Borrego secures $30M from Taiwanese investor

El Cajon, Calif.-based Borrego Solar Systems said today it's living proof that the U.S. stimulus package is driving foreign investment in U.S. companies—and creating jobs in the process.

CEO Mike Hall told the Cleantech Group that Borrego secured $30 million in project financing from Taiwan-based Walsin Lihwa for its power-purchase agreements for solar projects. Borrego plans to use that equity to unlock about $30 million in debt and $40 million in federal and other incentives, giving it $100 million to install about 20 megawatts of solar projects in the next 12 months, Hall said.

Hall also disclosed that Walsin was the unnamed investor that funded Borrego's $14 million Series A round in February (see Trans-India drops $375M Solar Semiconductor bid).

"What they bring that a VC wouldn't, first and foremost, is they had the appetite and ability to invest in solar projects, not just equity in the company. That's especially important to us at this time when project financing is the bottleneck for solar," Hall said. "Second, they give us a strong connection and an arm into Asia, which is important from the supply and demand side."

The project financing is expected to allow Borrego to increase its staff from 48 now to about 60 by the end of 2010. The company plans to use the money for installations in California, New Jersey, New England, and the mid-Atlantic states.

The company has no immediate plans to offer PPAs in Asia, but it's not out of the question down the line, Hall said.

"China is clearly going to be a producer of the majority of the crystalline modules," he said. "You're looking at strong markets there as well because the Chinese government has committed to pick up a significant amount of slack that's been left thanks to the slowdown in Europe."

In March, the Chinese Ministry of Finance revealed a new subsidy for installed solar projects 50 kilowatts and larger in order to help the industry recover from price drops along the value chain (see New solar subsidies in China set to reduce installed cost by half and Trina CEO expects 10x growth in China solar market). Late last year, the cost of solar panels worlwide began to drop because of inventory languishing in warehouses and Spanish ports (see Extra solar panels in Spain driving down prices).

Borrego sells commercial and government installations of about 100 kilowatts to 2 MW, a new direction the company took in February when it sold its residential solar division to White River Junction, Vt.-based solar power installer groSolar (see Biopesticides make a killing this week).

"It's a transaction-heavy business, and it requires focus and time in order to scale it," Hall said.

Hall said the commercial and government sectors are growing more quickly than residential. The company engineers and designs the systems, and is the contractor on each installation, using some outside installers. Borrego first began installing solar panels in 1980, with about 15 MW in its portfolio.

The company completed a 1-MW amorphous silicon project last year, as well as a small cadmium telluride project in 2007. Borrego uses multicrystalline and monocrystalline solar cells most of the time, but it's technology agnostic, which has given the company flexibility to adopt technologies as they become more cost effective. Hall noted that the cost of crystalline solar technologies dropped between 30 percent and 40 percent since the middle of the fourth quarter, boosting returns. Borrego had $58 million in revenue in 2008.

The solar PPA sector as a whole received a boost in late 2008 when U.S. legislation gave an eight-year extension to the 30-percent tax credit for solar projects (see Solar takes stock after tax-credit battle). The policy helps solar PPA firms secure financing by allowing investors to use the tax credits to reduce taxable income. However, the recession drove down corporate profits, reducing the demand for tax credits (see Tax flaw hurts renewables).

Hall said that appetite was restored with the U.S. stimulus package, which allowed investors to exchange those tax credits for Treasury grants (see Germany, U.S., Australia inject stimulus spending into cleantech). Hall said that Walsin's project financing investment came as a direct result of the new policy and the potential growth of the U.S. solar market.

Borrego isn't the sole commercial PPA provider to raise funding since the economic downturn began. In September, Mill Valley, Calif.-based Solar Power Partners closed on $100 million in debt and equity financing for its PPA model for commercial and government systems (see Solar financier SPP nets $100M, aims for more), while San Francisco's Recurrent Energy said last summer it raised $75 million from private equity firm Hudson Clean Energy Partners for its PPA model, in addition to $200 million in financing from Morgan Stanley in December 2007 (see Solar continues to take in cash).

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