A Canadian company developing an oil sands mining and extraction project in Utah has announced a decision to "reduce the pace of field construction in order to maintain working capital flexibility," based on low oil prices.
Oil sands, also known as bituminous sands or "tar sands", are loose sand or partially
consolidated sandstone saturated with a viscous form of
petroleum called bitumen. US Oil Sands Inc. is a Calgary-based company that describes itself as "focused on oil sands exploration and production in Utah." Its wholly owned United States subsidiary US Oil Sands (Utah) Inc. has bitumen leases covering 32,005 acres of land in Utah’s Uinta Basin.
US Oil Sands' PR Spring Project area
consists of 5,930 contiguous acres near the East Tavaputs Plateau in
Utah. According to the company, construction of Phase 1 of the PR
Spring Project is approximately 85% complete with costs coming in below
budget. If completed, it would be the first U.S. oil sands mine to enter commercial production.
While the company has not yet entered production, US Oil Sands has described a proprietary extraction process using a citrus-based bio-solvent to extract bitumen from oil sands without the need for tailings ponds. The company pitched this technique as different from traditional Canadian oil sands production in Alberta, where wastewater management is a controversial environmental challenge. But the Utah proposal has drawn concern over impacts to groundwater flowing under the Book Cliffs
But the company said it conducted a detailed review of the project "in light of continued low oil prices and the closure of two key contractors’ Utah-based operations." Specifically, the press release stated, "The low price
environment has impacted the Project as two of the Company’s key
contractors have closed their operations in Utah and have caused delays
to the Project." Indeed, spot prices for West Texas Intermediate have ranged near $30 per barrel in recent days, with U.S. crude futures falling below $30 earlier this year for the first time since
2003. The press release also mentions that $10 million in previously-announced
royalty financing had not closed, causing the company to explore other
options including equity financing.
According to the press release, project work on the PR Spring Phase 1 project will continue at a reduced level, with an expected focus on "critical path items and areas that will lead to the most efficient
restart of full construction operations in the future. In spite of
delays and increased costs that will occur with restart of full
construction operations, the Company is still targeting completion
within the original US$60 million approved budget."
How will US Oil Sands survive the low oil price environment? How will economic, environmental, or other factors affect the fate of Utah oil sands mining?
Energy powers society; society's choices shape energy policy. A blog about our energy resources and the choices they present for society.
Showing posts with label equity. Show all posts
Showing posts with label equity. Show all posts
Solar bonds: SolarCity launches first US public debt offering
Wednesday, October 15, 2014
Could publicly offered solar bonds play a significant role in financing solar photovoltaic projects?
Solar energy company SolarCity Corporation appears to think so, as this morning it filed a registration statement with the U.S. Securities and Exchange Commission to issue up to $200 million in solar bonds. SolarCity describes the move as "the nation’s first registered public offering of solar bonds." What does SolarCity's solar bond offering mean for solar energy?
By some metrics, SolarCity is the largest developer of residential solar photovoltaic projects in the U.S. The company says it is currently providing more than one out of every three new solar power systems in the U.S., and notes that it "installed more residential solar in the second quarter of 2014 than its next 50 competitors combined." While SolarCity develops projects under several financial models, its typically installs rooftop solar panels at its customers' sites with no upfront costs to the customer, who then pays the company every month for leasing the facilities or for the electricity it uses. These long-term contracts create more stable ongoing revenues for SolarCity compared to those experienced by developers of turnkey projects who may end their relationship after the project is commissioned.
SolarCity's model has proved attractive to capital, as it has been involved with financing the installation of approximately $5 billion in renewable energy assets. Much of the capital SolarCity needs to develop these projects has come from investments from major banks and corporations including US Bancorp and Google Inc., as well as individuals owning shares of the company's stock (traded as SCTY).
SolarCity has also turned to debt offerings, making three private placements of solar bonds in the last year. Generally speaking, SolarCity will pay returns on the bonds using income generated from customers' monthly payments. Because this income stream is both relatively stable and predictable, it should enable repayment of the bonds plus a steady yield.
But no company has previously publicly offered solar bonds of this type in the U.S. SolarCity thus views its publicly offered solar bonding model as unique, in that it gives individual investors access to new investment opportunities -- and in turn, it may give SolarCity access to a whole lot more money -- up to $200 million in this round, with the prospect of more to come.
Under SolarCity's new offering, investors will be able to purchase solar bonds for as little as $1,000, with maturities ranging from one year to seven years and interest rates of up to 4 percent. The relatively short maturity of these bonds, compared to those previously offered to institutional investors, helps reduce the risk that during the bonds' lives utility rates will change in a way that hurts their economics.
