# SolarShare Community solar bonds (solarshare.ca)



## realist (Apr 8, 2011)

Looking at these this afternoon. How does a 5% annual return compare to say a HISA that is compounded monthly? The $40 membership would eat up most of the profit on a $1000 investment in the first year but if I were to do it it would be at least partly to support the project rather than purely for the ROI. 

Thoughts?


----------



## Barwelle (Feb 23, 2011)

One thing to note... You can't yet hold them in a TFSA or RRSP, so all the interest is taxed. Though they are expecting to have a way to hold them in RRSP sometime this year. (Read this on their FAQ page)

I would compare it more to a 5-year GIC and not a HISA though, since interest rates will go up or down. And the bond's interest rate is (supposedly) set for the next five years, just like a GIC.

I just did a quick spreadsheet to compare... investing $1000 in Solarbonds would net me $130 after 5 years. _(Based on my marginal tax rate of 32%)_
Doing the same in a 2.25% (ING Direct) 5-year GIC compounded annually, in a TFSA, would net me $117. 
Taxable GIC would be $78. 

But if you invest more, the difference becomes greater because that $40 membership fee is spread over more principal... 
Even just doubling to $2,000 makes a difference. The numbers for 2k are $300 for Solarbond, $235 for TFSA GIC, and $157 for Taxable GIC.

----------

Another way to look at the numbers: If the return on $1,000 is $130 after 5 years, that is the equivalent of holding a 2.47% tax-free GIC. Or 3.65% taxable GIC. 

Doing the same for $2,000: equivalent to a 2.83% tax-free GIC, or a 4.16% taxable GIC. _(Again, based on my MTR of 32%)_

Can you tell I like numbers?

----------

Anyways... that's my analysis. If it's as secure as a GIC, and you have a fixed-income allocation in your portfolio that you would otherwise use GICs for, it actually looks like a good alternative. Despite being taxable. And would become even more attractive if/when it becomes RRSP eligible.

Question is, is it secure? Others can answer that better than I can. I'm interested to see what other people think of this too now.


----------



## Barwelle (Feb 23, 2011)

Just remembered, another downside is that it is an illiquid investment... I remember reading that you can't sell these things before they mature except in extreme circumstances, and there is no guarantee. Whereas some/many/most(?) GICs are redeemable early, just with little or no interest paid. (ING gives you 0.5% if you redeem a GIC early)

Edit: looks like it's open to residents of Ontario only.


----------



## GoldStone (Mar 6, 2011)

I think it's impossible to know how secure they are. As far as I can tell, no credit rating agency looked at them. You need to run your own credit risk analysis, which requires full access to their accounting and appropriate skills.

No thanks, I will pass.


----------



## andrewf (Mar 1, 2010)

The yield is too low, I think.


----------



## GoldStone (Mar 6, 2011)

I agree the yield is too low. This is essentially an unrated junk bond.


----------



## Barwelle (Feb 23, 2011)

What kind of yield would you expect to see? 

Toronto zoo has something similar for a biogas plant... for 7%. Although it's not an up-and-running operation like solarbonds is.


----------



## andrewf (Mar 1, 2010)

7-8% at least.


----------



## realist (Apr 8, 2011)

andrewf said:


> 7-8% at least.


Based on what?

I'd definitely be more interested if I could hold it in TFSA/RRSP. My portfolio also needs more equities right now rather than more bonds (I'm working on a Couch Potato like model) so it's bad timing for me in that sense. 

The lack of liquidity wouldn't bother me that much, since anything I put in there would be retirement funds with a 20+ year time horizon.


----------



## andrewf (Mar 1, 2010)

It's not rated. You have no idea how likely they are to repay. Sure, they benefit from guaranteed FIT from the province, but you're still exposed to execution risk. I couldn't find any explanation of the capital structure, either.

I picked 7-8%, which is the range for junk bonds, but that might be too generous given that you're buying a pig in a poke. This seems to be marketed at people who are investing in green energy not for return but for ethical reasons.


----------



## MRT (Apr 8, 2013)

Barwelle said:


> What kind of yield would you expect to see?
> 
> Toronto zoo has something similar for a biogas plant... for 7%. Although it's not an up-and-running operation like solarbonds is.


zooshare.ca - 7% over 7 years is rather attractive! however, the bonds are issued by "ZooShare Biogas Co-operative Inc" (which presumably presents a lot more risk vs. something backed by the city-owned Toronto Zoo).


----------



## HaroldCrump (Jun 10, 2009)

Why not buy something like Sprott Power (SPZ) or Brookfield Renewable Power.
These are large corporations unlikely to go belly up.
Both have high yields.


----------



## humble_pie (Jun 7, 2009)

realist please take note of the reality in all the warnings in this thread.

please don't buy this security. Instead, give them a donation, provided they can issue a tax receipt. Your finance perk from solarbonds dot ca will be the donation tax credit, not the $50 bond income.

meanwhile, add your $1000 to other cash in tfsa or rrsp, then go buy something sensible. Or you can use the 1k to top up some equally sensible holding that's already in the registered account.


----------



## peterk (May 16, 2010)

JNK yields 6.5% and hold a diverse portfolio, guaranteeing you won't lose all your money. Buying this individual, unrated bond, I would want at least 10%.

I think you should listen to Mr. Pie.


----------

