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SISER SOLAR: Stages Of Solar Projects Development
Solar is very viable and continues to grow in the US markets and it is considered very low risk due to low maintenance
and longevity of the solar panels.
From the Sponsor Equity financial point of view, a solar investment synthetically duplicates a long term bond investment,
where the subscription is represented by the equity funded in the structure; and the interest payments are replaced by
distributions from the partnership.
Investors seeking long-term stable low risk returns continue to fund projects.
Timing
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development of a solar project can take six months or more depending on location and utility requirements
High level milestones
- Site Location – Requires good access to grid
- Lease or purchase of property
- Design of system
- Application for interconnection to grid
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Power Purchase Agreement – Contract between owner and credit worthy utility company to purchase power at
a specified price and terms
- Site Preparation – Environmental analysis, permitting, soil evaluation
Marketability
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A shovel ready project, or at least a project with interconnection and PPA in place, could be offered in the market at a price
between $0,03/W and $0.05/W
- Costs: development costs cover the following:
- Option to purchase or lease the land
- Geological study
- Engineering study
- Negotiation of interconnection and PPA with the utility company
- Brokerage services to sell the project
- All state and federal permits for any Solar Farm
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In the aggregate, development costs for developer investors (Investor) are estimated in $0.02/W, including Siser’s partners
participation in the development entity
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Structure: the development activity is carried out by Siser for its principal, a SPV (Development Entity) participated by the
Investor and Siser’s partners on a 70% - 30% basis
- Return: depending on market conditions, return for development investor ranges from 25% to 75% in approx. 18 months
Stages of a Solar Project - Post-Development Activities
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When the project is offered to the market, purchaser (typically an EPC or financial investor) brings it to the shovel-ready
phase and builds up the plant
- Capital Stack for contruction
- 5% to 50% Debt
- 5% to 25% Sponsor equity
Sources
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Tax Equity – Mostly financial or large corporate entities with large tax liability that are able to efficiently utilize
Federal Tax Credit and depreciation losses
- Debt - Typically structured as construction to permanent debt in a first lien position
- Sponsor Equity - The owner/operator of the system typically in recourse position. Will be long term owner of asset
Description of - Capital Stack and Return
- Most projects use a construction-to-permanent-debt solution
- The debt service ratio is typically in the 1.25 DSR range
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Projects today are being financed in the 5.5% to 7.5% interest rate range for terms between 10 and 12 years with
refinancing options
- Revenues generated by the solar plant consist in proceeds of the energy sale and the tax benefits
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