Investors desiring to identify and successfully close on feasible project opportunities need to take multiple factors into consideration in devising their investment strategies and targeted returns.

Investing in clean power projects requires taking into account the various tax-related and other financing incentives offered by the Federal and state governments. At the Federal level, these include the section 45 production tax credit under the IRS tax code available to owners of certain types of renewable power projects, accelerated depreciation of project assets, and the section 48 investment tax credit available for solar projects. State grant and loan programs can provide further value, but also can erode the value of the Federal benefits. More information on such incentives is available from organizations identified in our Resources page.

Project developers and investment banks have developed multiple financing structures to enable tax-oriented institutional investors to invest in clean power projects. Variations in the structures reflect differing objectives and financial strength among project developers and investors, as well as the incentives available for given projects. Tax-oriented institutional investors frustrated with low returns from alternative investments are considering clean power projects, but may lack the internal experience or personnel to do so with confidence.

Developers are seeking third party investment capital at all stages in the development of projects. In some sectors, this is being driven by cost increases and scarcity of key equipment, e.g., wind turbines and photovoltaic panels. Investors need to understand the underlying project risks and potential rewards of investing at each stage in the development of projects and to be able to negotiate changes in the terms of an investment opportunity to mitigate identified risks consistent with the proposed equity returns. Investment opportunities are proliferating, as municipal, community, and other public entities seek to mobilize private sector capital in support of public sector renewable power development. Investors can profit by understanding the needs and goals of various types of developers.

Birch Tree Capital can assist investors in clean power projects in several respects:

• Identifying viable power off-take, ownership, and financing structures that meet both the needs of project developers and institutional equity investors.
• Identify suitable developer partners.
• Identify specific investment prospects meeting investor criteria.
• Evaluate development and investment prospects on a “fatal-flaw” initial review basis.
• Assist in negotiating equity letters of intent and definitive purchase and sale documentation.
• Identify and assist in retaining other appropriate transaction advisors, e.g., legal counsel, independent engineers, insurance experts, tax valuators.
• Coordinate due diligence reviews with the project developer and other investor advisors.
• Review financial models for adequacy in representing the specific project investments.
• Coordinate with investor’s legal counsel on tax matters relating to a project’s Federal and state tax impacts.
• Assist in crafting power and renewable energy credit purchase agreement documentation consistent with the goals of the developer and needs of the equity.
• Assist in identifying and securing construction debt financing sources, if and as needed to balance institutional equity and/or long-term debt financing.
• Assist in identifying prospective commercial term debt financing sources, if and as appropriate.