Hear directly from ConservGeo leadership and how they are paving the way for a cleaner planet. Gain industry knowledge, learn best practices around company formation, and get a competitive advantage as you learn how to leverage technology to grow your business globally.
Subscribe to this blog
Tax Equity - What Project Developers Need to Know in 2019
"A Complex Tax Environment"
Project “Sponsors” have long enjoyed stretching their upfront capital for renewable projects by
partnering with tax equity investors, a small group of investors who were greatly motivated by the federal and state tax benefits they would receive. With the passing of recent legislation, that market of investors may be less motivated to dish out their cash as we enter into 2019.
Prior to the Tax Cut and Jobs Act (TCJA) signed into effect December 22nd of 2017, tax equity
investors with high corporate liability found tax relief by lending to viable renewable projects in
exchange for Production Tax Credits (PTCs) and depreciation bonuses. Production Tax Credits
offered investors a dollar amount per MWh being generated by the project. These tax credits
were then utilized by the equity investor to reduce their tax liability come tax time. This type of
arrangement would typically last ten years allowing enough time for the equity investor to earn
back its investment and fully exercise its tax benefits. Particularly in a partnership flip, the
sponsor would regain majority ownership of its project after the equity investor collected and
could buyout the remaining stake at fair market value.
However, recent legislation is making it harder on project “sponsors” to find equity investors that
are motivated by the tax incentives. The TCJA essentially gave corporations the tax break they
have been looking for. Corporate tax rates fell from 35% to a flat 21%. Although, equity
investors can still get Investment Tax Credits (ITCs) on specific renewable technologies, the
PTCs’ market value has been on a steady decline making it less attractive for investors in an
already complex tax environment.
But that’s not the only reason tax equity investors aren’t jumping for joy…
PTCs are being phased out at the end of 2019. The Consolidation Appropriation Act of 2016
extended the eligibility for credits for wind projects until the end of 2019. Other technologies had
to begin construction prior to December 31st, 2017 to qualify for PTCs.
With legislative changes taking place, project “sponsors” should strongly consider how they
enter into financing. Debt vs Equity... Equity vs Debt...Tax Equity Investors vs Debt Lenders.
Below are just a few important considerations you should factor in as you look to finance your
renewable project in 2019.
- Do you have a strong Financial Model?
- Is there a positive IRR/NPV?
- Do you have existing financed debt for the project?
- Do you have an existing tax equity investment?
- What is the rate of depreciation for the system being implemented?
- How will assets, profits, losses, cash flow, credits be divided within any partnerships to
ensure positive return? - Do you have sufficient capital to cover proper due diligence, attorney’s fees, and SPV setup?
Are You Evaluating A Technology Partner? As a founder, the most critical decisions I’ve made was determining which technology partners I would leverage to take a product or service to market and the impact that technology would have on revenue long term. Stay with me as I shed light on what I look for in technology partners today and how I determine their true value.
With an abundance of technology partners out there to choose from, deciding between technology A, B, or C can be somewhat complex. As a “rule of thumb,” cost is never my deciding factor. We’ve all heard the saying, “you get what you pay for” and that saying couldn’t be more accurate. Below I’ve listed my top three “must haves” in a technology partner today. Relevant Past Performance For those technology partners that service more than one vertical, this “must have” is especially important to me. I need to know that the technology has been successfully deployed and supported for my specific vertical. For this requirement, I …
Alexandria Ocasio-Cortez has made the news advocating for climate change and positioning legislation around her “Green New Deal.” Several states have also offered up legislation and mandates for the utilization of renewable energy. But what will it really take to get these technologies and renewable resources successfully funded and implemented? Here, I talk about the makings of a Great Green Deal and best practices Project Developers should have when seeking financing.
As CFO of ConservGeo I see no shortage of green deals, but are they great? Are they worth the time and effort it takes to secure financing so that the projects can be implemented? Most projects that cross my desk are not financeable for many reasons. For the projects that do past muster and ultimately move towards financial close, there are noticeable commonalities among them. They have the right Project Components... When submitting a green project for funding consideration, it is important for Project Developers to…
EMPOWERING THE ENTREPRENEUR IN 2019We all know that starting a business is not as easy at it looks or sounds.There are multiple components to company formation that will make or break a business within years of it launching. Statistics show that over half of small businesses that launch today, fail often within their first few years of going live. However, this fail rate should not be demonstrative of why you shouldn’t go into business for yourself if you have a great idea. In fact, the picture this paints is much more pointed in that a successful business requires a 360° approach as you form your company and position it for success. This means experience is key, knowledge is power, and what you don’t know may kill your business before you even get started.
Experience is important because you not only learn what to do, but most importantly what not to do. The latter becomes an impossible approach as you form your business model if you have never in fact been in busi…