u.s. federal corporate tax reform: potential …...corporate income tax rate to be reduced...

“Best Renewable Asset M&A Advisor”- Power Finance & Risk

Investment Bankers for

Global Energy and Infrastructure Markets

Marathon Capital U.S. Federal Corporate Tax Reform

Potential Impact on U.S. Renewable Energy Financing

January 2017

Contacts & Disclaimer

2

Matt Shanahan Managing Director

(312) 989-1352 [email protected]

John Wisniewski Associate


Greg Andiorio Associate, Tax & Structuring


Marathon Capital, LLC www.marathon-cap.com

This White Paper presentation (“White Paper”) has been prepared by Marathon Capital, LLC and Marathon Capital Markets, LLC (collectively, “Marathon Capital”) solely for discussion and evaluation purposes. The White Paper should not be used as a basis for trading in the securities or loans of the companies named herein or for any other investment decision. This document does not constitute an offer to sell securities and should not be construed as investment advice. The White Paper does not constitute a recommendation or take into account the particular investment objectives, financial situation or particular needs of the investor.

The White Paper is conveyed by Marathon Capital based on our belief that the recipient can independently evaluate investment risks and is using independent judgment in its evaluation process.

Although reasonable care has been taken to ensure that the information given in this White Paper is accurate, it has not been independently verified. Accordingly, no representation or warranty, expressed or implied, is made in relation to the accuracy or completeness of the information and opinions expressed in this White Paper and, to the maximum extent permitted by law, any and all liability in respect of such information and opinions is hereby expressly excluded, including, without limitation, any liability arising from fault or negligence, for any loss arising from the use of this information or otherwise arising in connection with it.

Marathon Capital makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this White Paper.

This material is not for distribution.

mailto:[email protected]









About the Authors

3

Matt Shanahan Managing Director

Matt Shanahan is Managing Director at Marathon Capital and leads the firm’s growing tax equity practice. He has over 20 years of experience in structuring, syndication and management of large complex corporate finance transactions. Since joining Marathon in 2010, Mr. Shanahan has closed over $1.3 billion of tax equity related transactions in the solar and wind sectors, including partnership flips, sale-leasebacks, and tax-advantaged restructurings. Key clients have included Santander, NRG, Rockland Capital, Kruger Energy and Edison Mission Energy.

Prior to joining Marathon Capital, Mr. Shanahan held senior investment banking positions at The CIT Group, Inc., Newcourt Credit Group, Bank of America Leasing and Capital Group, and The Deerpath Group Inc. In those positions he was responsible for structuring and syndicating US domestic tax leases, US project finance leveraged leases, US and UK cross-border tax leases, partnership financings, and structured debt financings. Throughout his career Mr. Shanahan has focused on tax-based financings in the energy and transportation sectors, including those for hydro-electric, geothermal, natural gas, solar, wind and coal generation facilities, Section 29 tax credit monetization, rail operating leasing partnerships, and corporate and commercial aircraft.

Mr. Shanahan received a BA in Economics from Kenyon College and a MBA from the JL Kellogg Graduate School of Management (Northwestern University). Mr. Shanahan holds his Series 7, 24, 63 and 79 licenses.

Greg Andiorio Associate, Tax & Structuring

Greg Andiorio joined Marathon Capital as Associate, Tax and Structuring in 2016. Mr. Andiorio’s primary responsibilities include supporting Marathon Capital’s senior bankers on tax equity engagements, assisting on complex structuring assignments, and serving as an in-house tax expert across various engagements and opportunities.

Prior to joining Marathon Capital, Mr. Andiorio was a Senior Manager in the Mergers and Acquisitions – Tax practice at KPMG LLP, leading cross-border tax structuring, modeling, and due diligence engagements for U.S. multinational clients, as well as advising clients in the energy industry on tax attribute planning and other tax issues associated with bankruptcy restructurings.

Mr. Andiorio received a B.S. in Accountancy and a M.S. in Accountancy with a Concentration in Taxation from the University of Illinois at Urbana-Champaign and is a Certified Public Accountant. Mr. Andiorio holds his Series 79 license.

