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Announcement:

Moody's assigns Green Bond Assessment (GBA) of GB1 to the $400 million Solar Asset Backed Notes issued by Joint Venture of SunPower Corporation and Hannon Armstrong Sustainable Infrastructure Capital, Inc.

28 Nov 2018

New York, November 28, 2018 -- Moody's Investors Service today assigned a Green Bond Assessment (GBA) of GB1 (Excellent) to the $400 million Solar Asset Backed Notes, Series 2018-1, issued by the SunStrong 2018-1 Issuer, LLC, a special purpose limited liability company indirectly owned by SunStrong Capital Holdings, LLC ("SunStrong"), a joint venture of SunPower Corp. ("SunPower") and Hannon Armstrong Sustainable Infrastructure Capital, Inc. ("Hannon Armstrong").

"The GB1 assessment is driven by the use of proceeds to refinance qualifying green Solar PV projects and our expectation of comprehensive impact reporting practices over the life of the notes," -- said Anna-Zubets-Anderson, VP-Senior Analyst.

ASSESSMENT RATIONALE

The assessment is driven by our expectation that over 95% of the proceeds will be used for projects qualifying as green under the Green Bond Principles (GBP). SunStrong is an indirect majority owner of several limited liability companies that own solar PV systems installed on residential homes, and related customer lease agreements. We expect that roughly $385 million of the $400 million proceeds will be allocated to refinance the existing debt of the entities that own the PV systems or of the SunStrong member of such entities (of which over 80% was originated by Hannon Armstrong under its existing Green Bond Framework).

It is possible that the net proceeds after transaction related deposits, fees and expenses, may be distributed by SunStrong to Hannon Armstrong and SunPower as the joint venture owners. The main weakness of the transaction is limited tracking and reporting of this amount (totaling less than 5% of the issuance) subsequent to any distribution to SunStrong and potential distribution to Hannon Armstrong and SunPower. These funds are not included as qualifying green under our GBA Methodology.

Any distributed net proceeds are expected to be used by SunPower to support its general corporate purposes, specifically the manufacture, installation, and operation of Solar PV systems, and by Hannon Armstrong for investment in renewable energy, energy efficiency and other sustainable infrastructure. However, we do not anticipate that either Hannon Armstrong or SunPower will provide granular detail on how these net proceeds might be deployed if distributed out of SunStrong. Therefore, in applying our GBA methodology, we did not include this portion of the proceeds as qualifying green. That said, we acknowledge that the offering memorandum requires SunStrong to use any undistributed net proceeds for purposes aligned with the Green Bond Principles.

The assessment further reflects our expectation of robust proceeds management and impact reporting practices for the portion of the proceeds deployed for the refinancing of Solar PV projects and transaction related fees and expenses.

The underlying assets backing the notes include the total solar asset value of approximately $800 million, with projects located across 11 states and leased under over 37,000 customer contracts. The expected environmental benefits of these assets include total installed capacity of 318MW, producing an estimated 474,346 MWh (a 17% capacity factor) of renewable energy during the first year, equating to annual carbon dioxide emission savings of approximately 221,368 mtCO2e (calculated based on US EPA eGrid State-specific Emissions Factors). This equates to 0.34 metric tons of CO2 offset per $1,000 of the notes.

Ongoing reporting for SunStrong's investments in Solar PV systems will be provided on an annual basis by Hannon Armstrong as established under its Green Bond Framework. Hannon Armstrong's framework requires that green bond proceeds are utilized to pursue investments with a positive environmental impact, defined as reducing or being neutral on carbon emissions or have some other environmental benefit. Hannon Armstrong's framework establishes procedures for calculating and disclosing environmental impact of the green projects, particularly with respect to carbon emissions savings, which align with general market practices. Consistent with these practices, SunStrong is expected to provide annual updates for the entire time that the notes are outstanding, including disclosure on the environmental performance of the Solar PV projects, such as estimated renewable power generated and carbon emissions saved by the projects in total and per $1000 invested.

The principal methodology used in this rating/analysis was Green Bonds Assessment (GBA) published in March 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Located in Annapolis, MD, Hannon Armstrong (NYSE: HASI) is focused on reducing the impact of, or increasing resiliency to, climate change. With over 30 years of experience, Hannon Armstrong's portfolio includes efficiency, renewable energy and resiliency assets. Under its Green Bond Framework, qualifying green projects fall into one of the three categories - energy efficiency, renewable energy, and other sustainable infrastructure, all of which align with the Green Bond Principles.

SunPower (NASDAQ: SPWR) has more than 30 years of experience in providing complete solar solutions and services to a diverse group of customers, including residential homes, businesses, governments, schools and utilities around the globe.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Anna Zubets-Anderson
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Jim Hempstead
MD - Utilities
Infrastructure Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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