Canadian Solar Inc. today announced that it has completed the closing of its equity securitization in Japan.
Canadian Solar successfully raised JPY6.3 billion (US$58 million) from a diversified mix of Japanese and Korean institutional investors in its inaugural offering of equity backed securities, Canadian Solar Securitized Green Equity Trust 1. Proceeds from the offering were originally deployed to acquire Canadian Solar's 34MW operating solar portfolio, comprising the 23.8MW Smart Solar Yamaguchi-Aio Solar Power Plant and the 10.2MW CSJ Kamikitagun Rokunohemachi Solar Power Plant. Canadian Solar recognized revenue from sale of the plants in the third and fourth quarter of 2018.
The two projects have existing debts that have been raised through a non-recourse project bond structure developed using financial securitization techniques. The securitization of the equity portion of the capital structure brings the whole-business securitization concept one step further and culminates into a total securitization of solar assets. The investment period matures in September 2037 and the securities have been rated as Green 1.
Electricity generation from the CSJ Kamikitagun Rokunohemachi Solar Power Plant and the Smart Solar Yamaguchi Aio Solar Power Plant is purchased by Tohoku Electric Power Co., Inc. and Chugoku Electric Power Company under 20 years feed-in-tariff contracts at the rates of JPY36(US$0.33) and JPY40(US$0.37) per kWh, respectively. Canadian Solar's asset management arm, Canadian Solar Asset Management K.K., has been appointed as the Asset Manager to manage the securitized portfolio. Canadian Solar O&M Japan also provides Operations and Maintenance services for the remaining duration of the 20 years FIT period. The two solar power plants utilize MaxPower modules supplied by Canadian Solar and began commercial operations in late 2016.
"We are delighted to originate this ground-breaking transaction and to take solar securitization to the next level. We are proud of our continuous achievements to drive Environmental, Social and Governance investment growth in Japan. Since 2017, our Japanese asset management arm has rapidly expanded to manage over JPY 60 Billion (US$540 million) of ESG investment platforms, including the TSE-listed Canadian Solar Infrastructure Fund," commented Dr. Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar. "We plan to grow our ESG investor base to provide further avenue for institutional and retail investors who are increasingly looking to diversify their portfolios into supporting clean energy transition and secure an investment opportunity in solar assets backed by attractive long-term yields."
Goldman Sachs Japan Co., Ltd, acted as sole structuring agent and sole placement agent for the transaction.
The securities have been assigned the Green 1 rating in accordance with the ICMA's Green Bond Principles and Japan's Ministry of the Environment's Green Bond Guidelines. The portfolio is expected to produce 38,580MWh of clean solar energy annually, or sufficient to reduce 25,441 tons of carbon dioxide emissions.