Billy Lee
January 3, 2024
Advanced Power Announces Investment Tax Credit Purchase
Reunion, a technology-enabled finance company, originates and facilitates tax credit transfer for Advanced Power
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Advanced Power Announces Investment Tax Credit Purchase
Purchase demonstrates commitment to a sustainable energy future
Provided by Advanced Power
January 3, 2024
BOSTON, January 3, 2024 – Advanced Power continues to show its commitment to advancing a sustainable energy future with its purchase of renewable energy investment tax credits (ITC). The credits were made available through the development of rooftop solar facilities offered for sale by a third party.
“Advancing a sustainable energy future drives our actions,” said Advanced Power’s CEO Tom Spang. “We are pleased to close this latest transaction, which supports our vision of a clean, reliable energy future.”
The 2022 Inflation Reduction Act (IRA) made the transfer of renewable energy tax credits possible. The IRA aims to accelerate the transition to a clean energy economy and drive increased deployment of new, clean electricity resources. Section 6418 of the Internal Revenue Code allows for the transfer (sale) of certain renewable energy tax credits from renewable energy project developers to a qualified third party.
“Advanced Power is a developer, owner, and asset manager of modern power infrastructure and has now made a tax equity investment and completed a tax credit transfer transaction. We are positioned to execute similar transactions soon,” added Spang.
Reunion, a technology-enabled finance company that helps guide corporate tax teams through the clean energy tax credit transaction process, originated the opportunity for Advanced Power and facilitated the transaction between the parties.
Advanced Power focusing on further U.S. renewables development
Advanced Power manages all aspects of an energy project's life cycle, including development, construction, financial structuring, and operations. A robust renewables pipeline across Desert Southwest, ERCOT, PJM, and MISO is underway. Late-stage projects in the pipeline include:
- Eldora Energy – 240 MWdc solar with an additional 200MW/400MWh battery storage facility
- Alina Energy – 220 MWdc solar with an additional 200MW/400MWh battery storage facility
- Elio Energy – 300MW/600MWh battery storage facility
- Rock Rose Energy – 200MW/400MWh battery storage facility
For more information about Advanced Power, its energy projects, and its expertise in development, financial structuring, and asset management, please visit www.advanced-power.com.
About Advanced Power
Advanced Power is a privately owned global developer, manager, and owner of modern power infrastructure. The company develops low-carbon and renewable electric generating projects as an independent power producer. Advanced Power’s successes include 11 gigawatts in development or operations in the United States and Europe. The company has offices in Boston and Houston, with a registered office in Zug, Switzerland.
Founded in 2000, Advanced Power is focused on advancing a sustainable energy future, bringing reliable energy to places that need it, and providing economic benefits plus jobs to communities while making massive contributions to reducing CO2 emissions.
Denis Cook
December 17, 2023
IRS Provides IRA Tax Credit Pre-Registration Portal Data Requirements and Review Timeline
The IRS published guidance for its transferable tax credit pre-registration portal. We created a checklist for each credit type.
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In early December, the IRS launched a webpage for its pre-filing registration tool. As of this post, the actual tool is "unavailable to the public."
However, developers who want a head-start can review the portal's user guide to get a clear sense of what to expect – including the IRS's recommended 120-day review timeline.
Reunion's key takeaways from the pre-registration portal user guide
- Takeaway 1: The IRS pre-registration portal is not yet open, but the user guide discloses the portal's data and documentation requirements
- Takeaway 2: The IRS does not issue a registration number until the review is complete, and the IRS recommends at least 120 days for review
- Takeaway 3: Projects must be placed in service before submitting a registration
- Takeaway 4: For every credit, the portal requires standardized information about the registrant
- Takeaway 5: The portal includes credit-specific requirements, including a "non-exhaustive" list of documents. (Navigate directly to a credit's requirements: §30C, §45, §45Q, §45U, §45V, §45X, §45Y, §45Z, §48, §48C, §48E)
- Takeaway 6: Developers will need a registration number for each facility/property
- Takeaway 7: A registration number does not mean a registrant qualifies for a credit of any specific amount
TAKEAWAY 1
The IRS pre-registration portal is not yet open, but the user guide discloses the portal's data and documentation requirements
In early December, the IRS launched a webpage for its pre-filing registration tool. As of this post (December 18, 2023), however, the actual tool is "currently unavailable to the public."
Although the portal is not yet live, developers can get a preview of the tool's look, feel, and workflow through the Pre-Filing Registration Tool User Guide and Instructions.
The 69-page guide includes step-by-step instructions for registering each facility/property, including a bulk upload functionality – complete with a spreadsheet template – for the §30C, §45, and §48 credits. (The template is not yet available.)
