The renewable energy securitization market continues to grow in
the US and Europe. TMF Group experts report from the 2016 Global
ABS conference in Barcelona.
Green bonds gaining pace
Craig Braun of Renovate America joined the conference's
Green Bonds/Renewable Energy Securitization panel. Renovate America
originates Property Assessed Clean Energy (PACE) residential loans,
swaps these loans into a municipal bond program with certain
counties located in California and securitizes them through their
HERO note program. Renovate HERO Trusts are the leading issuer of
US PACE bond securitizations.
Renovate and the other panelists highlighted the growing
interest in green bonds by investors. Green bonds enable
capital-raising and investment for new and existing projects with
environmental benefits, and meet the green bond designation
criteria. Green bond investors are finding the securitization of
consumer loans financing – the purchase and installation of
rooftop solar panels – an attractive investment.
Along with the Renovate America program, Elizabeth Bellis Wolfe
of Energy Programs Consortium (EPC) discussed financing residential
energy efficiency loans. TMF Group's existing renewable energy
experience in South America and Africa is beneficial as developers
create new programs. Our experts can assist in developing
operational and administrative solutions with financing and
In Africa, we are seeing a number of investors seeking
attractive yielding investments to finance off-grid micro
solutions. Transactions are often structured using
securitization-type technology. Repayments are generally collected
and serviced via mobile 'money' technology.
The renewal energy program carried out by the country's
government has resulted in numerous wind and solar projects, to the
point that at certain periods, most of the energy consumed in the
country comes from renewable sources.
Most of the renewable energy projects are financed by
international organisations; banks or development banks such as the
IDB or CAF. These projects require local collateral agent services
which TMF Group provides in most South American countries,
particularly in Uruguay. The collateral is backstopping the
guarantee of the developer/ borrower and secures the investors of
Services that TMF Group provides as a local collateral and
depositary agents include:
allocating revenue received from the
project under the terms of the waterfall specified in the
financing's underlying agency agreements
guarantee agent of the development
guarantee agent of the PPA (Purchase
in most projects, assets are pledged
in favour of the collateral agent
the insurance agreements are pledged
in favour of the agent
in some cases, as an additional
guarantee, borrower shares are pledged in favour of the agent.
The advantage of these projects is that the state energy company
has oversubscribed demand for energy, and is almost forced to buy
TMF South Africa is extensively involved in the Renewable
Energy Independent Power Producer Procurement Program (REIPPPP),
providing corporate fiduciary services and independent directors
and trustees to the related financing structures.
TMF South Africa's Commercial Director, Brendan Harmse
attended inter alia the Global ABS covered bond discussion and
participated in the RSA market securitisation panel. The RSA term
and conduit market has been shrinking, with declining issuance
largely due to bank issuers and investors not able to come to terms
Investors are also preferring to invest in the banks' senior
unsecured paper rather than in the higher-rated securitization
paper, due to much better liquidity in this market. Hopefully the
central bank, RSA National Treasury and market participants will
sometime in future agree on ways to facilitate mechanisms to
improve liquidity, so that more securitisation issuance could be
During the RSA panel, Harmse also touched on securitization
activity in other African markets. Kenya has
securitization-enabling regulations formulated and managed by the
Capital Markets Authority (CMA), but no deals have been issued
to-date, despite increasing enquiries and interest to set up
issuers. This is due to inter alia uncertainty around ring-fencing
and bankruptcy remoteness of assets in the allowed issuing entity
– namely a trust.
The CMA is working with various global advisors to resolve the
legal and regulatory challenges. In Nigeria, proposed enabling
regulations have been before the parliament since 2012 and are not
yet finalised. Moody's mentioned that successful issuance has
taken place in Morocco.
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