A SolarZero install, with the battery front right. The 'solar as a service' firm says it also pioneered a new financing model as it raised $195m worth of debt - with one series focussed on its customer contracts, the other on the more pushing-the-envelop virtual power plant side of its business. Photo / File
A SolarZero install, with the battery front right. The 'solar as a service' firm says it also pioneered a new financing model as it raised $195m worth of debt - with one series focussed on its customer contracts, the other on the more pushing-the-envelop virtual power plant side of its business. Photo / File
Kiwi-founded firm SolarZero - now owned by US private equity giant BlackRock - says it has “pioneered a new financing model” to expand its debt funding to $195 million.
The firm has around 15,000 customers today, representing around 40% market share, its chief financial officer James Allard says.
Customers canbuy solar panels and a battery setup outright, which often runs to $20,000-plus or - as most do, pay nothing up-front. Solar Zero continues to own all the hardware and the customer pays it a set fee a month for “energy as a service”. Rates vary depending on the setup, particularly the number of solar panels installed, but Allard says a family of four might pay around $177 per month.
Some potential customers have baulked at the contract term - currently listed at 25 years on SolarZero’s website, with one free battery life for batteries rated for 10 years. Allard says, “Under our model, the contract term is required to spread the capital cost over a period that results in a monthly fee that provides a year-one saving to the customer.”
The new debt funding “enables SolarZero to increase its customer base by more than 50%”.
But of more recent installs, it’s currently closer to 100% he says - thanks to the fact that solar panels have become so much cheaper recently (the FT reported in April that overproduction in China - notably in 2023 as more than 250 million panels were made but under 150 million installed - has led to a glut of solar panels that has seen some punters use them for fencing).
A solarZero installation. The firm says it has around 15,000 customers today - representing around 40% market share. It's targeting 100,000 'by the 2030s'. Photo / File
A SolarZero customer in Laingholm, told the Herald he’d had no issues over five years, with his setup covering most of his household’s power use, most of the time - particularly in summer. He used the firm’s app to monitor daily usage. He liked “helping out” with emissions by selling back to the grid when his panels generated surplus power. A major benefit was “the fridge and other appliances staying on during power cuts” (Laingholm was particularly hard hit during Auckland’s wild weather of early 2023.)
If solar doesn’t cover all of your needs, you buy power in the usual fashion from power company (SolarZero currently partners with the Genesis-owned Ecotricity).
If you produce surplus electricity, it can be sold back to the grid - you get a credit from your power retailer, rather than the money going to SolarZero.
"This is a really exciting milestone not only for us, but for Aotearoa’s structured debt space. It’ll open the door to a range of new investors" - SolarZero CFO James Allard.
But the firm does get a fee for managing the process of making its customers’ solar batteries available - and even coordinating them into a “virtual power plant” as it did with the March 10 cold snap - when SolarZero customers collectively supplied 30 megawatts, helping to relieve pressure and prevent a grid emergency. (Tesla did the same thing with its Powerwall solar batteries, albeit with a lack of communication that left some customers confused or annoyed that they had been army-volunteered.)
This cutting-edge virtual power plant technology helped shape SolarZero’s debt-funding exercise.
The firm split its debt-funding into two distinct series – the “customer series” and the “battery series”, each tailored to cater to different types of investors, Allard says.
While financiers are familiar with financing asset-backed customer contracts, the market for SolarZero’s virtual power plant services is developing quickly and requires “more bespoke financial structuring”.
The debt-funding round SolarZero works with the Crown-backed NZ Green Investment Fund (NZGIF) under its Solar Finance programme and French bank Societe Generale.
“It’s all closed. We’re already utilising the facilities to finance new installations,” Allard says.
“Societe Generale provided $130m of the $195m and then NZGIF provided the balance.”
He added, “This was expanding the existing arrangements. Prior to the refinancing, we had a $80m facility with NZGIF. They gave us that facility with the idea that we would then bring another lender in to expand it.”
Does NZGIF offer mates-rates interest given SolarZero contributes to its decarbonisation mission?
“They’re a really key partner of ours. But for what they’re lending, they’re looking to make a market-level of return,” Allard says.
“What’s really different about NZGIF is that they have a broader remit. They’re looking to drive the energy transition and elements like our virtual power plant. That’s a market that’s still developing. It’s probably not at a state where you could easily attract, commercial finance. They plug that gap.”
Broader remit
Allard adds, “And what NZGIF have offered us in relation to the more simple part of our financing proposition - financing the customer contracts - is mezzanine debt that sits in there above the senior debt and provides a bit of credit enhancement.” Mezzanine debt can be more flexible and tied to cashflow. It can be higher risk. NZGIF was willing to take it on.
Solar operators need long-term, fixed-rate debt as well as warehousing debt facilities, and existing funders have been cautious about financing the more disruptive and innovative participants in the sector, NZGIF chief investment officer Jason Patrick says.
Total $356m
The CIO said NZGIF had now led two rounds of debt issuance that had made a total of $365m available for medium to long term debt for solar providers.
The total lending facility will help provide access to affordable renewable generation for 20,000+ New Zealand households, he says.
NZGIF chief investment officer Jason Patrick: "Public and private sector capital, working together with companies like SolarZero, is exactly what is needed for New Zealand to reach its decarbonisation goals."
“We took a bundle of residential solar assets and solar contracts and were able to structure them for investors in this programme. Under attractive criteria and standardised terms, we created an opportunity that has brought in offshore investors looking for a long-term investment.”
Patrick adds, “NZGIF Solar Finance was established as a repeatable financing facility, so it’s great to see this second round of financing become available with the support of Societe Generale. Public and private sector capital, working together with companies like SolarZero, is exactly what is needed for New Zealand to reach its decarbonisation goals.”
Tech partners
SolarZero will also work with partners to improve its virtual power plant technology, Allard says. The firm primarily takes its solar panels from China’s JA Solar. Its batteries and inverters are primarily from Panasonic - which has also been a development partner for some of SolarZero’s technology.
The firm, which has its roots in a Canterbury University research spinout in the 1970s, took its modern form in 2008 when founder Andrew Booth used equity from Sir Stephen Tindall’s K1W1 to fund a rollup of three solar operators to create one nationwide firm, then investment from private equity firm Pencarrow to expand.
SolarZero was sold to BlackRock in a deal approved by the Overseas Investment Office in November 2022. No price tag was put on the deal, but it would have been somewhere north of the OIO’s $100m threshold for assessment.
SolarZero ‘solar as a service’ subscriptions
Moderate: 9 - 11 panels: $157.55
Average: 12 - 14 panels: $177.10
High: 15 - 17 panels: $203.55
Ultimate: 18 - 20 panels: $227.70
Maximum: 21 - 22 panels: $249.45
Pricing includes GST and covers installation and maintenance.
If you sell your home, the new owner can take over your monthly SolarZero subscription - about 85% do, CFO James Allard says - or the firm will come in take the setup away. If necessary, you buy top-ups from a regular power company. SolarZero’s default partner is Genesis-owned Ecotricity.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
