Advanced Energy Perspectives

STATE: New York Green Bank Begins Lending, Quietly Changing the Finance Game

Posted by Dan Scripps

Nov 6, 2014 3:58:30 PM

    

nygreenbank

On October 22, the New York Green Bank announced its first round of transactions. When Governor Andrew Cuomo announced the $1 billion bank last year, it was touted as an innovative way to combine the goals and resources of the state’s public and private sectors.

 

“We will leverage public dollars to attract private sector investment into building a new clean energy economy that will help make our state greener and create jobs,” Cuomo said in a statement. The bank will use “limited state resources to drive investment into critical areas of the economy.”

 

Totaling $800 million in expected investment, the transactions just announced involve partnerships with private sector capital providers, with the New York Green Bank providing targeted financial supports such as credit enhancements, loan loss reserve funds, and loan bundling to overcome a range of market barriers that make it difficult for the private sector to finance these activities. The seven initial transactions provide both new financing models for advanced energy projects and funds for several projects themselves. The transactions are:

  • Expanding Commercial and Industrial (C&I) energy efficiency and distributed generation. The New York Green Bank is providing a credit facility for transactions conducted by Ameresco, with third-party project lenders providing additional capital.
  • Energy equipment financing. The New York Green Bank will partner as a co-investor with Bank of America Merrill Lynch to increase financing for renewable energy, energy efficiency, and combined heat and power projects.
  • Using Energy Service Agreements (ESAs) to grow commercial property efficiency markets. The New York Green Bank will provide a senior debt facility to Deutsche Bank to support its initiatives in energy efficiency projects under ESA structures.
  • Template for mid-sized commercial solar projects with new sources of capital. The New York Green Bank will provide guarantees for First Niagara Bank and M&T Bank for construction loans and tax equity financing relating to the development of a 4 MW PV array being developed by BQ Energy’s SteelSun, LLC on a brownfield site that once housed the Bethlehem Steel Mill. These guarantees are focused on developing financing markets for smaller-scale commercial solar by demonstrating to the commercial markets that financings of this size are an attractive investment for institutions such as regional and community banks and can be replicated easily to potentially build larger aggregated and marketable portfolios.
  • Scaling up residential energy efficiency. The New York Green Bank will provide a credit facility in partnership with the Warehouse for Energy Efficiency Lending (WHEEL) warehouse facility developed by Renewable Funding and Citi. The New York Green Bank will also provide $100 million in medium term notes to expand the availability of loans for homeowners and promote the creation of a marketplace for the securitization of residential energy efficiency loans.
  • Building marketable portfolios of energy efficiency and distributed generation assets for C&I and public buildings. The New York Green Bank will provide a credit facility for an investment vehicle developed by Sustainable Development Capital, LLP and capitalized by First Eastern Investment Group and other investors.
  • Expanding capital availability for small-scale commercial cogeneration projects. The New York Green Bank will serve as senior lender in partnership with Tatum Management to provide construction financing and permanent debt for a portfolio of cogeneration projects developed by GreenCity Power LLC.

These initial transactions are supported by the New York Green Bank and other parties and agreed to in principle. Terms for most of the projects are still being finalized and the New York Green Bank is working to close the transactions by year-end. 

 

In announcing these projects, Richard Kauffman, Chairman of Energy and Finance for the State of New York, said, “These transactions demonstrate NY Green Bank is working exactly how it is supposed to, through collaboration with the private sector and addressing the very issues that are preventing them from fully engaging in the clean energy marketplace. Each of these arrangements proves the private sector is ready to engage in public-private partnerships to drive a significant increase in New York's clean energy economy, benefitting all New Yorkers. Today’s announcement cements New York's strategy to transition to a more environmentally and economically sustainable energy infrastructure.” 

 

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Topics: State Policy Update, Energy Finance

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