Last week, Bank of America Corporation (NYSE:BAC), Prologis and NRG Energy announced an offer to help the largest distributed rooftop solar generation project in the world. The offer includes a provisional assurance with respect to finance from the U.S. Department of Energy’s Loan Programs Office. The loan guarantee will facilitate debt of $1.4 billion of the total project size of about $2.6 billion, which will be financed completely by the private sector over the next four years.
After receiving the offer from the Department of Energy, BofA and other two firms are working on the financing documentation of the solar project to commence the first phase of installation. Under the first phase, 15 megawatts (MW) of solar capacity is instantly ready for construction and installation in Southern California. After the completion of the installation, the power generated will be sold to a local utility under long-term power purchase agreements that have been permitted and implemented. NRG Energy has agreed upon to be the lead investor for the first phase of the project over the next 18 months.
Under the plan, solar panels will be erected on the top of industrial buildings in 28 states. The project will take place at sites offered by Prologis, who is an owner, operator and developer of the industrial real estate. Prologis with the aim of generating renewable energy will provide access to rooftops and will act as a developer, construction manager and program sponsor in addition to making an equity investment. This project will add considerable level to the distributed solar market while providing economic and environmental benefit to Prologis’ shareholders and customers.
Through this distributed solar project, more than 10,000 full-year jobs will be generated across 28 states. After completion, these installations are estimated to supply about 733 MW of distributed solar energy, which would provide renewable energy to power roughly 100,000 homes.
BofA is acting as financial and structuring advisor and sole lender in this agreement. The transaction is conducted under the Department of Energy’s Financial Institutions Partnership Program (FIPP). Through FIPP, the DOE will warranty 80% of the $1.4 billion debt financing for this deal.
Through this innovative transaction, BofA brings together several parts of Global Banking and Markets franchise. Such achievement renovates the dynamics of distributed solar generation, produces a significant source of clean energy and generates thousands of jobs across the U.S.
NRG Energy, one of the nation’s largest electric power companies and solar energy developers with funding the first phase of the project along with providing development resources and project proficiency for the installations. As per the company, rooftop solar program will transfer the benefits of solar power to its customers across the country. This project will almost double the amount of grid-connected solar online in the United States and positively contribute to cleaner air and a healthy environment.
Within BofA, the business was led by the Cross Asset Solutions and Strategies group. This team is formed to control BofA’s entire platform and synchronize the vast resources of the company from initiation to implementation while collaborating with BofA’s Global Investment Banking and Global Leasing teams.
This step in solar energy generation exhibits the strength of BofA’s Global Banking and Markets platform forming a part of the company’s 10-year, $20 billion environmental business initiative. Such initiatives are taken to mark climate change by aligning BofA’s global financial products and services and help in enhancing energy efficiency and low-carbon energy markets.
In October 2010, BofA’s closest competitor, JPMorgan Chase & co. (NYSE:JPM) also announced that its unit JPMorgan Capital Corporation signed a deal with SunEdison to finance a solar (photovoltaic) energy development project. The amount to be invested by the company was approximately $60 million, which be deployed in major SunEdison markets across the U.S.
BofA currently retains its Zacks #4 Rank (a short-term “Sell” rating). Moreover, we maintain our long-term ‘Underperform’ recommendation on the shares of BofA.