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Equity investments in community wind projects. Presented by Clifford M. Kenwood. SANTA FE, NM. 7/26/2007. Rebirth Capital Overview. Rebirth Capital is specialty finance firm focusing on: Helping finance smaller renewable energy projects nationwide.
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Equity investments in community wind projects Presented by Clifford M. Kenwood SANTA FE, NM 7/26/2007
Rebirth Capital Overview Rebirth Capital is specialty finance firm focusing on: • Helping finance smaller renewable energy projects nationwide. • Helping the Gulf Coast recover from Hurricane Katrina. Two New Markets Tax Credit funds: • The Gulf South Rebirth Fund – business loans and investments in GO Zone • American Community Renewable Energy Fund – renewable energy, biofuels and green technologies. Rebirth Capital Renewable Energy Fund • Focuses on tax credit equity investments in smaller commercial-scale renewable energy projects nationwide.
Rebirth Capital Renewable Energy Fund • Partnership between Rebirth Capital and TransCapital • Fund focuses on tax credit equity investments in renewables, including: • Wind • Solar • Small Hydro • Other technologies eligible for Federal PTCs • Investment size of $2 – 25 million • Streamlined documents and closing process help manage transaction costs • Community economic development background offers different investment perspective
Capitalizing Community-Based Projects • Why is it so hard for community projects to attract tax equity? • Institutional investors don’t have the time to do small, one-off projects. • Transaction costs can be very high • Developers generally less experienced and financially sophisticated • Difficult to manage a portfolio of small projects • Why do we think equity investments in community projects are worthwhile? • High community impacts – can be important to some investors. • Can develop diversified portfolio to minimize geographic, technology and developer risks. • Life is too short to take the easy route!
Preparing a Project for Tax Equity Investment • Tax equity is generally the last money into a wind deal • Tax equity investors look for projects that: • Have turbines (the hardest part these days?) • Rebirth is currently investigating “frame agreements” with turbine manufacturers for community projects. • Are fully permitted • Have a PPA (merchant projects are possible, but not easy) • Have lined up non-recourse project financing and construction financing • Representation by an attorney with experience closing smaller deals is very important
Deal Structure: Basic Flip Structure Stage 1: Construction Loan Construction Lender Project Developer (Man. Member)
Deal Structure: Basic Flip Structure Stage 2: Commercial Operation Date Debt Repayment Construction Lender Project Developer (Man. Member) Rebirth (Tax Equity Investor) Equity Capital
Deal Structure: Basic Flip Structure Stage 3: Pre-Flip Operations 95% distributed cash and tax benefits until target IRR achieved 5% distributed cash and tax benefits Project Developer (Man. Member) Rebirth (Tax Equity Investor)
Deal Structure: Basic Flip Structure Stage 4: Post-Flip Operations 95% distributed cash and tax benefits 5% distributed cash and tax benefits Project Developer (Man. Member) Rebirth (Tax Equity Investor) Other structures are possible, but with smaller projects it is best to keep it simple.