Solar Sale Leasebacks: 6 Hidden Transaction Costs

Solar Sale Leasebacks: 6 Hidden Transaction Costs

Rather than raising Tax Equity, some solar Developers are turning to Sale Leasebacks. It’s an easier transaction, but don’t let that fool you. There are still a few significant transaction costs. These costs are paid out of the Developer Fee. Worse, Developers can feel a little blindsided when the bill comes because these costs aren’t often disclosed during negotiation. To help our clients evaluate a Sale Leaseback, this article discusses six common transaction costs and includes ballpark numbers to add to your model. The Six Transaction Costs The six transaction costs we’ll cover are the (1) Legal/Diligence Review,                 (2) Appraisal, (3) Independent Engineering Report, (4) Cost Certification (5) Lockbox Agreement, and (6) Sales-Tax. Each is explained below. A Little Context It’s important to understand the context for these costs. The capital provider in the Sale Leaseback, usually a Bank, requires each of these items as part of its diligence process. Typically, the Bank hires an outside party to perform the analysis (such as a law firm or appraiser). The objective is to independently confirm the relevant metrics underlying the solar project pro-forma upon which the Bank is placing capital. Each party then provides the Bank a report, which the Bank uses to re-evaluate the amount of funding the Developer receives. At the end, the Bank asks the Developer to pay for each of these reports. 1. Legal/Diligence Review The Legal/Diligence Review costs $20k. It is performed by a law firm hired by the Bank. The lawyers look through all the project documents to assess a number of items (To better understand...
Solar Sale Leasebacks: Example Pricing and Deal Terms

Solar Sale Leasebacks: Example Pricing and Deal Terms

Solar Developers struggling to secure Tax Equity or Sponsor Equity should consider a Sale Leaseback. You get 100% of the capital from the Bank, meaning you don’t need Tax Equity. It’s cheaper, easier, and lower cost. Zenergy is often asked: How does it work? Is it a good fit for our project? To answer that, we provide a simple overview of a Sale Leaseback, a few example numbers for your model, and basic investor eligibility criteria Zenergy has a long history of working with small-mid size Developers on C&I and small utility-scale projects. Not only that, we also directly finance and acquire mid-size projects in our sister investment fund, SolRiver Capital. In both cases, we’ve helped structure and raise tax equity for these smaller deals under a Partnership Flip dozens of times. The Flip structure is still a good fit for many projects. However, over the last 18 months, we’ve started to see Sale Leasebacks become the better option in many cases. In this article, we explain what we’ve seen and how that applies to your projects. Sale Leaseback vs Partnership Flip Partnership Flips (and Inverted Leases) are currently more common amongst the large solar Developers and main Tax Equity investors. That’s because in the last 5-6 years, Developers made more under a Partnership Flip than a Sale Leaseback. However, as the cost of Sponsor Equity rises, that may no longer be true. More importantly, for Developers with smaller pipelines or smaller projects, securing Tax Equity with a Partnership Flip may not be realistic. That’s why you should consider using a Sale Leaseback. Under a Sale Leaseback, Developers can...
6 Ways To Fix Your Commercial Solar Sales Pitch

6 Ways To Fix Your Commercial Solar Sales Pitch

The most painful part of commercial solar sales is the waiting. Sales cycles often take 8 to 12 months. One major reason is a lack of urgency. To the sales rep this is crazy. A PPA/Lease deal is a no-brainer. Why do customers take so long to pull the trigger? After studying this intensely, I found part of the problem is the sales pitch. Below are 6 techniques to improve your pitch. 1. Make It A Story People are hardwired to remember stories better than a stack of raw data. They pay attention to stories. They emotionally engage with stories. They retell stories. As a result, you should frame your pitch within a story. Come up with a narrative theme that runs throughout the pitch. Weave the details of your sales pitch into that story. What do I mean by a story? Here’s a very simplistic example: I once helped the General Manager at a facility like yours. The GM had a problem. He wanted a new [forklift], but the budget is tapped. He needs another [forklift] because it will increase productivity by [20%], which boosts revenue by [$100,000]. The problem is paying for it. The solution: he goes solar. The whole thing is financed upfront. Construction only takes a few weeks. Painless. Once the system is on, his electric bill automatically drops. After a few months, his OpEx surplus grows to $80,000, and he gets his [forklift]. The End. Main Reason To Use A Story Framework: Retell-ability You probably think I’m going to say the main benefit of a story framework is the audience pays attention. Wrong. I’m...
Rolling Marketing For Commercial Energy