TAKEAWAY 2
The IRS does not issue a registration number until the review is complete, and the IRS recommends at least 120 days for review
The IRS does not issue registration numbers until the application has been reviewed and marked as "Returned - Closed." The registration field will go from "pending" to an alpha-numeric string.
The guide counsels registrants to submit their pre-filing registration at least 120 days prior to when they plan to file their tax return. 120 days "should allow time for IRS review, and for the taxpayer to respond if the IRS requires additional information before issuing the registration numbers."
Importantly, 120 days is the IRS's current recommendation, suggesting this timeline could vary. Developers should prudently assume 120 days is the minimum.
TAKEAWAY 3
Projects must be placed in service before submitting a registration
The guide states, "Before a facility/property can be registered to make a transfer election...that property or facility must have been placed in service no later than the date the registration is submitted." However, nothing prevents a registrant from getting a head-start on a draft submission.
TAKEAWAY 4
For every credit, the portal requires information about the registrant and allows for "additional information, if any"
All registrations must provide the following "general information" about the registrant:
- Tax period of the election
- EIN
- Name associated with EIN (as it appears on tax return)
- Parent of consolidated group?
- Registrant type (C corporation, sole proprietorship, etc.)
- Address
- Bank account information (account number, routing number)
- Type(s) of prior-year return(s) filed (Form 1120, Form 1040, etc.)
The portal also allows for "additional information, if any" as unformatted text. This field is optional but allows for the collection of "any additional information the registrant may wish to provide to identify a specific property or facility." In general, registrants should consider this field an opportunity to address any potential questions about their submission. Registrants should remove as much uncertainty in their application as possible.
TAKEAWAY 5
The portal includes credit-specific requirements, including a "non-exhaustive" list of documentation
Depending on the type of credit a developer is registering, the portal will ask for specific data – the date construction began, for example – and a "non-exhaustive" list of supporting documentation.
According to the guide, "Supporting documents will usually be relatively short documents, such as permits, title documents, [and] sales documents (showing the name of the registrant, date of purchase, and identifying information such as serial numbers)." On several occasions, the user guide states, "Do not attach detailed project plans or contractual agreements."
The guide does not list requirements for credits that are pending:
- §45Y – Clean electricity production credit: Applies to facilities placed in service after 12/31/2024
- §45Z – Clean fuel production credit: Applies to transportation fuel produced after 12/31/2024
- §48E – Clean electricity investment credit: Applies to facilities placed in service after 12/31/2024
Scroll to a credit: §30C | §45 | §45Q | §45U | §45V | §45X | §45Y | §45Z | §48 | §48C | §48E
TAKEAWAY 6
Developers will need a registration number for each facility/property
Developers will need a separate registration number for each facility/property, depending "on how the credits must be computed and reported on the source credit form and Form 3800."
The source forms for each credit are as follows:
Transferable tax credit source form links
Here are links to available source credit forms for transferable tax credits. Some forms, like 7213, are in draft as of this post (December 11, 2023):
- §30C (Alternative fuel refueling property credit) – Form 8911
- §45 (Renewable electricity production credit) – Form 8835
- §45Q (Carbon oxide sequestration credit) – Form 8933
- §45U (Zero emission nuclear power production credit) – Form 7213. As of December 2023, this form is draft
- §45V (Clean hydrogen production credit) – Form 7210. As of December 2023, this form is draft
- §45Z (Clean fuel production credit) – Form 8835. As of December 2023, this form is pending a future revision
- §45X (Advanced manufacturing production credit) – Form 7207
- §45Y (Clean electricity production credit) – Form 7211. As of December 2023, this form is pending
- §48 (Energy credit) – Form 3468
- §48C (Qualifying advanced energy project credit) – Form 3468
- §48E (Clean electricity investment credit) – Form 3468. As of December 2023, this credit will involve a future form revision
TAKEAWAY 7
A registration number does not mean a registrant qualifies for a credit of any specific amount
The guide reminds registrants that the portal demonstrates an "intent to monetize" a credit. A registration number, in other words, "does not mean that the registrant has been determined to qualify for a credit of any specific amount."
To monetize a credit, a developer must meet other requirements to make a valid election, including:
- Reporting the credit on the applicable source credit form (see list above)
- Completing Form 3800
- Fully executed transfer election statement
- Attaching these forms to a timely-filed tax return
QUESTIONS
Interested in learning more?
To learn more about the pre-registration portal or the IRA tax credit market it supports, please contact Reunion.
