Finance

Question 1

either tax or cash return portion of cost

Answer 1

Rebates

Question 2

Interest allocated

Answer 2

based on capital investment

Question 3

Sponsor developer

Answer 3

forms a Finance Company to maintain a partnership

Question 4

If sponsor doesn’t use back leverage then

Answer 4

no finance company is formed

Question 5

Tax equity (TE) and Finance Company forms

Answer 5

Project Company that owns the System

Question 6

Project Company

Answer 6

holds PPA with customer

Question 7

Project Company distributes

Answer 7

cash and incentive (tax equity) to finance company and also distributes project debt.

Question 8

Who recieves all the benefits from the ITC

Answer 8

the system owner

Question 9

What is third party ownership.

Answer 9

Customer who want renewable energy but without the maintenance or management of the system is called third party ownership. The customer pays to system owner ( lease or PPA )

Question 10

Allocation of loss cover

Answer 10

satisfies all portion of the profit and loss agreement as well as profit/loss ratios to absorb and deficiency.

Question 11

Third party owner issues for consideration are

Answer 11

Developer receives tax credit and can apply depreciation to its taxable income as well as tax desire can choose for finance company via project debt or monetize tax debt.

Question 12

Developers without tax apatite

Answer 12

Preform partnerships without financial tax apatite require tax equity investments .

Question 13

Tax equity

Answer 13

A structured finance investment to give the investor tax credit at depreciation.

Question 14

Partnership flips

Answer 14

are majority solar and wind use. In partnership flips investors and developers who own systems will in turn have access to benefits cash flow.

Question 15

Tax investors and system owners

Answer 15

use complex financial structures to maximize their returns

Question 16

What do income statements show

Answer 16

revenue and expenses.

Question 17

Net income=revenue + expenses

Answer 17

Operation, interests as well as taxes.

Question 18

Key components of partnership flips are what

Answer 18

Separate allocation of income and cash. Separate allocation of income and cash. ⦁ Target IRR flip – the tax equity exits and the investor calls and buys payout prices. ⦁ Separate allocation of wealth.

Question 19

Federal incentives for renewable energy are

Answer 19

Performance tax credit. ⦁ Investment tax credit. Acceleration deprecation. ⦁ Creates tax losses that shield developer over 3 years.

Question 20

Allocations that can shift over time are

Answer 20

⦁ U.S. partnerships can allocate income and cash items virtually any way they want. ⦁ Limitations on allocation structure based economic tests sent out by IRS. ⦁ In partnership flips, cash allocations are different from income allocations.
⦁ Tax equity may receive 99% of income and ITC and 20% of general cash flow, for example, while the managing member receives the remainder of each. ⦁ In some cases cash and income from different sources (e.g. PPA, RECs, incentives, etc.) are allocated independently.

Question 21

⦁ Allocations to each partner may also change over time such as

Answer 21

Income allocations may adjust to most efficiently monetize tax benefits.

Question 22

⦁ Allocations of income must must be carefully planned to avoid recapture of the ITC

Answer 22

Five year recapture period as well as after recapture period, partners can more freely allocate income (discussed in detail later)