U.S. Bancorp (USB) has agreed to put an additional $90 million into its fund for privately held SolarCity to finance commercial and residential solar projects in 2010 in Arizona, California, Colorado, Oregon and Texas.
This represents the third deal between U.S. Bancorp and SolarCity. In Jun 2009, U.S. Bancorp Community Development Corporation (USBCDC), a unit of U.S. Bancorp, and SolarCity entered into an agreement to install solar electric panels on homes and businesses in California, Oregon and Arizona for customers who do not prefer to pay the upfront cost of buying and installing a solar energy system. The size of the fund was doubled to $100 million in Oct 2009.
Financing solar installations is attractive for investors like banks as they enjoy tax breaks including a solar tax credit. The federal tax credit is equivalent to 30% of a project’s cost. SolarCity could also apply for the cash equivalent of the tax credit from the U.S. Department of Treasury.
USBCDC has assets over $6.3 billion and is the largest “new markets tax credit investor” in the country, investing billions of dollars nationwide in hundreds of transactions. Such investments help provide renewed and new resources to communities throughout the country. It finances community development and affordable housing projects through the use of New Markets, Historic, Low-Income Housing and Renewable Energy tax credits.
U.S. Bancorp’s fourth quarter earnings of 30 cents per share were 2 cents ahead of the Zacks Consensus Estimate. Results were driven by higher revenue, partially offset by deteriorating credit quality.
We expect the overall uncertainties for the industry, competitive market conditions and higher credit costs to continue weighing on the shares of US Bancorp in the coming quarters. However, we expect the company to post growth in core earnings and benefit from its diversified revenue base and strategic acquisitions.
Read the full analyst report on “USB”
Zacks Investment Research