Reunion
November 29, 2023
Tax Notes - Tax Credit Transfers Start Rolling Along
The Inflation Reduction Act opened the market for buying and selling energy tax credits by creating a new asset class. One result of that innovation was the launch of new marketplaces in which buyers and sellers can transact.
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Download the PDF
To Market, To Market: Tax Credit Transfers Start Rolling Along
Reprinted with permission from Tax Notes - Volume 181 | October 30, 2023
The Inflation Reduction Act opened the market for buying and selling energy tax credits by creating a new asset class. One result of that innovation was the launch of new marketplaces in which buyers and sellers can transact. A novelty in the federal tax area, tax credit marketplaces are working to establish themselves as a key aspect of the implementation of both the new and the dramatically revised energy credits.
The objective of the marketplaces is to facilitate credit transfer transactions by bringing buyers and sellers together and helping them complete their deals efficiently. The early deals appear to be mostly dominated by established participants in the traditional tax equity market, but the founders of the new marketplaces see a chance to both assist in those transactions and turn the untapped potential of smaller projects and new credit purchasers into completed deals.
New market, new marketplaces
As the recent spate of announcements has heralded, the market for credit transfers is taking off. “There are very few tax planning strategies that can have as large an impact as this can have for a single transaction, but it’s all based on scale,” Gabe Rubio of BDO USA LLP said. Where marketplaces fit within the credit transfer market is still being determined, but there are indications that they’ll play an important role.
“There has been an awesome amount of demand from clean energy project developers,” said Andy Moon of Reunion, an energy tax credit marketplace that launched this year. His company currently has $3 billion in credits from hundreds of developers on its platform from leading solar, wind, and other project developers. Moon said that because of the shortage of available tax equity and the complexity involved in tax equity partnership structures, there is a growing realization that transfers will be an important part of the financing toolkit for all developers.
One of the challenges is that the population of sellers is reasonably well defined, but the population of potential buyers is not. “People are interested and are feeling out the market but are trying to figure out how the process works and figuring out what they need in order to be able to transact,” said Seth Feuerstein of Atheva, another credit marketplace. For the sellers’ part, they’re often learning what buyers want, he said. That learning process will continue as the market matures.
By educating buyers and sellers and making transactions significantly less onerous than tax equity deals, the marketplaces hope to help the market mature faster. Moon said Reunion is focused on educating market participants and ensuring that transactions are done properly and are good experiences for buyers and sellers. “Part of why we’re interested in providing our knowledge to the market, including to our competitors, is that if there is fraud or recapture, that’s bad for us too,” he said.
The transactions facilitated by the marketplaces still involve outside counsel for each party to the deal. Moon said that Reunion helps lower expenses for buyers and sellers by guiding the due diligence process and providing a starting point with standardized documents that the parties and their counsel can customize through negotiations. There are additional benefits to having a nonparty facilitator whose role is to efficiently move the transaction to closing, he noted. For example, he explained that while developers may seek higher-than-market sales prices initially, Reunion has been able to bring its market expertise to the table to help buyers and sellers achieve a price that makes sense. “The go-between role is important,” he said.
Moon said that the long-term vision for Reunion’s role in the market is to be a place where many buyers and sellers can transact regularly in an auction style and to offer buyers the ability to purchase a portfolio of many projects. “Right now, buyers want projects with scale, but by the time we get to the later part of 2024, one thing that we anticipate is more, smaller projects with larger discounts,” he said. The key to those deals will be risk mitigation.
The marketplaces might also carve out a niche as matchmakers between buyers and sellers who don’t already know each other by helping them to find the right deal partners. Rubio said that the marketplaces could provide a valuable service to clients that have very specific parameters.
Transfers on the rise
Both on and off of the marketplaces’ platforms, credit transfers have taken off. Rubio said his firm closed transfer agreements of just under $300 million in credits in September. “VPs of tax are starting to wake up to this, as are developers, and it is becoming a very relevant tax and cash planning strategy,” he said. That growing awareness is why the credit transfer market is on an upward trajectory.
Moon predicted that the rest of 2023 and early 2024 will continue to see bilateral transactions, as the process becomes more familiar to purchasers. “Once a company and their finance team get comfortable with the process, there’s no reason not to continue to transact at equal or larger volumes in future years,” he said.
The market is currently heavy on solar projects, probably because that technology is among the most prevalent and there are many small solar projects that drive up the numbers, said Feuerstein. He added that developers have shown a preference for selling investment tax credits because they generate more income for the seller, but production tax credits are actually easier to sell because of the lack of recapture risk. So far, there doesn’t appear to be much of a difference in sales price between ITCs and production tax credits.
