to debt and tax equity financing being in place; and
- USF has said that it is in a strong position to commence the full 5.5% (annualized) dividend from Q1 2021 in line with the target set out at IPO.
Operating Projects – ‘Acquisition Three’ projects operating at capacity
- After almost a full quarter operating under USF ownership, the operating projects acquired as Acquisition Three are performing at 100% of weather-adjusted expectations; and
- Acquisition Four was acquired at the end of Q1 2020 and plant availability since acquisition is meeting expectations. Full performance data will be available once the plants have been part of USF’s portfolio for a full calendar month.
Construction – 167 MWdc of projects constructions with completion expected before the year-end
- Seven projects totaling 167 MWdc are currently in-construction (Acquisition One in Utah and Acquisition Two in North Carolina). These seven projects are expected to be completed before the end of 2020, consistent with announced target completion dates, with limited or no covid-19 disruptions; and
- USF has a fifth portfolio under exclusivity (Potential Acquisition Five) which comprises four projects totaling 61 MWDC in Oregon. These projects are expected to be acquired at or near construction completion during Q2 2020, with USF’s acquisition subject to tax equity and debt financing being in place.
Cashflow Stability and Dividend – fixed-price power purchase agreements (PPAs) cover 100% of the portfolio over a 15-year term
- The USF portfolio has fixed price PPAs for 100% of electricity generated for a weighted average PPA term of 15 years (including Potential Acquisition Five), and all PPA counterparties are investment grade (S&P rated A to BBB+);.
- USF’s PPA prices are fixed at the time of execution so the resulting steady, contracted cashflows put the Company in a strong position to consistently deliver dividends despite electricity and broader market volatility. There are no mechanisms for PPA prices to be reduced;
- USF does not expect to be impacted by reductions in electricity demand because of covid-19 . Although covid-19 measures in the US have reduced electricity demand, utilities are expected to reduce generation from other forms of generation, including their own assets, before curtailing USF’s assets;
- USF expects to fully cash cover the remaining ramp-up dividend of 2-3% (relating to the remainder of this financial year to 31 December 2020) with cashflows from operating projects; and
- The Company is in a strong position to commence the full 5.5% (annualized) dividend from Q1 2021 in line with the targets set out at IPO.
Health and Safety Considerations
- The investment manager team has been working remotely since late March 2020 using existing remote working and monitoring systems;
- Portfolio management team members are still able to visit US construction sites on a limited basis or conduct inspections and meetings virtually; and
- The investment manager is working with all contractors and other stakeholders to ensure that operational and construction targets can be met whilst ensuring safety on site and meeting relevant covid-19 requirements or restrictions.
USF: US Solar sees no material impact on construction timeline or operating cashflows