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Asset-backed Securities

Similar to mortgages and car loans, cash flows from renewable energy project leases or power purchase agreements can be pooled and sold to investors in the form of a tradable instrument. The income payments from the securities are collateralized by the renewable energy installations. Securitizing renewable energy projects helps remove debt and equity obligations from the project owner’s balance sheet and ideally brings in a lower cost of capital, with the interest rate paid on the securities matching the risk profile of the portfolio of assets.

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