Risk mitigation is one of the major focuses of the credit marketplaces. Treasury and the IRS stated in the proposed regulations that the risk of recapture should be on the buyer, with a few exceptions in the case of partnerships and S corporations, but they allowed transferors to indemnify transferees. The focus in deals is now on mitigating the recapture risk through insurance and guarantees that let buyers feel more secure about their purchases. “All of our agreements put the burden of recapture on the seller,” Feuerstein said.
No portal
The IRS says it expects to open a registration portal for credit transfers by the end of the year, the main missing link in the transfer process. Credits sold today still have to be registered. Uncertainty about what exactly that prerequisite will entail is causing some additional friction in the market, but it’s “more of a hurdle than a barrier,” Feuerstein said.
Pricing
The price range for credits is still fairly wide, but it’s starting to crystallize, and it will probably narrow over time. “The highest we’ve seen is 94 cents [on the dollar],” Feuerstein said. But sales in the low-80-cents range are also happening, and some sellers may even go into the 70s. “The pricing depends on the size of the credit and the creditworthiness and reputation of the seller, among other things,” he said.
Moon said that for the 2023 tax year, current production tax credits sell in the mid-90s, and ITCs from established solar, wind, and battery storage developers are in the low 90s. Technologies that now have a smaller pool of buyers, such as biogas, are trading around 90 cents or in the high 80s, he said. “Smaller projects, projects from newer developers, or projects with more risk or complexity may have a discount in the mid-80s,” Moon said. Looking forward to 2024, the options will increase with additional technologies, such as carbon capture, and new structures. For example, buyers could lock in a larger discount by committing to purchase tax credits for projects that will be placed into service at least 12 months in the future.
The proposed regulations established that the discount at which credits sell isn’t taxable income to purchasers, which has caused sales prices to rise. Moon noted that from the standpoint of the internal rate of return, the returns on purchases are quite healthy because the credits can be used to offset quarterly estimated payments.
The successful completion of the initial credit sales is likely to serve as a proving ground for the process. Buyers and sellers of smaller credits in particular may be the beneficiaries of the collective knowledge and eventually more standardized processes that follow on the heels of the initial transactions. “It’s harder to justify the transactional expense necessary for a smaller transaction,” Rubio said. He said that he hasn’t seen a completed sale of a credit under $5 million so far, but that is likely to change as the market develops.
Andy Moon
November 22, 2023
Reunion's Mission and Values
Take a look at Reunion's mission and values to see how these guiding principles shape our team and culture. Join us as we fight the climate crisis by ensuring more renewable energy projects get built.
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At Reunion, we believe that setting a strong company culture from the start is a critical part of building a high-performing company. Our founding team worked together to define company values that influence our everyday work; from how we screen and hire new employees, to how we collaborate and develop our product offering.
Our mission has remained constant. Our team members are motivated by our mission to make a meaningful difference in the fight against climate change. We believe that our team is uniquely positioned to increase deployment of renewable energy through our deep experience in financing.
We have five core company values. Every quarter, we re-visit our company values and ask whether these values remain relevant to how we work. This always spurs insightful and honest reflections on where we are succeeding and where we can improve. Sometimes, it leads us to adjust our company values to better reflect what is truly important.
Our mission
Reunion’s mission is to accelerate investment into renewable energy projects by simplifying the project financing process.
Our values
Communicate empathetically and directly
- We communicate openly and directly, even in disagreement
- We are kind and assume our teammates, customers, and partners have the best intentions
How can we go faster?
- We make firm and fast decisions, particularly on decisions that can be reversed
- We ship fast and adjust course based on data and feedback
How can we do it better?
- We run experiments that we can measure and are open to changing our minds when presented with data
- We keep an “enterprise-level” bar for excellence
Everybody is a leader and an owner
- Anybody can own an initiative and make it a reality
- If we commit to a project, we aim to follow through to finish
Continuous growth
- We strive to keep learning and improving, both as a company and as individuals
- Feedback is a gift; we embrace opportunities to grow
Come join us
Defining and refining our company values has helped us clarify who we want to be as a company. We have developed a high-performance culture, and we have surprised ourselves at times with our pace of execution despite having a small (but mighty) team. I should also emphasize that, although it’s not an official company value, we also have fun! 🙂
We believe that hiring and motivating the best people will be core to achieving our climate mission. If our mission and values resonate with you, we are always looking for talented people to join us – check out our open roles.
Reunion Accelerates Investment Into Clean Energy
Reunion’s team has been at the forefront of clean energy financing for the last twenty years. We help CFOs and corporate tax teams purchase clean energy tax credits through a detailed and comprehensive transaction process.
