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Michael Eckhart Managing Director Global Head of Environmental Finance Corporate & Investment Banking Citigroup Capital Markets, Inc.

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Presentation on theme: "Michael Eckhart Managing Director Global Head of Environmental Finance Corporate & Investment Banking Citigroup Capital Markets, Inc."— Presentation transcript:

1 Michael Eckhart Managing Director Global Head of Environmental Finance Corporate & Investment Banking Citigroup Capital Markets, Inc. Past, Present and Future of Solar Finance Presented to: Intersolar Solar Finance and Asset Symposium IV July 7, 2014 San Francisco

2 PERSPECTIVE

3 : Invention of PV 1839: Photovoltaic effect first observed in science by Edmond Becquerel, Paris 1888: Edward Weston receives first US patent for "solar cell" 1922: Nobel Prize awarded to Albert Einstein for his 1905 mathematical explanation of the photovoltaic effect 1954: Bell Labs produced the first functioning solar cell 1959: NASA launched Vanguard 1, the first spacecraft using solar PV (still in orbit!)

4 : Oil Crisis and OECD Reply 1973: Ford Foundation Study: “solar and efficiency” by David Freeman “Solar Energy in the Service of Mankind”, Paris: Wolfgang Palz Solarex founded by Peter Varadi and Joe Lindmeyer Arab oil embargo : International Energy Agency IEA) Federal Energy Administration (FEA) Energy Research & Development Administration (ERDA) Congressional Solar Coalition, Scott Sklar Oil industry begins investing in solar PV development: – ARCO --Texaco--Chevron – Exxon--Shell--Mobil

5 : U.S. Government Action 1977: DOE founded by merger of agencies: FEA, ERDA, NASA Solar, Coal research Solar Energy Research Institute (SERI) established in Golden, CO DOE sets PV cost goal = 50¢/Wp ($1976) 1978: PURPA enacted: creating Qualifying Facilities (QFs) Energy Tax Act created the first business tax incentives for solar, leading to first leasing structures –Keith Martin, Chadbourne & Parke BAH study for the White House: “Assessment of Solar PV Technology, Industry and Policy”: Eckhart et al 1979: ARCO Solar produces 1 MW of PV in one year

6 : The Lost Decade 1979: Iranian hostage crisis and oil price increase 1980: Ronald Reagan elected; beginning of major cutbacks in Federal funding 1983: Solarex acquired by Amoco, commercial applications for PV 1985: Solar tax credits allowed to lapse 1986 Oil and gas prices collapse

7 : Rebirth of Renewables 1990: SERI renamed NREL 1992: EPAct1992: EWGs and wind PTC Aachen Model, Germany – precursor to the FIT SELF founded by Neville Williams 1995: Founding of Nth Power, first VC in renewables, by Nancy Floyd Founding of E+Co, the Rockefeller-funded finance fund for SMEs 1996: World Bank-Rockefeller joint task force on Solar Financing

8 : Kyoto and EU White Paper 1997: Kyoto Protocol European “White Paper on Renewable Energy” by Wolfgang Palz World Bank hosts “Village Power” conference 1998 SolarBank Initiative in South Africa, Mike Eckhart, Reinhold Viljoen, Sake Kotse et al SolarBank Initiative in India: training 1,000 bankers by Mike Eckhart, Griff Thompson, Harish Hande, KM Udupa, Rahul Arora, Aesha Grewal German 100,000 roofs program, Hermann Scheer California AB 32 solar subsidy 1999: First RPS in Texas for 2,000 MW of wind power Founding of the Shell-Eskom Solar Energy Co. in South Africa using pre-payment Siemens Solar achieves 100 MW produced – announces 25-year warranty

9 : Stage-Setting 2000: German FIT for solar PV plus KfW solar loan program – Hermann Scheer EU Publishes “Take-Off for Renewable Energy” Net Metering PowerLight hires Greg Rosen, first full-time financier of solar 2001: ACORE founded, Mike Eckhart, Scott Sklar, Dan Reicher, Michael Ware, John Mullen, Mark Riedy, Hank Habicht and many others. 9/11 Enron bankruptcy - ending of utility restructuring 2002: Solar leasing offered by Stella Group – Scott Sklar Rio+10 meeting in Johannesburg: renewables blocked

10 : Policy for Financing 2003: First REFF-Wall Street – repeated annually since then by Mike Eckhart, Ken Locklin, Dan Reicher, Michael Ware et al New Energy Finance founded, Michael Liebreich SunEdison founded – PPA model for rooftop solar, Jigar Shah : German 20-year FIT for all renewables, Hans Josef Fell et al 2004: Bonn Renewables 2004 – Gerhard Schroeder, Jurgen Trittin, Hermann Scheer Increasing RPS in the US 2005: Increased VC investment: John Doerr at KPCB, Stephan Dolezalek at VPCP, Raj Atluru at DFJ, Erik Strasser at Mohr Davidow, Nancy Floyd at Nth Power, plus NEA, others

