Cadence, a leader in the digital securitization of alternative investments, is partnering with Equity Finance and JPI / Solar4America (“JPI”) to expand its offering of investment products.
Cadence is pleased to announce a strategic partnership with Equity Finance and JPI, a relationship that will apply Cadence’s unique capital solutions to a pervasive financing challenge common to the solar and home improvement financing industry.
Based in Newport Beach, California, Equity Finance is a specialty finance company focused on facilitating better funding structures to the residential solar sector.
Fremont, California based JPI is a leader in the consumer and homebuilder solar installation market, achieving a five-year growth rate of almost 19% per year. While the company’s consumer sales are driven by the growing secular adoption of solar panels and battery storage, homebuilder sales are growing as builders adopt California’s new 2020 Solar Mandate – which requires every new home constructed in California have a solar system on the roof. According to the industry trade group, SEIA, the current $17 billion industry is poised to double in size over the next five years as solar power gains ground within the market for energy generation.
However, delivering an installed solar system involves a sequence of tasks which include (1) design and engineering (2) roof remediation / main panel upgrades (for older homes) (3) approvals from the municipality and utility (4) installation and finally, (5) 3rd party inspection prior to providing the customer with the permission to operate their system. This process can often extend installations timelines over 150 days from start-to-finish. These long timelines create a barrier to growth for companies seeking to facilitate the adoption of solar power generation.
Cadence plans to apply its innovative short term securitization program to help JPI optimize its working capital exposure. This program, originally developed for non-bank lenders, aims to provide accredited investors with unique, high-quality private credit exposure.
This partnership is the first of its kind for Cadence because neither Equity Finance nor JPI are non-bank lending originators. However, they still face the challenges of managing a balance sheet full of predictable receivables that are very well suited for securitization. The significance of working with JPI goes beyond these unique challenges, as Cadence’s Head of Capital Markets, Prath Reddy, noted.
“JPI is benefiting from the increasing adoption of solar energy systems and is also a leading installer of the battery systems that help increase the appeal of solar power at scale,” Prath said. “At Cadence, we are keenly aware that there is a heightened interest in factoring environmental considerations into investment decisions, and we are excited to explore all the ways this partnership can leverage this growing trend.”
In addition to solar power systems, JPI has also installed over one million roofs in its over 35 years in operation and holds a dominant market share in this space in California.
Jerry Conrad, CEO of Equity Finance, notes “Our partnership with Cadence provides a compelling alternative to traditional bank financing by recognizing the value of JPIs contracts. The size and scale of JPI creates predictable cash collections from a diversified pool of contracts. Partnering with Cadence to monetize these collections earlier in the installation process provides JPI with the cash to mitigate the structural working capital deficit that hampers the solar industry.”
Cadence is excited to partner with Equity Finance and JPI to continue building an extensive network of high quality originators around its alternative investment platform.