How to Start Your Own Solar Project Company: 7 Q&As from our Originator Webinar
The pandemic and economic crisis has left over 30 million unemployed in the U.S. At Raise Green, we believe there are green jobs for anyone out there if they create their own local solar company. These are the first steps towards ensuring an equitable clean energy transition is accessible to everyone and is driven by new entrepreneurs and small businesses—increasing local self-determination and economic growth.
Through clean energy projects, Raise Green can help provide jobs for the unemployed and ensure projects bring economic and environmental benefits at the community level. Our two-sided marketplace helps create and fund climate projects to make investing in clean energy easy.
Each of these projects needs a project creator, or an Originator as we call it at Raise Green, to create opportunities in the marketplace for our impact investor network to support them. This Originator could be an individual, a group of folks, or another legal entity. We want to make it easier for clean energy entrepreneurs to create a solar project in their community than a fast food franchise. We need everyone’s help in the fight against climate change and now you don’t have to wait!
On June 10th, 2020, we shared our Originator project creation process. Within the webinar, we had the opportunity to recap our own founding story and two successful pilot projects, as well as provide an overview of the four crucial steps of being a Raise Green Originator: Create, Fund, Build, and Run.
Our first pilot project took us approximately 10 months to create and fund. The next one took about 4 months. With our Originator Engine software, a product we co-created with IBM, we streamline the process so that Originators can complete this process in as little as 10 weeks or less. If you are interested in learning how to start a project with Raise Green, check out the recording of the webinar here: https://youtu.be/pKZswTC48ac
Our webinar played host to prospective Originators from a variety of different backgrounds, and we had the opportunity to field an extensive Q&A session with some great folks after our presentation. We decided to share some of these questions along with our written answers below. Please feel free to continue the conversation with us by tweeting @RaiseGreenInc, emailing us at firstname.lastname@example.org, or signing up for our mailing list.
Additionally, if you already have an idea or a lead for a project, please reach out to our Head of Originator Sales, Jackie Logan, over email: email@example.com. We want to make all of your projects a reality, and we will do our best to connect you with the best tools and people to do so.
Stay tuned for our next webinar, focused on Impact Investors, on July 8th at 2pm Eastern. To make sure to get the most up-to-date information on this event as well as all other Raise Green content, please follow any of our social accounts (Instagram, Twitter, Facebook, LinkedIn.
7 Questions from prospective Originators:
What is the contractual relationship between Originators and Investors?
This is the exciting part - unlike traditional finance where you have to take terms offered by a bank, Originators can set the terms that work for your project and see if investors are interested in owning a piece of your project. Raise Green works as an intermediary, performing due diligence on contractual obligations and securities structuring. We also provide template documentation to help issue non-voting member units into your project structure, although the extent of involvement is up to you as an Originator.
How is the dividend to investors calculated?
Dividends or other types of repayments depend on whether you use equity or debt to raise capital for your project. You will be issuing dividends if you sell equity in your company, whereas if you sell debt securities, you will be paying interest against that debt. For both of these investment mechanisms the calculation of dividend or interest depends on the operating costs and the power purchase agreement price signed with your project company, and at the end of the day this is a decision that you can make as an Originator. For example, before raising any money, Raise Green will help assess what kinds of capital outlays the project would need for ongoing operations and maintenance. Then, based on whether or not tax equity is included, Originators can determine how much they can offer their investors. Some investors may only join for a higher modeled return (e.g. 7%+), but others may join for a lower modeling return (e.g. 3-5%) if they have a relationship with the project, for example. Part of the exciting part of creating a company on Raise Green is that you help to define and elucidate the new efficient frontier of a new asset class - green private equity for community-level project finance.
How is the timeframe of the project negotiated?
Our team will work with Originators to negotiate a timeline that is in-line with your objectives and commitments. Regardless, the timescale of different phases in projects may vary due to project scale, location, off-taker relationship, etc.
How long does the initial RAISE (Revenue, Ambition, Impact, Social, Environmental) screening process take?
The initial screening process will differ extensively depending on where you are in your project creation process and could range from as little to two weeks to as long as two months. Whether you just have an idea, or you already have a project location and type already selected, we will work with you to bring your idea to fruition.
How do the tax benefits and credits apply to the Investor and/or Originator entity and how vital is capturing “tax equity” in generating revenue as an originator?
Raise Green has created a templatized structure that integrates a Tax Equity Partner in order to enable access to the relevant renewable energy tax benefits (e.g. Investment Tax Credit) into your project company cash flow. Our team assists in helping to find a Tax Equity Partner that may invest as a partner in the project company. By involving a Tax Equity Partner, your community-scale project could be roughly 30-40% less expensive due to receiving tax benefits and accelerated depreciation that might otherwise not be accessible. Choosing the right structure for your project finance company is vital to capture this “tax equity” as an Originator in order for these community-scale projects to be successful, and our team has unlocked this through our unique financing approach.
Do you have any suggestions on how to approach a potential off-taker (i.e. a community center) about how they’ll benefit from an Originator putting solar panels on their roof?
Building trust from the outset of a business relationship is essential. The best way to build trust with a potential off-taker is to approach them with sufficient preparation on the details of your project, along with a clear sense of the benefits that could come with a cooperative agreement between your project and the off-taker’s site. Our team can help with this step of communications, but it is a good idea to have an idea of the size of the project along with benefits such as: electricity cost savings, pollution reduction, community support, etc. prior to initiating communications with an off-taker. It is important to note that a trusting relationship between the you and your off-taker is crucial to a project’s success, and setting up ongoing communications and open feedback will help ensure a beneficial relationship overtime.
Is it possible to start a company with such a low equity stake at the outset? Will originators have to give up some of their 10% to create a team (accountant, etc.)?
When you create a project company with Raise Green, by default, your Originator team would start with 100% of the equity in your project. This percentage will decrease depending on the amount of equity you sell to fund your project (ex: 80%), as well as if you decide to offer equity in order to create a team. It is up to you as the Originator and your team whether to share a percentage of equity with key community members or organizations in order to grow the Originator team and incentivize partners to help you get the project done!
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