Sandy notes

* Large plants, small projects tap different fundingBy Matt DailyDALLAS, 18 (Reuters) - The sunset of two key U.S. subsidies has set the solar industry scrambling to keep the cash flowing to fund new renewable energy projects, and the outlook looks cloudy, according to industry experts.The U.S. solar industry is on pace to install a record 2 gigawatts of new installations this year, according to China’s Suntech Power, more than than double the 880 megawatts put on line in 2011 and well above earlier forecast of 1.5 to 1.6 GW.But a Department of Energy loan guarantee program that helped fund billions of dollars in solar installations expired at the end of the September, and another program that pays solar developers a cash grant of 30 percent of the cost of new projects will expire at the end of the year.”What we hear from our members is finance, finance, finance,” said Thomas Kimbus, general counsel and vice president for strategy at the lobby group Solar Energy Industries Association.The cost of solar power has dropped dramatically in recent years, but even a decline of nearly 40 percent in the price of solar panels this year has not yet eliminated the need for government incentives to make the energy source competitive with fossil fuels.Kimbus and other company executives say they are hopeful the U.S. government will extend the cash grant program, but even the most optimistic observers admit that the collapse of Solyndra, which sank after taking $535 million in government-backed funding, has hurt solar’s profile in Washington.The cash grant program will turn into a tax benefit program that allows solar power plant developers to deduct 30 percent of their projects’ costs over several years.Project developers typically sell those tax benefits into the ‘tax equity’ market, which allows the buyers to use the proceeds to cut their own tax burden and brings cash to developers to pay for their construction costs.”The two key drivers are the cost of the module and the cost of capital,” said Robert Krugel, managing partner of Smart Energy Capital, which has helped develop more than 300 megawatts of solar projects.Industry experts differ on their view of that tax equity market and whether the major banks - usually the biggest buyers of the tax credits — still have an appetite to help fund the clean energy industry.”I don’t think anyone knows how it’s going to work out,” said Bill Bush, chief financial officer of Borrego Solar Systems Inc, which has helped fund more than than 1,000 solar projects.”(But) banks are still making money and still want tax credits,” he said.BIG VERSUS SMALLSolar panel makers such as First Solar , SunPower and Suntech Power Holdings have benefited from the advent of “utility scale” solar power plants that can rival in size natural gas and coal-fired power plants.Those plants cost billions of dollars to build, require long-term power purchase agreements from utilities to guarantee future revenue flow, and have depended on the now-expired government guarantees to bring their loan costs down.Major power companies such as Exelon Corp , Sempra Energy and NRG Energy have taken stakes in those plants, but the expiry of the loan guarantees has put future development in jeopardy.Those large plants may be able to tap into the debt markets that are typically reserved for fossil fuel power plants and other big projects.”I’m quite sure we’ll see 300-, 400-, 500-million-dollar projects financed in the (solar) debt market,” said Marty Klepper, co-head of the energy and infrastructure projects group at law firm Skadden, Arps.Still, it is the small projects that have surprised many in the industry this year, driven by the success of solar leases. Under those programs, an investor builds and owns a homeowner’s or business’s installation and receives a monthly payment from the property owner.Those leases have made it cheap for property owners to cut their monthly power costs and install solar power without spending tens of thousands of dollars up front.Clean Power Finance CEO Nat Kreamer raised $75 million from Google to fund solar leases under an investment fund and is deploying millions of dollars from another unnamed software company to installers of residential solar systems who use its software.The young company, whose number of financed projects has grown by 5 percent per day since April, is looking to banks, infrastructure funds and other corporations to raise money and roll out more rooftop systems.”We’ve had volume over $1 million daily in the summer months,” he said.

Thousands attend funeral of executed convict Troy Davis At the end of the service, loudspeakers relayed an audio message from Davis recorded before his death in which he thanked his supporters and asked them to continue a campaign against the death penalty.

* Money mkt stress capped but more relief unlikely in near termBy William JamesLONDON, Oct 12 (Reuters) - Low demand at the ECB’s first offer of long-term dollar funding since 2010 reflects the high cost of borrowing from the central bank and shows that whilst dollar funding remains scarce, most banks still have some market access.Banks borrowed $1.4 billion at the first of three dollar liquidity offerings announced last month in a bid to stave off pressure in money markets caused by a growing reluctance to lend U.S. currency to euro zone banks.The take-up was below the $5 billion predicted by a Reuters poll of money market traders, but in line with many analysts’ view that the 1.08 percent rate and steep collateral haircuts made the ECB funding expensive relative to market rates.”It’s not surprising to see a small demand because the implied cost of obtaining that funding via the ECB is higher than the market,” said Morgan Stanley strategist Elaine Lin.”It shows that there are only a limited number of banks that are not able to get any market access. Anybody who has access would rather use the market than the ECB.”Six banks bid for the three-month loans and one bidder borrowed $500 million at the regular seven-day tender.In September, U.S. money market funds’ reluctance to lend to euro zone banks because of exposures to troubled Greece grabbed investors’ attention, causing a spike in dollar funding costs and a sharp fall in banking shares.Since then the cost of swapping euros into dollars — a key barometer of market stress — has eased off its most expensive levels, in part thanks to the ECB’s liquidity provision. The three-month euro/dollarcross currency basis swap last stood at around -90 basis points, compared to -115 bps on Sept. 12.BANKING RECAP RELIEF LIMITEDThe decision to implement three-month dollar tenders along with one-year euro liquidity offerings has capped the risk that banks could face a reoccurance of the 2008 funding drought, justifying a modest easing of prices, analysts said.But further improvement in money market conditions —with banks lending freely to each other, rather than depending on the ECB —would require greater progress on plans to recapitalise the region’s banks, and was unlikely to come in the near term.French and German leaders have pledged to introduce a sweeping new plan by early November to shore up banks and draw a line under Greece’s worsening fiscal problems. Risk-appetite in other assets classes has improved on the back of the promise, but interbank markets remain more circumspect.”I’d don’t think (recapitalisations are) particularly something that will ease funding costs for the remainder of this year, even if we do get details fleshed out in the next week or so before the G20 summit,” said Simon Smith, chief economist at FxPro in London.”Such recapitalisation will take time… trying to raise that capital before year-end will be difficult and so it will fall into next year.”Highlighting the importance of interbank funding markets to the wider economy, a lobby group of top European companies said a repeat of the 2008 credit crunch could drive the region into recessionEurope’s continuing sovereign debt crisis was sapping the continent’s credibility and causing major businesses to worry about making new investments, said Leif Johansson, chairman of phone maker Ericsson and head of the European Roundtable of Industrialists