Wall Street banks' attraction towards solar energy seems to continue. On Wednesday, Wells Fargo & Company ( WFC ) announced a further investment of more than $100 million of tax equity financing over the next 18 months to SunEdison, Inc. ( SUNE ) - a leading solar energy provider.
Wells Fargo plans to invest in distributed generation solar power projects developed by SunEdison. Since 2007, the banking major has financed almost 200 utility-scale solar projects throughout 13 U.S. states and Puerto Rico, for an amount worth $950 million. This has allowed SunEdison to provide clean and cost-effective energy to its customers.
SunEdison designs its projects according to the terms of a power purchase agreement (PPA). Its customers buy the energy produced for a fixed rate as specified in the PPA. Hence, third-party investors are beneficial to SunEdison as they facilitate the company to install solar power equipment without requiring customers to pay upfront costs. Since 2008, SunEdison has garnered approximately $5 billion in project financing for solar power plants.
Recently, Sunrun - a privately held rooftop solar solutions provider - secured funds worth $630 million from JPMorgan Chase & Co. ( JPM ) to acquire and install solar power equipment.
Financing solar installations have become attractive for major banks as they enjoy tax rebates, including a solar tax credit. The federal tax credit is equivalent to 30% of a project's cost. Moreover, at times, banks receive a fraction of the homeowners' lease payments, as per the terms of the deal.
An acute awareness of the benefits of green energy exists in the U.S., as evinced in the rising demand for rooftop panels from homeowners and businesses in recent times. Consequently, financial markets have recognized renewable energy as an immensely valuable asset. Notably, distributed solar alone has secured almost $1 billion in third-party financing from Wall Street biggies in the last few days.
Wells Fargo currently carries a Zacks Rank #3 (Hold). KeyCorp. ( KEY ) is a better performing stock, which carries a Zacks Rank #2 (Buy).
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