SOLAR SECURITIZATION AND PROJECT FINANCE IN SINGAPORE

Abstract

Singapore is highly dependent on energy for its urban needs and yet relies on other countries to provide energy. Solar Photovoltaics (PV) have been a viable alternative in reducing the dependency of energy from other countries. Efforts have been made by the Government of Singapore in promoting Solar PV projects but despite this, Singapore has only managed to achieve 6% of the target. The slow initiation of solar PV projects could possibly be due to the high capital investments and long payback periods which deters the private sector from initiating such projects. Henceforth, introducing alternative financing methods such as securitization could potentially improve the initiation of Solar PV projects. This paper calculates, evaluates and compares the financial feasibility as well as profitability on the implementation of securitization. Using the financial modelling process and data from a recent project from Sunseap, a leading solar PV leasing company in Singapore, this paper aims to illustrate the possible implications of the models. Cash flow statements are generated and financial indicators of the different models are calculated using the Net Present Value (NPV), Discounted Payback Period (DPP) and Internal Rate of Return (IRR). These indicators are evaluated and compared to determine the feasibility and profitability of each models. Lastly, a sensitivity analysis is conducted on the variables to validate the results. From the results, securitization helps in decreasing the DPP by up to 8 years and increase the IRR of the project by as much as 4.5%. This would help Sunseap achieve a higher profitability if projects were securitized. As such, securitization would enable a more efficient use of capital and would spur a higher speed of project initiation. The paper could help private companies understand the financial benefits of securitizing solar projects and to encourage companies to consider securitization as a financial method for their projects in the future to create a better environment for the solar industry.