11 : China and California 2006: China enacts Renewable Energy Law: Li junfeng California Solar initiative: $3 billion over 10 years 2007: SolarCity, SunRun, Sungevity founded Sale-leaseback financing of a utility-scale PV project for SunEdison, Keith Martin, Chadbourne & Parke Inverted Lease for resi-rooftop created by US Bank and Morgan Stanley: Marshal Salant and Jason Cavaliere First solar set-aside established in the Colorado RPS

12 : Financial Crisis/Incentives 2008: WIREC 2008 world meeting by ACORE, Mike Eckhart, Jim Connaughton, Reno Harnish, many others Partnership flip financing by SunEdison Financial crisis: Lehman Bros bankruptcy ERRA: 30% ITC for 8 years, Rhone Resch; beginning of the new era of tax equity for solar 2009: IRENA founded $*9 Billion ARRA with cash grant, loan guarantees and R&D funding EU enacts 20/20/20 by 2020 CPF Founded: Nat Kreamer

13 : Loan Guarantees 2010: China has 523 companies manufacturing solar PV, begins dropping prices RBF convenes off-site to advance FITs to the US: Michael Northrop, Craig Lewis 2011: Fukushima nuclear power accident in Japan ARRA loan guarantees awarded for CSP to BrightSource, SolarReserve and Abengoa ARRA loan guarantees awarded for PV to First Solar, SunPower, Cogentrix $2.3 billion Desert Sunlight financing with first solar project bonds by Citi, Stuart Murray et al

14 : Capital Markets 2012: Japanese FIT enacted China PV installation program enacted SolarCity IPO: Lyndon Rive, Bob Kelly, Ben Cook et al Solar Mosaic founded creating first crowd funding: Daniel Rosen and Billy Parish SAPC founded by NREL: Michael Mendelsohn Birth of Community Solar – cooperative financing 2013: First REIT: Hannon Armstrong Sustainable Investment IPO: Jeff Eckel First solar securitization by SolarCity: Credit Suisse First Yieldco by NRG, David Crane working with Citi TruSolar founded by Distributed Sun: Chase Weir, Jeff Weiss, Doug Payne “Banking on Solar” founded 2014: Green Bond Principles developed by Citi and BAML and adopted by over 50 banks, investors and issuers: $20.5 Billion issued YTD.

15 Summary: Phases of Innovation Technology Innovation RE Policy Innovation Financial Innovation ERDA / USDOE ARRA RD&D Funding PURPA EPAct 1992 FIT, Net Metering, RPS, tax credits LG, CG, ITC, Interest Rates Market Structure Innovation Environmental Policy Innovation Clean Air Act Kyoto EPA

16 Global Solar PV Global Installations ( GW/Year) Source; BNEF 2013 ROW India China US Japan EU

17 U.S. Solar PV Installations (S Millions) Utility-Scale Small-Scale

18 Future of Solar Finance: Near-Term Drivers Drivers trending towards solar: Global markets driving down hardware costs Interconnection and permitting Grid and distribution system upgrades Storage Continued PV technology advancement and cost reduction Drivers trending away from solar: ITC and other direct supports Net metering and resolution of utility rates Interest rates

19 Future of Solar Financing: Long-Term Drivers Drivers trending towards solar: Global market pull on PV success Power economics with environmental and climate costs Public attitudes on climate and environment Public acceptance of solar Infusion of climate policy in utility decision making Drivers trending away from solar: None

20 Future of Solar Finance Continued innovation: Easy credit for residential rooftop Credit backstop mechanisms for C&I financing Portfolio financings for substation-level projects Risk mitigation and credit enhancement M&A and consolidation: Solar installation companies Solar financing companies Scale-up of issuances to the capital markets: Solar securitizations Yieldcos – Carve-outs, Newcos, REITs, and maybe MLPs Green bonds and the return of balance sheets

21 Michael Eckhart Managing Director Global Head of Environmental Finance Corporate & Investment Banking Citigroup Capital Markets, Inc. Thank You

22 © 2013 Citigroup Global Markets Inc. Member SIPC. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world. Citi believes that sustainability is good business practice. We work closely with our clients, peer financial institutions, NGOs and other partners to finance solutions to climate change, develop industry standards, reduce our own environmental footprint, and engage with stakeholders to advance shared learning and solutions. Highlights of Citi’s unique role in promoting sustainability include: (a) releasing in 2007 a Climate Change Position Statement, the first US financial institution to do so; (b) targeting $50 billion over 10 years to address global climate change: includes significant increases in investment and financing of renewable energy, clean technology, and other carbon-emission reduction activities; (c) committing to an absolute reduction in GHG emissions of all Citi owned and leased properties around the world by 10% by 2011; (d) purchasing more than 234,000 MWh of carbon neutral power for our operations over the last three years; (e) establishing in 2008 the Carbon Principles; a framework for banks and their U.S. power clients to evaluate and address carbon risks in the financing of electric power projects; (f) producing equity research related to climate issues that helps to inform investors on risks and opportunities associated with the issue; and (g) engaging with a broad range of stakeholders on the issue of climate change to help advance understanding and solutions. Citi works with its clients in greenhouse gas intensive industries to evaluate emerging risks from climate change and, where appropriate, to mitigate those risks. efficiency, renewable energy and mitigation


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