From the beginning, Wunder’s central mission and guiding purpose has been to accelerate our clean energy future by connecting investors with large-scale solar projects across the U.S. With each new fund launched and each passing year, we’ve sought to better pair borrowers with investors. You can see the results of that continuous improvement in our 2017 Mid-Year Review. Alongside Wunder’s growth and maturation, we’ve also seen the institutional capital markets engage more deeply and thoughtfully in the solar industry. As a result of both, I am ecstatic to announce Wunder’s next leap: our fifth fund, Wunder Capital 5. Launching on October 5th, Wunder Capital 5 will offer investors a projected 7.5% annual return with a 5 year investment term and a 20 year amortization of principal. This lengthened amortization is designed to keep more investment principal at work earning interest throughout the investment term. This also represents an advantage for borrowers who can more effectively match this longer amortization schedule to a solar project’s warrantied life, and see a lower monthly bill. See how Wunder Capital 5 compares to the Wunder Term Fund here:
New 5-Year Term
Since our inception, we have regularly received interest from Wunder investors in a shorter investment term. While past funds have required that investors commit capital for 7 or 10 years, we have worked hard on a structure to reduce the investment term associated with Wunder Capital 5. Now investors can commit capital for just 5 years. Borrowers benefit from shorter loan terms as well, providing the flexibility to refinance their system in a solar financing market 5 years more mature, and armed with 5 years of loan payment and project performance data.
New 20-Year Amortization
While Wunder Capital 5 has a five year investment term, the loans it issues are amortized on a 20 year schedule. At Wunder we’re often faced with an inherent tradeoff between investors and borrowers, but we see an extended amortization structure as a win for both sides. For investors, a longer amortization is intended to keep a larger portion of principal at work throughout the investment term. Outstanding principal is scheduled to be returned at investment maturity in the form of a bullet payment. For borrowers, a longer amortization reduces monthly principal repayments, and thereby total monthly payments. This enhances the cost competitiveness of the solar systems Wunder finances, and expands the project types and geographies for which we can provide attractive financing.
In addition to Wunder’s growth and maturation as a solar lending platform, we’re emboldened by the increasing solar financing activity that we’ve witnessed amongst many of our capital markets colleagues. To note a few, Citigroup, Goldman Sachs, and Berkshire Hathaway have collectively committed to invest more than $150 Billion in renewables by 2030. Since we began in 2013, the length and quality of hardware warranties, the continuous improvement in borrower economics, the standardization of construction and servicing, and the simple seasoning of assets has materially altered the way solar portfolios are evaluated. Our confidence in amortizing solar projects over 20 years is reflective of this progress, as is issuing Wunder Capital 5 Notes at a projected 7.5% return in order to secure attractive borrowers in a rapidly evolving U.S. commercial solar market.
Given these dynamics, and the value of focus, we will be closing the Wunder Term Fund to new investment concurrent with the launch of Wunder Capital 5 on Thursday, October 5. We will process any investment into the Wunder Term Fund for which we’ve received all necessary information by 11:59pm MST on Wednesday, October 4. It’s with a wistful and proud heart that we move the Wunder Term Fund, our most successful to date, from actively accepting new investment to managing, servicing, and maturing its now-substantial portfolio of solar loans. We are confident, however, that Wunder Capital 5 will unlock an even larger swath of investor capital and borrower demand to accelerate U.S. commercial solar deployment.
For those of you who have been alongside us in accelerating this underserved market for some time, Wunder Capital 5 represents a large step forward, taken together, toward unlocking the commercial solar market. By keeping a dramatically higher percentage of an investor’s principal at work through the investment term, and reducing that term to five years, Wunder Capital 5 can support what we believe to be a more competitive projected yield. And by pairing the amortization schedule to projected and warrantied system life, we can finally match the low monthly financing cost structures that have unlocked residential solar so effectively. We believe wholeheartedly structures like these can and will fuel the commercial market to the stratospheric growth rates seen in residential and utility scale solar, and bend U.S. carbon emissions down.
Welcome to Commercial Solar 2.0, and God Bless the solar cost curve.