In just more than a year’s time, local solar power company Borrego Solar Systems Inc. has gone from hoping to dive into the ocean of project ownership to watching the hope become a deeper reality as the months have passed.
Tuesday, the El Cajon-based company announced it closed its latest fund with partners U.S. Bank and East West Bank to finance new solar energy projects on both sides of the U.S. coast. The fund pushes Borrego Solar over the $100 million mark in power purchase agreement-financed solar projects during the last year.
The company's work with the San Diego Community College District in 2010 kicked off its participation in power purchase agreements. Last June, Borrego Solar stepped into the project ownership market when it completed its first transaction with the two banks, financing about 3 megawatts of projects totaling about $20 million. The projects included extensive work with SDCCD, such as the installation of solar power-generating carports at Mesa and Miramar colleges and rooftop solar systems at the district’s Learning Resource Center and headquarters buildings.
Prior to that first agreement with the banks last June, Borrego Solar had mainly limited its role to design and construction.
But the continuous relationship with the banks has transformed Borrego Solar into a more complete operation, from design and construction to financing and ownership, Borrego Solar chief financial officer Bill Bush said.
The fund will provide Borrego Solar with the necessary money to build the projects and become co-owners with its sister companies, while U.S. Bank receives the tax credits available. Through the PPA, project hosts need not invest the upfront capital costs, but buy the energy from Borrego Solar at a reduced, fixed rate. East West Bank acted as the lender in the transaction.
K.Y. Cheng, executive vice president of East West Bank, said in a statement that the partnership with Borrego Solar has strengthened with the company’s presentation of “shovel-ready” projects.
East West, Cheng added, is continually looking for ways to invest in the solar energy market.
What’s interesting about the latest fund, Bush said, is that it “crosses geography,” financing projects not only in California, like one at Edwards Air Force Base and another in Santa Clara County, but in Easthampton, Mass. and New Jersey with the Archdiocese of Newark.
Borrego has been operating outside California -- securing procurement -- for some time, but the announced fund closing represents the first group of PPAs to sprout from the company’s Northeast offices and land into an institutional portfolio. Borrego has offices in Pennsylvania and Boston.
"Those are big markets for us -- Massachusetts and New Jersey,” Bush said, adding that the company expects a lot of growth to come from them. “It’s definitely a move forward for us.”
The fund represents the third installment from partners U.S. Bank and East West Bank. With each new round, the dollar value has risen, so much to the point where the latest figure, nearly $45 million for 8.5 megawatts in projects, nearly equals the total of the first two combined.
“Whenever you can extend partnership relationships -- we’ve now crossed $100 million in total financing with them -- that’s definitely an exciting thing for us to be able to attract them to invest alongside us.”
Bush credits the progressive increase in the size of the funds to two factors, starting with the positive outcomes of the first couple transactions.
“Those two funds have performed very well,” Bush said, also noting that Borrego’s reputation in the marketplace has given U.S. Bank reason to believe in Borrego Solar’s product.
“Borrego Solar has continued to demonstrate itself as a bankable investment partner,” said Darren Van’t Hof, director of renewable energy investments for U.S. Bank, in a statement. “Looking at Borrego’s diverse project pipeline, we could not be more confident in the success of this new round of financing.”
In addition to its work for the San Diego Community College District, Borrego Solar has completed a number of solar projects in the San Diego area, including work for Helix Water District, Vista Irrigation District and the San Diego County Water Authority.