John Wisniewski Associate

John Wisniewski is an Associate responsible for leading complex structuring assignments, creating detailed financial models, conducting due diligence, evaluating market dynamics and transactional risk/return parameters, collaborating on strategic transaction positioning and preparing investment marketing materials in support of Marathon Capital's senior bankers in their relationship management responsibilities. Since joining the firm in 2014, Mr. Wisniewski has worked on a variety of corporate and asset-level transactions, including M&A advisory, tax equity and partnership structuring and capital raises for clients including Main Street Power, Wind Capital Group, Mexico Power Group, FLS Energy and Empower Energies.

Prior to joining Marathon Capital, Mr. Wisniewski was a Senior Associate on the finance team at SoCore Energy, a solar distributed generation developer. While at SoCore, Mr. Wisniewski was responsible for a number of roles including structuring leveraged finance and tax equity transactions and managing the acquisition process of the company by Edison International. Previously, Mr. Wisniewski was an Analyst in the Global Industrials Investment Banking Group at Citi, where he worked on a variety of mergers and acquisitions, leveraged buyouts, and debt and equity financings in the metals and mining, diversified industrials and automotive industry sectors.

Mr. Wisniewski graduated from the University of Illinois at Urbana-Champaign where he received a B.S. in Finance with Highest Honors distinction. Mr. Wisniewski holds his Series 63 and 79 licenses.

Executive Summary

In light of the November 2016 election results, the combination of a Republican President-elect and Republican control of both the House and

Senate suggests a strong possibility of U.S. corporate tax reform. The two major Republican tax reform proposals have a number of different

provisions, though a common theme and cornerstone of both is a decrease in the U.S. federal corporate income tax rate

U.S. renewable energy projects generate a portion of their value from accelerated tax depreciation deductions. The value of those deductions

would decrease as the U.S. federal corporate income tax rate is reduced

The potential decrease in value is not uniform across renewable energy projects since the impact varies based on different tax incentives and

contractual structures. In general, wind project economics are more sensitive to a tax rate decrease than solar projects, and certain wind projects

(e.g. projects with long-term PPAs at current market rates) are more sensitive to a tax rate decrease than other wind projects

– Our analysis shows that after-tax returns for wind projects would decrease by 40 to 120 basis points, while solar projects would experience no

material impact

If the value of a wind project decreases with a reduction in the U.S. federal corporate income tax rate, who bears the risk of that loss?

– For wind projects financed by tax equity partnerships, if tax equity investors are able to shift that risk to the sponsor, the sponsor returns

would be adversely impacted by ~80 to ~240 basis points

To restore sponsor returns to current market levels, build costs would need to decrease by ~8% while off-take prices would need to increase by

~10% in a 15% tax rate environment

In summary, while a reduction in the U.S. federal corporate income tax rate would have an impact on the valuation of wind projects, the market

should be able to absorb the potential loss in value through some combination of adjustments to off-take prices, build costs, and/or sponsor

returns

We think that the uncertainty created by the prospect of tax reform, with imperfect knowledge of what it would contain, should drive tax equity

investors to larger, better-capitalized sponsors that are able to absorb the risk of tax changes through indemnities or higher upfront investments,

which in turn should drive consolidation in the U.S. renewable energy sector

4

5

Table of Contents

Sections

I. U.S. Federal Corporate Tax Reform & Potential Impact on U.S. Renewable Energy Financing 6

Appendix I - Tax Rate Sensitivity Analysis on the Sample Projects 19

Appendix II - Detailed Wind Project Analysis 23

Appendix III - Detailed Solar Project Analysis 34

Table of Contents

Section I

U.S. Federal Corporate Tax Reform & Potential Impact on U.S. Renewable Energy Financing

6

Background

In light of the November 2016 election results, the combination of a Republican President-elect and Republican control of both the House and Senate

suggests a strong possibility of U.S. corporate tax reform

While tax reform could present a number of changes to the U.S. tax system, one of the most impactful and likely changes appears to be a decrease in the

marginal corporate tax rate

– Both the Republican tax reform blueprint (the “Blueprint”) published in June 2016 and President-elect Trump’s tax reform proposal call for the

corporate income tax rate to be reduced significantly (to 20% in the Blueprint and to 15% in President-elect Trump’s plan)

– While both tax reform proposals contain other changes that could impact the U.S. renewable energy sector, the tax rate cut is the cornerstone of both

proposals and therefore is the focus of this White Paper. Given the potential impact to U.S. renewable energy projects, we also included an analysis of

the proposal for a 100% write-off of capital expenditures in the first year and elimination of net interest expense deductions

