With federal and state tax credits in flux, owner/developers are looking for new ways to finance or monetize utility-scale solar developments. Meanwhile, high-net-worth individual investors and small institutions continue hunting for stable risk-adjusted returns in this low interest rate environment.
Like other financial innovators such as Kickstarter, LendingClub and Prosper, AlternativeXGroup provides a platform that brings these two groups together.
Historically, alternative assets have generated returns with low or negative correlation to conventional equities and fixed income securities. In this way, alternatives traditionally enhance returns and cushion investor portfolios against extreme market fluctuations.
However, during the 2008-2009 credit crisis and ensuing Great Recession, traditional diversification strategies such as real estate, commodities and professional hedging strategies failed to safeguard investor portfolios from downside risk. As volatility reached crisis proportions, asset classes became more highly correlated, leading to less diversification and more vulnerability to market risk.
AlternativeXGroup's proprietary Solar Hybrid Royalty Model is a new addition to the alternative asset class. The owner/developer calculates a given development's cash flows after payment of debt service, taxes, operating and maintenance costs and investors buy this future royalty stream at today's net present value.
The owner/developers, thus, raise relatively low-cost capital by monetizing future income while maintaining ownership of the asset, the resulting tax credits, renewable energy certificate ("REC") income and depreciation benefits.
Investors receive a 10-20 year bond-like investment providing predictable cash flow and backed by power purchase agreements ("PPA") with regulated, creditworthy counterparties such as utilities, municipalities and large corporations.
To further reduce risk for the investor, only late-stage, "shovel-ready" or completed projects with assignable PPAs are eligible for the program.
We are looking for partners within the solar energy community to help refine the architecture of this new financing model. If you are interested please reach out directly to us at AlternativeXGroup.
By: Sean Peace (Alternative X Group) and Kimberly Barnes (GreenFIRE Energy Advisors)
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