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Business Heats Up for Solar Electric Power

Borrego Solar Systems Inc. lined up a $36 million financing deal recently that will help the company construct and operate six solar energy projects for two customers through the use of a power purchase agreement.

Such agreements are becoming more common as the federal and state governments are providing tax breaks to encourage use of solar power, and as investors become more familiar with the arrangements, said industry sources.

“Banks are more than happy to make these types of loans because they’re based on predictable revenue streams from solar facilities,” said Joe Budano, chief executive officer of Energy Innovations Inc., a Poway manufacturer of industrial solar panels.

Under the recent power purchase agreement, Borrego is building the solar energy systems for the San Diego County Water Authority and Madera Community Hospital, which is in the central part of California, north of Fresno. Borrego has agreements with those customers to generate the power and sell it to them for 20 years at a lower price than the agencies would have paid their utilities. The privately held Borrego Solar owns and operates the projects, and is receiving its financing through two banks.

Borrego’s lenders on the projects, and for a similar solar project for the San Diego Community College District, are U.S. Bank and East West Bank.

No Capital Outlay

Mike Hall, Borrego Solar’s CEO, said the power purchase agreements allow public entities such as the water authority to install solar systems without any capital outlay because the energy provider, Borrego Solar, is both the builder and owner.

Borrego also collects 30 percent federal tax credits, and subsidies from the state for the solar generation.

The latest agreement, announced this month, should also generate some 50 new jobs for at least six months, Hall said.

Borrego Solar now has about 70 employees, but by year end it should be in the mid-90s, said Hall. Among the new jobs are construction project managers, engineers and salespeople.

In July, Borrego announced a power purchase agreement with the San Diego Community College District to build nine solar arrays at six locations on its campuses at a cost of about $20 million. The systems will provide 2.8 megawatts of power. Once the systems are in place, the district will buy the electricity from those systems at rates that are about 18 percent cheaper than those now charged by San Diego Gas & Electric Co., according to Borrego Solar.

The savings to the district, which operates San Diego City College, San Diego Mesa College and San Diego Miramar College, for a year will be about $110,000, said Borrego Solar.

$1.7 Million in Savings

For the water authority, the project installations will be at its Kearny Mesa headquarters, an operations center in Escondido, and a water treatment plant in San Marcos. The systems are expected to generate about 2.8 million kilowatt hours of electricity annually, which is sufficient to power 30,000 homes.

During the 20 years that the water authority is buying power from Borrego, it should reap some $1.7 million in savings compared with the cost of energy without the solar power systems, said Borrego Solar.

The water authority is the purchaser of all the water used in the region, selling the water to 24 member agencies. Its two-year budget for the term ending in June is $1.65 billion, according to spokesman John Liarakos.

Budano, whose business is not affiliated with Borrego Solar, said power purchase agreements, particularly involving public entities, are becoming more attractive because they don’t require the buyers to put up any funds to build the solar systems, and result in locked in power rates, avoiding the pattern of increasing rates.

“The bills become predictable and less expensive and they’re not paying a dime to put (the installations) in,” he said.

Solar power companies have been sprouting in and around San Diego County in recent years, so much so that CleanTech San Diego, a local trade association representing alternative energy industries, calls it the Solar Capital of the state.

The group says 175 solar-related businesses are based locally, but it could not provide the number of workers within the solar energy subsector.

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