USF and the COVID-19 Pandemic

Reviewed and up to date as of 05 May 2020.

In light of the continued development of the 2019 Novel Coronavirus (COVID-19) pandemic, we are thinking of all of our stakeholders across the globe and hope that everyone is staying healthy and comfortable. Our thoughts are with those who are already suffering from the virus and we are feeling deep gratitude to those who are working on the front lines throughout the world.

The pandemic has continued to spread globally, having impact across industries. As a reaction to the outbreak, the governments of numerous countries have implemented controls to minimise the spread of the virus. Within the solar industry, there is concern that these government controls will disrupt international solar supply chains. Further, as the virus spreads, work across industries may be interrupted for periods of time based on workforce availability. We are thinking about these implications across USF’s investment strategy and the work of New Energy Solar (the Investment Manager) as well as our assets that are currently in construction and USF’s operating solar plants.

  • USF’s Investment Strategy

    • Revenue: USF has long-term contracted cashflows across a diversified portfolio of solar plants. The IPO proceeds have been invested across four transactions, including 37 power plants in four states, totalling more than 380 MWDC. More than 50% of USF’s assets are now operating and its cashflows are 100% contracted with investment-grade off takers for an average remaining term of 16.2 years, decreasing the Fund’s exposure to near-term power price volatility.
    • Deal flow: USF has completed four acquisitions and has one portfolio under exclusivity. We still expect to sign binding documents for the portfolio under exclusivity in coming months. Some other transactions in the market where an exclusive bidder has not been selected have been delayed but we continue to see new opportunities coming to market. The situation is developing so rapidly though, so would expect some processes to be paused or cancelled given how distracted markets are becoming.
  • Running USF and the Investment Manager

    • We have a business continuity plan in place and the entire team is now working remotely. Fortunately, we acted quickly and closed our New York office ahead of the situation there deteriorating as it has in the past week. We are in close regular contact with scheduled calls and teams working efficiently to ensure continuity. Our team was already geographically diverse, so we are no strangers to cross-border communication and already have processes and practices in place for virtual communication including using all the great conferencing and collaboration tools available to us.
  • In-Construction Solar Plants

    • For assets in construction, key risks relate to the supply chain for equipment and the ability to keep workforces on the ground to continue construction.

      • The key supply chain risks revolve around module production and delivery interruption. Some solar manufacturers have halted operations under central and provincial governments’ guidance, raising concerns around delayed module delivery.

        • Of the total 37 projects in the current portfolio, there are seven projects that are yet to be constructed, all of which have met safe harbour conditions to qualify for the ITC. To meet these conditions, equipment has been purchased ahead of 2020 and/or sufficient and suitable works have been carried out on site ahead of 2020.
        • Solar panels for the Olympos Portfolio (six in-construction projects in North Carolina) have been imported into the US and are being stored in various warehouses close to the sites. The rest of the materials required for construction are either on site or have been procured from various international suppliers overseas and are still scheduled to be delivered on-time or with a delay that is not expected to impact completion.
        • Solar panels for Milford, our project in Utah, are being manufactured within the continental US. The balance of construction materials have already been delivered to site or are already in the US. The Investment Manager believes that USF’s in-construction assets are relatively well-positioned regarding supply chain concerns.
      • Labor: Construction is on schedule for the in-construction assets. Given the global spread of the virus, work interruptions across industries are increasingly likely and the Investment Manager continues to work with Engineering, Procurement and Construction contractors to assess and consider alternative risk mitigation strategies at USF’s solar plants as more details develop.
  • Operating Solar Plants

    • The Investment Manager has a capable and experienced internal asset management team who has access to remotely gathered performance data for all our operating plants. We also work closely with the third-party operations and maintenance providers who manage the day to day operations of our assets and are the first line of response if anything goes wrong.
    • Of our sites, only those with a capacity of more than 40 MWDC have dedicated on site personnel. Service personnel visit sites only to perform required maintenance.
    • So far, there has been no direct impact on day to day operations. We believe that, in most states, electricity generation including solar would fall under essential services so even if people are mandated to stay at home, our plants would continue running and service personnel will be permitted to travel to site to conduct work.

We will continue to keep our stakeholders informed as the virus situation develops around the world. As always, thank you for your continued support and we wish you all health and comfort in the weeks ahead.

 

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