In this White Paper, Marathon Capital seeks to determine how a decrease in U.S. federal corporate income tax rates* would impact the U.S. renewable

energy financing landscape. We analyzed the impact a tax rate decrease would have on the economics of both 2017 COD wind and solar projects,

existing operating projects, and sponsor and tax equity membership interests in partnerships owning projects

Our working assumptions are that (i) Production Tax Credits (“PTCs”) and Investment Tax Credits (“ITCs”) extended in December 2015 will remain in

place as they phase out over the balance of this decade, (ii) any tax reform would allow such credits to continue to offset corporate tax liabilities as under

current law, and (iii) whatever changes become law would remain in place for the duration of the analysis period (i.e. 30+ years)

The impact of tax rate decrease on a given project varies based on a number of factors, including the type of tax incentive (i.e. PTC versus ITC), the tax

depreciation schedule, the technology utilized, the type of off-take agreement, power prices, and the tax equity financing structure. In order to illustrate

the relative economic impact across a variety of projects, we performed both project and tax equity partnership structuring analyses for the following

four types of projects common in the U.S. renewable energy market (the “Sample Projects”):

– Moderate net capacity factor wind project with a 20-year PPA claiming the PTC (the “Wind PPA Project”)

– High net capacity factor wind project with a hedge claiming the PTC (the “Wind Hedge Project”)

– Utility-scale solar project with a 20-year PPA claiming the ITC (the “Solar PPA Project”)

– Utility-scale solar project with both a contracted off-take and a 5-year contracted Solar Renewable Energy Credit (“SREC”) strip (the “Solar SREC

Project”)

Detailed descriptions of the inputs and structuring assumptions for each Sample Project are summarized in Appendix II and Appendix III

Given the uncertainty in timing and nature of tax reform, we assessed the impact of a tax rate decrease from the current 35% level to either 25% or 15%

starting in 2017

7

* Throughout this White Paper, all references to the “tax rate” or “tax rates” refer to U.S. federal corporate income tax rates only

Key Observations

8

Our Tax Rate Sensitivity analysis shows that the returns from certain types of projects rely more heavily on Non-Tax

Credit Tax Benefits than others, and therefore, such projects would be more significantly impacted by a tax rate

decrease. We measure a project’s sensitivity to changes in tax rates by calculating the percentage of a project’s

present value created by Non-Tax Credit Tax Benefits (the “Tax Rate Sensitive Value” or “TRSV”)

We refer to projects in which a higher proportion of value is driven by Non-Tax Credit Tax Benefits as having high

Tax Rate Sensitive Values. Conversely, we refer to projects in which a lower proportion of value is driven by Non-

Tax Credit Tax Benefits as having low Tax Rate Sensitive Values

The higher the Tax Rate Sensitive Value for a project, or the more the project relies on Non-Tax Credit Tax Benefits

to drive value, the more the project would be negatively impacted by a tax rate decrease

Tax Rate Sensitivity

U.S. renewable energy projects have three drivers of value: cash distributions, tax deferrals created from accelerated

depreciation deductions (“Non-Tax Credit Tax Benefits”), and tax credits (i.e. PTCs or ITCs). The value of cash

distributions and tax credits are not impacted by changes in tax rates

However, a decrease in the tax rate would make Non-Tax Credit Tax Benefits (i.e. MACRS depreciation and bonus

depreciation) less valuable

General

Wind projects have higher Tax Rate Sensitive Values than solar projects as they typically have lower power prices, higher operating expenses, higher discount rates, and a heavier reliance on tax benefits

For 2017 COD wind projects, unlevered after-tax project returns would be adversely impacted by ~40-60 basis points if the tax rate decreased to 25% in 2017, or ~80-120 basis points if the tax rate decreases to 15%. Even tax efficient sponsors that are able to utilize tax credits and tax losses as they are generated would see a decrease of ~40-80 basis points in unlevered returns and a decrease of ~50-100 basis points in levered returns

For 2017 COD solar projects, project returns would not be adversely impacted by a tax rate decrease in 2017 and would be positively impacted by a rate decrease in 2018 or later. Returns for tax efficient sponsors would not be materially impacted by a 2017 tax rate decrease; however, levered returns would see a moderate negative impact

Wind and Solar Projects

Experience a Very

Different Economic

Impact

The relationship between the year a project achieves COD and the year the tax rate is decreased is critical to this analysis. After a certain point in a project’s life, a tax rate decrease would improve a project’s economics because the majority of the project’s Non-Tax Credit Tax Benefits were realized at a 35% tax rate, while the taxable income generated is taxed at a lower rate

