Rooftop solar finance group issues second green bond in Australia

Australian based credit finance group FlexiGroup has issued a second green bond to the national market, doubling down on strong investor demand for clean energy assets, and in particular for residential rooftop solar and battery storage.

The $A50 million certified climate bond was issued on Tuesday with an underlying asset base of residential rooftop solar – and with a $20 million cornerstone investment from the Clean Energy Finance Corporation.

This follows the group’s landmark issue, just over one year ago, of green Asset Backed Securities, raising $50 million to refinance residential rooftop solar systems.

FlexiGroup is a major financier for rooftop solar systems, through its subsidiary Certegy Ezy Pay, which in 2015 had more than 120,000 customers and links with more than 400 installers and wholesalers.

In 2015-16, it gained $200 million in revenues from solar financing and it sees the rooftop solar and the nascent battery storage as one of its major growth areas.

“The next major phase for the domestic solar PV sector is solar battery storage systems which are rapidly being developed and will become increasingly significant in sales volumes over the next 1 – 5 years,” Fexigroup said at a 2016 results presentation.

As we reported at the time, Flexigroup’s April 2016 bond issuance, while relatively small in size, had the important effect of bringing rooftop solar into the mainstream bond market in Australia for the first time, and providing an avenue for cheaper finance for this and other technologies, potentially including battery storage.

CEFC CEO Oliver Yates described the bond – in which the green bank also invested $20 million – as a “significant milestone” in the development of the Australian green bond market and an important demonstration of its potential.

The CEFC said on Tuesday that its support for Flexigroup’s new climate bond had helped attract strong investor participation, signalling growing investor appetite for clean energy assets.

“FlexiGroup achieved tighter pricing on this climate bond, which shows investors were prepared to pay a ‘green premium’,” said CEFC Debt Markets lead, Richard Lovell on Tuesday.

“This is a strong market signal which will assist in accelerating the development of a more varied and flexible green bond market in Australia.”

As we have reported on RenewEconomy, Australia’s green bond market is, indeed, taking off, led largely by the ‘big four’ Australian banks.

In 2014, NAB issued certified climate bonds for wind & solar, while ANZ Bank tapped the market for low carbon buildings, wind & solar in 2015, and Westpac for wind, low carbon buildings and commercial property in 2016.

Earlier this month, NAB broadened its reach to the European, US and UK green bond markets, with the issuance of a €500 million ($A690 million) bond, targeting what the bank describes as “strong investor demand” for solar and wind energy projects.

“There is clearly a global trend toward investment in green bonds,” the CEFC’s Lovell added. “Our investment support for the FlexiGroup climate bond is part of our strategy to ensure that Australia’s clean energy sector can tap into this burgeoning source of capital, and that investors with a socially responsible mandate have the opportunity to participate.”