OwnEnergy

Financing Options

Building a wind farm is not cheap. On average, wind power development costs around $1 million per MW of generating capacity installed. However, the variety of incentives and funding support implemented result in a myriad of financing resources that can be used to optimize a construction project’s capital costs and reduce the amount of developer equity required.  

These include a slightly modified form of the tax equity flip partnership structure, using ARRA’s loan guarantee program to attract project debt, sale-leaseback structures, or partnering with a utility accessing the Clean Energy Renewable Bonds (CREBs) market, among others. Historical tax equity continues to be available, though in different form and at a higher cost than in the early 2000’s.  Commercial banks here and abroad are also attracted to the secure revenue stream of a well-structured project financing.

Loan Guarantee Program

Historically, federal loan guarantees for the renewable industry focused almost exclusively on “innovative” technologies that were otherwise unable to borrow from commercial banks. ARRA expanded existing loan guarantee programs to cover “commercial” projects in the industry as well. 

The program allocates $6 billion to cover anticipated losses from the loan guarantees.  This is expected to provide as much as $60-80 billion in guarantees. To qualify for a loan, the project must begin construction no later than September 30, 2011.

Clean Energy Renewable Bonds

CREBs were authorized via ARRA ($2.4 billion) and are issued by public entities, such as local utilities and the government, to fund construction of renewable power-producing facilities. Although not a direct source of construction capital to an independent wind developer, CREBs can be a powerful tool when paired with a build-transfer agreement or other strategic venture between the developer and the local power purchaser. 

Tax Equity Monetization

Available tax equity purchasers have decreased in size following the recent recession and banking crisis. Buyers still exist and certain structured financings using traditional lease structures and sale-leaseback structures have broadened the number of potential buyers.

Commercial Banks

Contrary to popular opinion, the availability of lending capital assuming sound project economics, long-term contracts and an appropriate structure continues to exist. The sources of capital have broadened and include a number of foreign as well as U.S. banks. Generally, the debt will be sized against available P99 wind levels and with required debt service coverage ratios.