JPMorgan to Invest in Solar Energy – Analyst Blog

On Wednesday, JPMorgan Chase & Co. (JPM) announced that its unit JPMorgan Capital Corporation has signed a deal with SunEdison to finance a solar (photovoltaic) energy development project. The amount to be invested by the company is approximately $60 million, which would be deployed in important SunEdison markets across the U.S.

 

JPMorgan will fund the SunEdison project through SunE Solar Fund X and will finance several megawatts (MW) of solar deployments. This will be used in government and commercial projects. The SunEdison project is the first distributed generation (DG) solar program for the company. The distribution grid of such installations is usually located at or near the intended place of use.

 

Under the agreement, SunEdison will finance, construct, monitor and maintain the photovoltaic power plants at customer locations. These clients will purchase this energy at prices at or below retail rates. JPMorgan’s financing will enable the commercial and public clients to get the benefits of solar energy with low upfront capital costs that are related to solar deployments.

 

JPMorgan’s foray into the renewable energy sector is not new. The company’s Energy Investments group is mainly focused on renewable energy projects – wind, solar, biomass and geothermal. The group had 6,000 MW of renewable energy portfolio as of June 30, 2010. JPMorgan has financed $2.3 billion of projects from its own pocket and raised about $3.3 billion from other institutional co-investors. The company plans to further diversify its portfolio over the next few years.

 

SunEdison is a subsidiary of MEMC Electronic Materials Inc. (WFR) and a leading solar energy provider. MEMC Electronic, on the other hand, is a global leader in the manufacture and sale of wafers and related intermediate products to the semiconductor and solar industries.

 

While we anticipate continued synergies from JPMorgan’s diversified operations and strong capital position, pressured credit quality and reduced levels of client activity will drag future earnings.

 

JPMorgan currently retains its Zacks #3 Rank (short-term “Hold” rating), implying that the stock is expected to perform in line with the broader U.S. equity market in the near term. Also, we maintain our long-term Neutral recommendation on the shares.