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FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 2 Process/Financing Issues PROJECT FINANCE ISSUES UNIQUE TO WORKING WITH.

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Presentation on theme: "FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 2 Process/Financing Issues PROJECT FINANCE ISSUES UNIQUE TO WORKING WITH."— Presentation transcript:

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2 FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 2 Process/Financing Issues PROJECT FINANCE ISSUES UNIQUE TO WORKING WITH USG: Developer creates special purpose entity (SPE) SPE responds to USG request for proposal (RFP) with respect to power purchase agreement (PPA) and land lease USG awards land lease and PPA pursuant to competitive bids Key underwriting hurdles include the following –Project level debt ( Stand still provisions, Termination for convenience, etc.) Basic Partnership Flip Structure Basic Lease Pass-Through Structure Sale Leaseback Structure

3 FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 3 Basic Partnership Flip Structure Project Sponsor Limited Partner (Tax Equity Investor) SPE OpCo (Owns and operates facility) EPC Developer Power Buyer (USG) Partnerships for federal income tax purposes Tax paying entities Denotes an ownership interest Cash flows from non-owners Ground Lessor (USG)

4 FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 4 Basic Lease Pass-Through Structure Developer Project Sponsor Limited Partner (Tax Equity Investor) SPE “OwnCo” “Depreciation Entity” SPE “OpCo” “Tax Credit Entity” Partnerships for federal income tax purposes Tax paying entities Denotes an ownership interest Cash flows from non-owners Power Buyer (USG) Ground Lessor (USG)

5 FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 5 Sale Leaseback Structure Investor SPE - Single Member LLC (Lessee ) Single Member LLC (Lessor) SPE OpCo SPE OpCo $ Lease Agreement Lease Payments Ground Lessor and Power Buyer (USG) Power PPA/Lease Payments Lease Agreement Project Sponsor $ 100% interest Constructed Project Purchase & Sale Agreement

6 FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 6 Contact Information Tony Grappone Novogradac & Company LLP 101 Arch Street, 10 th Floor Boston, MA 02110 Tel: 617.449.3030 Fax: 617.330.1922 Tony.Grappone@novoco.com www.novoco.com

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