Financing Renewable Projects
Dec 08 2021
This article is based on a presentation on “Financing the Intersection of the Circular Economy and the ESG Revolution” at the Equipment Leasing and Finance Association’s 60th Annual Convention. Womble Bond Dickinson attorney Mike Dow was joined in the discussion by Cortland Brady, Aspen Field Services; Cristina Dolan, insideCHAINs; and Brett Reed, Cohealo. The following is a summary of Dow’s portion of the presentation.
Most renewable technologies benefit from federal tax credits. Investment tax credit & production tax credit. Under investment tax credit, the tax owner of asset can get a certain percentage of the equipment cost directly credited to its taxable income. The basic asset classes in renewable technology are:
There are two primary ways that tax equity transactions are done. The project developer doesn’t have taxable income, so they cannot use the tax credit. But they leverage these credits using two basic structures:
The financing structure depends on the goals of each party. While these factors will vary from deal to deal, they can be thought about in the following general terms:
Traditionally, energy efficiency projects have been financed with a conventional debt, capital leases and receivable financings. But in recent years, two new structures are becoming more popular:
Womble Bond Dickinson’s equipment finance team has extensive experience in complex financial transactions representing lenders and lessors in all aspects of equipment finance, with an emphasis on transportation assets and renewable energy transactions. Our lawyers manage deals across the country, working closely with financial institutions and law firms in New York, Chicago, Washington, D.C., Baltimore, Boston, San Francisco and other cities nationwide. Learn more.
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