1. Financing Solar Energy
Combining New Markets & Solar Tax Credits Herb Stevens

2. Overview of ETCs
Energy Tax Credits are generally 30% of “facility” cost (e.g., transmission lines and substations are not eligible for the ITC)
Includes Photovoltaic (PV) Concentrated Solar Power (CSP) & fuel cells
Must generate electricity, heating, cooling, hot water, or fiber-optic lighting. Sale of elec. is not required

3. Placed in Service When is a facility placed in service?
Usually when completed, with licenses and after pre-operational testing
“Daily operation” can matter
Acquired property must be delivered and ready to use; mere purchase is not enough

4. The Tax Benefits and Timing
30% ETC is usually taken in the year the facility is “placed in service”
Possible recapture for 5 years (100% in first year, 80% in second year, etc.)
Mostly 5-year MACRS depreciation, but new rules permit 50% depreciation in first year (PIS in 2009)

5. Technical Rules
Almost all investors are corporations because of “At Risk” and “Passive Loss” Rules
Basis reduction of 50% of ITC, meaning less depreciation
Profit motive -- But compare Rev. Proc (for wind) with Reg (for LIHTC)

6. Solar/New Markets Single Equity Structure
Leverage Lender
NMTC Investor
$1.4 million
$3.6 million
Loan
Equity
Fund
Solar Credit Investor
$4 million
Developer .01%
Equity
Equity 99.99%
$5million
Allocation of $5 million NMTCs
CDE
Power Purchase Agreement or Lease
Project Owner
Loan and Equity
Energy User
NMTC $5 million Solar $4 million
Need $1 million
Solar Project
$10 million cost

7. Solar/New Markets Lease Pass Through Structure
NMTC and Solar/Investor Credit
Solar $4 million NMTC $1.5 million
Equity
Developer 51% Equity
Lender
CDE
$5.5 million allocation
Loan and 49% Equity
$5.5 million
Loan
Power Purchase Agreement or Sublease
$3.5 million
Lease
Lease
Project Owner
Master Tenant
Energy User
Credit Pass Through
Solar Project
$10 million cost
Credit Equity $5.5 million
Debt $3.5 million
Need $1 million REC or Rebate

8. Thank you
Herb Stevens