US Solar launches fundraise

US Solar launches fundraise – US Solar Fund has launched a placing programme to be conducted over the next 12 months which includes an initial placing, offer for subscription and intermediaries offer which has launched today. A prospectus will be published shortly.

The initial proceeds are expected to principally be used to fund two transactions:

• About $82.5m to refinance the 177MW_DC Heelstone portfolio (reducing the cost and amount of gearing); and 
• About $22m to buy a further 25% interest in Mount Signal 2, a 200MW_DC operating solar plant located in the Imperial Valley of Southern California, bringing the company’s stake to 50%.

The issue price will be $1.00 a share, a discount of 4.3% to the closing mid market share price as at 12 April 2021 and a premium of 3.1% to the 31 December 2020 NAV. The end March NAV is likely to be not much changed.

The company is still aiming to pay 5.5 cents a share in dividends and for that to be covered by cash earnings. After six transactions, US Solar has a portfolio of 42 assets with a total capacity of 493MW_DC. These solar projects are spread across four states in the US. All 42 assets have power purchase agreements (PPAs) for 100% of generation with nine investment-grade offtakers, and a weighted average PPA term remaining of 15.4 years.

The portfolio performed 4% above weather-adjusted expectations during 2020 and in-line with weather-adjusted expectations during Q1 2021; with the Utah and Oregon plants performing particularly well, and continued improvement in North Carolina.

The proposed investments

In January 2020, the Company announced the successful acquisition of a 177MW_DC operating portfolio from a subsidiary of Heelstone Renewable Energy, LLC (Heelstone Portfolio). The existing capital structure includes approximately $148m of project level debt, an amount larger than is typical for this portfolio with a portion being supported by post-PPA merchant cashflows. The level of gearing, debt structure, and the interest rate environment at the time the debt facilities were established, mean that the cost of this debt is approximately 3.5% higher than the cost of debt the company expects it could achieve by refinancing with a smaller facility.

MS2 is a 200MW_DC operating solar plant located in the Imperial Valley of Southern California. MS2 has a 20-year PPA with Southern California Edison, that commenced in June 2020. Under the PPA, 100% of the electricity generated by MS2 is sold to Southern California Edison (SCE) at a fixed price, escalating each year by an agreed percentage. SCE, a subsidiary of Edison International, serves a population of more than 15 million people and is the primary electricity provider for central, southern and coastal California.

Expected Timetable

USF : US Solar launches fundraise