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Tax Credits Vs. Cas h Grants In Renewable Energy Deals

Tax Credits Vs. Cas h Grants In Renewable Energy Deals. Speakers Anita Molino – Bostonia Partners LLC Tony Grappone – Novogradac & Company LLP Moderator Ted Risher – Basile Baumann Prost Cole & Associates LLC Comments on Expiration of Section 1603 Cash Grant Program – Market Impacts

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Tax Credits Vs. Cas h Grants In Renewable Energy Deals

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  1. Tax Credits Vs. Cash GrantsIn Renewable Energy Deals • Speakers • Anita Molino – Bostonia Partners LLC • Tony Grappone – Novogradac & Company LLP • Moderator • Ted Risher – Basile Baumann Prost Cole & Associates LLC • Comments on Expiration of Section 1603 Cash Grant Program – Market Impacts • Renewable Energy Finance Going Forward • Q&A

  2. Tax Credits and Deductions • Federal Tax Credits • Production Tax Credits • Investment Tax Credits • Grants/Rebates • Tax Deductions

  3. Basic Partnership Flip Structure Limited Partner (Tax Equity Investor) General Partner (YOU!!!) EPC HOST/POWER BUYER 99% Pre Flip 5% Post Flip 1% Pre Flip 95% Post Flip 100% Project Entity -Owns and operates facility Deferred Developer Fee Partnerships for federal income tax purposes Developer Tax paying entities Denotes an ownership interest Cash flows from non owners

  4. Basic Lease Pass-Through Structure 100% General Partner (YOU!!!) Limited Partner (Tax Equity Investor) 1% Pre Flip 95% Post Flip 99% Pre Flip 5% Post Flip 70% Deferred Developer Fee Master Lease Tenant “Tax Credit Entity” Landlord “Depreciation Entity” 30% Partnerships for federal income tax purposes Developer Tax paying entities Pass-through ITCs Denotes an ownership interest Cash flows from non owners

  5. Sale Leaseback Structure $ Single Member LLC (Lessor) Investor Host 100% interest Lease Payments Lease Agreement Constructed Project PPA/Lease Payments Purchase & Sale Agreement Power $ Developer (YOU!) Single Member LLC (Lessee ) Project 1 Lease Agreement 100% interest

  6. Contact Information Tony Grappone Novogradac & Company LLP 101 Arch Street, 10th Floor Boston, MA 02110 Tel:   617.449.3030 Fax:  617.330.1922 Tony.Grappone@novoco.com www.novoco.com

  7. Agenda • Capital Stack Across the Stages of Development • Operating Returns of a Typical Project • Project and Modeling Assumptions

  8. Capital Stack Across Stages of Development Development Stages of a Typical 10MW Project Shovel Ready COD • Project Stages - Development to Operations: • Early Development ($200,000): Development cash needed for permitting, front-end design, legal costs for PPA and permitting, securing land, etc. Time-frame is approximately 1 year. • Construction Stage ($26,250,000): Construction financing, early tax equity investment (1-5%), development equity needed for balance of development costs to COD. Time-frame is 6 months to 1 year. • Operational Stage ($28,700,000): Long term debt, tax equity, and long term project equity deployed to pay construction loan and various legal, financing and engineering fees due at COD. Operation is 20 – 25 years.

  9. Operating Returns of the Project Owner

  10. Assumptions • Development Assumptions: • Project Size: 10MW • EPC Cost per Watt: $2.50 • Additional Development Costs: Interconnection, Site Work, Legal Fees, Financing Fees, Construction Interest, Independent Engineer • PPA Price: $0.10/KwH • SREC Price: $150/MwH x 9 years • Operations Expenses: O&M, Insurance, Property Tax, Administration • Financing Assumptions: • 85% Construction Loan to EPC Cost • 10 Year Senior Loan, LIBOR swap + 350bps at a 1.35x Debt Service Coverage Ratio (48% of Capital Stack) • 10 Year Debt Service and O&M working capital facility • Tax Equity investment for 99% of benefits (ITC + MACRS Depreciation) and 2% preferred cash return over 5 years (40% of Capital Stack). Buyout is sized to approximately 10% of initial investment. • Long Term Equity 20 year hurdle rate of 15% IRR (12% of Capital Stack)

  11. Contact Information Anita Molino Bostonia Partners LLC 699 Boylston Street, 7thFloor Boston, MA 02116 Tel:   617.437.0150 Fax:  617.437.7080 amolino@bostonia.com www.bostonia.com

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