Solar Energy Tax Credit Sample Deal Terms
CityScape Capital Group syndicates energy tax credits through its CCG Energy Partners Funds involving all types of project uses, such as residential, office, retail, and hospitality.
CCG Energy Partners Funds utilizes a multi-tier transactional structure so that the energy system owner retains the depreciation benefits. While an in-depth review of the energy system budget and financial projections would provide a better indication of the marketability and financial benefits of the tax credits, some generalities can be made as to pricing and deal structure.
Price Per Federal Tax Credit Dollar
$.85 - $1.00
Pay-In Schedule
While the timing of the equity contribution is flexible, one frequently used pay-in schedule is approximately 80% at the installation and in-service date of an operating energy system and the remaining 20% at 2-months of stabilized operations and receipt of an accountant's cost certification.
Annual Cash Flow
CCG usually receives an annual 3% priority return of capital based upon its capital contributions and the deal structure.
Put Option
Each transaction is structured with a put option that may be exercised after the end of the 5-year compliance period. Typically, the put option is priced at 15%-18% of its total capital contributions plus any unpaid priority return.
Developer Guarantees
In addition to the standard construction completion, operating deficit and environmental indemnification guarantees, the energy system owner is also required to provide a tax credit indemnity guarantee from a creditworthy entity. The amount of the guarantee is based upon the project type, pay-in structure and perceived risk.
Transaction Costs
CCG pays for the first $25,000 of its legal fees. Relative to other investors, the energy system owner’s cost savings could be as much as $25,000.
Asset Management
CCG charges no annual asset management fee. Relative to other investors, the energy system owner's cost savings could be as much as $10,000 annually or a total of $50,000.
Audit Requirements
CCG has no annual audit requirements except for the year(s) in which the tax credits are earned and claimed. Relative to other investors, the energy system owner's cost savings could be as much as $10,000 annually or a total of $40,000.
In lieu of providing a pledge of collateral or acceptable guarantee to ensure the availability of funds for the payment obligations and tax credit indemnity guarantee, the energy system owner can accept a staged pay-in schedule and deposit the final capital contribution into an interest bearing escrow account.
Note: Because of the initial due diligence and structuring costs, transactions with less than $600,000 of energy tax credits may fall below these pricing ranges. In addition, based upon project specific merits, the above price ranges may be exceeded.