The company notes that solar bonds will be available to all U.S. investors who are at least 18 years old and meet SolarCity’s eligibility requirements, with no fees for purchase. Indeed, the relatively low $1,000 minimum investment for this solar bond offering highlights SolarCity's strategy of targeting the millions of small or "retail" investors. To facilitate these individual investors' access to the bonds, the company launched a new online investment site (solarbonds.solarcity.com).
How will the new solar bond offering affect SolarCity and the pace of solar development in the US? With a market capitalization of $4.2 billion, SolarCity is relatively large compared to the $200 million that it may raise pursuant to the current public bond offering. Nevertheless, individual investors' appetite for opportunities to participate in solar and other renewable energy projects may be significant enough that more bond offerings will follow on the heels of this one. As the Brookings-Rockefeller Project on State and Metropolitan Innovation found in an April 2014 report, Clean Energy FinanceThrough the Bond Market:A New Option for Progress, "Bond finance holds tremendous potential for clean energy investment, at levels in the tens of billions of dollars in the next several years." If SolarCity is indeed successful in attractive individual bond investors, other solar developers like First Solar, Inc. and Sunrun may soon follow suit with solar bond offerings of their own.
Solar energy company SolarCity Corporation appears to think so, as this morning it filed a registration statement with the U.S. Securities and Exchange Commission to issue up to $200 million in solar bonds. SolarCity describes the move as "the nation’s first registered public offering of solar bonds." What does SolarCity's solar bond offering mean for solar energy?
 |
| Solar panels on a residential rooftop in Massachusetts. |
By some metrics, SolarCity is the largest developer of residential solar photovoltaic projects in the U.S. The company says it is currently providing more than one out of every three new solar power systems in the U.S., and notes that it "installed more residential solar in the second quarter of 2014 than its next 50 competitors combined." While SolarCity develops projects under several financial models, its typically installs rooftop solar panels at its customers' sites with no upfront costs to the customer, who then pays the company every month for leasing the facilities or for the electricity it uses. These long-term contracts create more stable ongoing revenues for SolarCity compared to those experienced by developers of turnkey projects who may end their relationship after the project is commissioned.
SolarCity's model has proved attractive to capital, as it has been involved with financing the installation of approximately $5 billion in renewable energy assets. Much of the capital SolarCity needs to develop these projects has come from investments from major banks and corporations including US Bancorp and Google Inc., as well as individuals owning shares of the company's stock (traded as SCTY).
SolarCity has also turned to debt offerings, making three private placements of solar bonds in the last year. Generally speaking, SolarCity will pay returns on the bonds using income generated from customers' monthly payments. Because this income stream is both relatively stable and predictable, it should enable repayment of the bonds plus a steady yield.
But no company has previously publicly offered solar bonds of this type in the U.S. SolarCity thus views its publicly offered solar bonding model as unique, in that it gives individual investors access to new investment opportunities -- and in turn, it may give SolarCity access to a whole lot more money -- up to $200 million in this round, with the prospect of more to come.
Under SolarCity's new offering, investors will be able to purchase solar bonds for as little as $1,000, with maturities ranging from one year to seven years and interest rates of up to 4 percent. The relatively short maturity of these bonds, compared to those previously offered to institutional investors, helps reduce the risk that during the bonds' lives utility rates will change in a way that hurts their economics.
The company notes that solar bonds will be available to all U.S. investors who are at least 18 years old and meet SolarCity’s eligibility requirements, with no fees for purchase. Indeed, the relatively low $1,000 minimum investment for this solar bond offering highlights SolarCity's strategy of targeting the millions of small or "retail" investors. To facilitate these individual investors' access to the bonds, the company launched a new online investment site (solarbonds.solarcity.com).
How will the new solar bond offering affect SolarCity and the pace of solar development in the US? With a market capitalization of $4.2 billion, SolarCity is relatively large compared to the $200 million that it may raise pursuant to the current public bond offering. Nevertheless, individual investors' appetite for opportunities to participate in solar and other renewable energy projects may be significant enough that more bond offerings will follow on the heels of this one. As the Brookings-Rockefeller Project on State and Metropolitan Innovation found in an April 2014 report, Clean Energy FinanceThrough the Bond Market:A New Option for Progress, "Bond finance holds tremendous potential for clean energy investment, at levels in the tens of billions of dollars in the next several years." If SolarCity is indeed successful in attractive individual bond investors, other solar developers like First Solar, Inc. and Sunrun may soon follow suit with solar bond offerings of their own.
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