Blue sky thinking for China’s solar revolution
First non-recourse green loan in China’s distributed solar sector is a landmark financing for commercial and industrial customers
China’s decarbonisation agenda is challenging the energy sector to scale up the use of renewable energy that will power a carbon-neutral economy by 2060. Reaching that goal will require innovation, both in the application of green technologies and the business models that support them.
The rapid growth of distributed solar is a powerful example. As an alternative to large-scale solar farms – which require vast amounts of land – distributed solar involves the construction of smaller, local facilities that power a particular company, factory or community. Often these smaller installations make use of rooftop space above a warehouse or industrial building.
A new model
For individual companies, distributed solar can be an attractive way of reducing carbon emissions by ensuring steady access to clean energy. It can be cost-effective, too: instead of buying power from the national grid, companies can benefit from selling any excess generation back to the network.
This departure from the traditional energy model has enormous potential, but it is clear that a new range of financing tools will be needed to support additional investment.
In this context, Societe Generale is proud to be supporting TEESS, a 50/50 joint venture company established by TotalEnergies and Envision, on an US$80 million non-recourse project financing for a 170 megawatt (MW) portfolio of rooftop solar projects in China.1 Societe Generale acted as Structuring Bank, Mandated Lead Arranger, Joint Green Loan Coordinator and Original Hedging Provider in this financing, the first Distributed Generation Photovoltaic (DG PV) non-recourse portfolio project financing for commercial and industrial (C&I) customers in China’s renewable sector.
“We are grateful to Societe Generale for the hard work of the project team and for their collaboration on this landmark innovative financing in China’s renewable energy sector. We look forward to deepening our cooperation with Societe Generale in this field in the future and achieving more breakthroughs in financing practices,” said Sun Jie, CEO of TEESS.
This unique package is the first international non-recourse project financing in China’s renewable sector and the first international Green Loan in the distributed solar segment.
Financing breakthrough
It proves that lenders such as Societe Generale are able to support investments in distributed generation infrastructure. Non-recourse project financing has traditionally been uneconomical for smaller-scale solar projects, but TEESS and its arrangers were able to structure an innovative portfolio financing that met all objectives. The portfolio approach – a first in China’s distributed solar sector – is especially notable due to the complexity of a diversified pool of installations providing power to more than 65 commercial and industrial customers.
“Distributed generation will have a crucial role in decarbonising China’s economy, and we are honoured to support TotalEnergies and Envision on the expansion of their distributed solar portfolio. As this asset class is expected to grow exponentially over the coming years, this deal will set an important benchmark for future renewable energy projects in China,” said Daniel Mallo, Head of Natural Resources and Infrastructure, Asia Pacific, Societe Generale. “This project also demonstrates Societe Generale’s ability to support our key global clients’ expansion into the China renewable market and the growing C&I renewable sector.”
This financing has been structured as a Green Loan under a newly established Green Loan Framework, demonstrating TEESS’ commitment to global standards and its ambition to mobilise green finance for energy transition projects. An independent opinion from Sustainalytics, a leading ESG research, ratings and data firm, confirmed the alignment of the Framework with the APLMA, LMA and LSTA Green Loans Principles (2021) highlighting the positive impacts of its intended use of proceeds.
“We were delighted to support TEESS in developing a robust Green Loan Framework aligning with the best market practices, allowing the issuance of impactful green financing that contributes to China’s energy transition journey and advances the UN Sustainable Development Goals,” said Yasmine Djeddai, Head of Sustainable Finance for Asia Pacific, Societe Generale.
Societe Generale has a strong track record in providing innovative solutions for Asia’s solar power sector, having arranged financing for the first major floating solar installations in Taiwan2 and Indonesia, as well as local currency solutions in India3.
TEESS already operates 140 MW of solar facilities in China and aims to expand its portfolio to over 500 MW of projects in operation in the next two years.
China has pledged to peak CO2 emissions by 2030 and become carbon-neutral by 2060. Solar power will be key to meeting those targets: the country aims to connect at least 90 gigawatts of wind and solar capacity to the electricity grid in 2021 on the way to lifting non-fossil fuel generation to 25% of its primary energy requirement by 2030.4
Societe Generale is committed to supporting China’s energy transition as part of the bank’s strategic objectives to reduce carbon emissions across its global business. As a founding member of the UNEP-FI Net-Zero Banking Alliance, Societe Generale has undertaken to proactively manage its financing portfolios in alignment with trajectories that aim to achieve carbon neutrality by 2050, which is consistent with limiting global warming to the ambitious target of 1.5 degrees Celsius by 2100. 5,6
1 https://corporate.totalenergies.cn/en/news/teess-closes-us80m-non-recourse-financing-bnp-paribas-societe-generale-natixis-and-credit
2 https://wholesale.banking.societegenerale.com/en/insights/clients-successes/clients-successes-details/news/how-marubeni-using-sun-and-wind-power-asiaes-energy-transition/
3 https://wholesale.banking.societegenerale.com/en/insights/clients-successes/clients-successes-details/news/the-sun-rises-renewable-energy-india/
4 https://www.reuters.com/business/sustainable-business/china-add-least-90-gw-wind-solar-capacity-grid-2021-2021-05-20/
5 https://www.unepfi.org/net-zero-banking/
6 https://www.societegenerale.com/en/news/press-release/societe-generale-joins-net-zero-banking-alliance
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