Rolling Marketing For Commercial Energy

Commercial energy marketing is about maintaining a drum beat. The most effective campaigns tailor messages to Industry Segment + Utility + Energy Solution. Small teams trying to do this quickly get overwhelemed. Below is an alternative tactical marketing plan optimized for a small team. To improve efficiency, we use templates and repeatable tasks to streamline campaign creation. To improve effectiveness, we simultaneously set up a short term and long tail inbound funnel. My experience is leading small 2-3 person marketing teams, with a $3-5K monthly budget, and an engaged/supportive sales team. Drawing from those resources, we found the following extremely effective: The Plan In A Nutshell In a nutshell, the plan works like this: W start by identifying a target sector. We figure out messaging that resonates with the sector. We create collateral customized to that sector. We then launch email, direct mail, and cold call campaigns. After that, we spin customized collateral into articles used for a sector specific PR and conference circuit. The process takes 2 months to launch. By month 3 it is on autopilot. Starting in month 3, the marketing team begins prepping a new sector, while outside PR and inside sales finish with the current sector. The best part of the process is it keeps rolling sector after sector, with a small team, without giving up the long tail investment. Breaking Down The Steps   Step 1: Identify your sector. Build Target List. First, id your sector. This plan is built around tailoring content and distribution to each target sector. Normally, sectors are defined with three elements: Industry + Geographic Area + Energy Solution....
The Money Wasted Email – Creating Urgency For Commercial Solar

The Money Wasted Email – Creating Urgency For Commercial Solar

One thing truly baffles me about the long commercial solar sale cycle. Customers will get a proposal, then delay making a decision for months. Every month they “think about it” literally costs them money. The lack of urgency shows they don’t get the “money wasted” problem. It’s ok. Many things in life take a little while to sink in. The worst part, though, is when a proposal goes into decision limbo the sales rep often is helpless. He/she can ping the customer via email/phone, but typically hears “Oh, we have been busy. Hopefully, we’ll make a decision in the next few weeks.” Eventually, the phone calls/emails become annoying and turn off the prospect. So what do you do? My simple solution is an automated email that I call the “Money wasted Email.”   The Money Wasted Email Each month, send every customer with a proposal outstanding an automatic email. The email simply shows how much money the customer wasted on energy bills while thinking about the proposal. It is amusing at first. It’s not pushy because its automated. Over time, though, the $$ wasted number gets bigger and bigger. In doing so, it literally illustrates “the problem” to the customer. Eventually, the number gets so big the customer starts to feel the pain of delay. At that point, you have urgency.   How To Set Up The Money Wasted Email Setting up a customized Money Wasted Email is actually fairly simple. You either need an email service like InfusionSoft, or a CRM like Salesforce. Below is a quick outline of how you do it. Of course there are a...
Segmenting Commercial Marketing – A Few Do’s & Don’ts

Segmenting Commercial Marketing – A Few Do’s & Don’ts

You cannot treat all commercial energy customers as a monolithic block. A School Superintendent does not think like a Manufacturing CEO. That’s why you break your marketing into targeted segments. However, there is an art to picking the right segment. Below are my Guidelines For A Good Segment and Pitfalls To Avoid.  Following these tips should spare you wasted money and time running campaigns on targets that never close.   Segmenting – How & Why 101 Let’s start with the end in mind. What are some of the tactical advantages of segmented marketing? Once you identify a segment, you can: Build customized target lists (ex. All the manufacturers in Orange County); Tailor marketing collateral to your segment; Identify the trade press and events popular with your segment; and Find channel partners and associations serving your segment. Often, segmenting around industry works well for marketing messaging. For example, car dealers, grocery stores, and manufacturers.   Segmenting improves if you combine industry with city. (e.g. Car Dealers of Raleigh). The goal is to pick a label they will respond to. A couple lessons learned the hard way: I have tried segmenting around other criteria, and it did not work that well. A few that did not work well: building type, location, and utility customer. Segmenting around Job Title works well for messaging, but it does not allow you to apply the company screen criteria discussed below. Thus, I don’t recommend building campaigns using Job Title as a segment.   Guidelines For Picking A Segment When picking a segment, you need to consider a mix of traditional market attributes plus a few technical...