For wind projects, a tax rate decrease in year one or two would have an adverse impact on project economics. From year three, a tax rate decrease would either have a neutral impact on or improve the project’s economics

For solar projects, a tax rate decrease in year one would have a neutral impact on project economics. From year two

and thereafter, a tax rate decrease would have a positive impact on project economics

Timing of a Potential Tax

Rate Decrease Matters

Impact on Development Projects

9

2017 COD Wind Projects 2017 COD Solar Projects

Project Level Economics

Wind projects have higher Tax Rate Sensitive Values than solar

projects, and are therefore impacted more significantly by a tax

rate decrease

If the tax rate decreases to 25% in 2017, wind project level after-

tax returns would decrease by ~40-60 bps; a decrease to 15%

would cause the project return to drop by ~80-120 bps. Projects

with lower net capacity factors and lower off-take prices would

see decreases to returns at the higher end of the range as

illustrated in Table 6 – Impact of 2017 Tax Rate Decrease on

Sample Project Tax Rate Sensitive Values

Solar projects typically have higher cash flow and less reliance

on tax deferrals than wind projects, and therefore would not be

impacted as severely as wind projects

A decrease in the 2017 tax rate would be neutral to the project

level return on most solar projects as illustrated in Table 6 –

Impact of 2017 Tax Rate Decrease on Sample Project Tax Rate

Sensitive Values. A decrease after 2017 would improve solar

project economics

Tax Equity Economics

The tax equity investor’s economics would be negatively

impacted by a tax rate decrease in 2017 as a significant portion

of the investor’s return is driven by accelerated depreciation

deductions, which would be worth less at a lower tax rate

Tax equity investors would either have to reduce their upfront

investment or increase their share of cash flow in order to keep

yields constant

A tax rate decrease after 2017 (e.g. in 2018, 2019, or 2020) would

have a less severe impact

Similar to wind projects, the tax equity investor’s economics

would deteriorate if tax rates decrease in the first few years of a

project

However, given that the impact on overall project economics is

not as pronounced as in wind projects, in many cases, the tax

equity investor’s upfront investment could decrease or cash

sharing could increase without hurting the sponsor’s

economics

Sponsor Economics

Assuming that tax equity investors either reduce their

investment, increase cash sharing, or insist on full

indemnification from tax rate decreases, sponsors on wind

projects would need to focus on either reducing capital costs or

improving offtake pricing in order to maintain return levels in

the current 35% tax rate market

In most cases, the benefit to sponsors of the lower tax rate in

periods after a solar project turns tax positive would outweigh

the negative impact of either lower tax equity sizing or a higher

portion of cash flow allocated to tax equity

Solar projects would require minor structural changes, but

such changes should not create significant deal issues

Impact on Operating Projects

10

Our analysis of the Sample Projects shows that for wind projects, a

tax rate decrease in the first two years after COD would have an

adverse impact on the overall project economics; a decrease in the

third year would be roughly neutral and a decrease beyond year

three would improve project returns

For solar projects, a tax rate decrease in the first year of the project

would be neutral to the overall project economics, while a decrease

in year two and beyond would have a positive impact

The yield impact for tax efficient sponsors that own projects without

third party tax equity would mimic the impact on project-level

returns on an unlevered basis. Levered tax efficient returns would be

slightly lower due to the lower benefit of interest deductions with a

lower tax rate

For a wind project financed with tax equity, a tax rate decrease in the

first three years would have an adverse impact on the tax equity

investment, while there would be a neutral impact from a decrease

in the fourth year, and positive impact in year five and beyond

– Wind Projects – Tax Rate Decrease Impact to Flip Date

For a solar project financed with tax equity, a tax rate decrease in the

first two years would have an adverse impact on the tax equity

investment. There would be a neutral impact from a decrease in year

three, and a positive impact from a decrease in year three and

beyond

– Solar Projects – Tax Rate Decrease Impact to Flip Date

The sharing of negative and positive exposure to a tax rate decrease

between the tax equity investor and sponsor is a function of the

specific structure and terms of the agreement

In a sale-leaseback, the sponsor does not typically indemnify the tax

equity investor for losses related to a change in the tax rate.

Therefore, the tax equity investor would bear the positive or

negative exposure to a decrease in the tax rate

In “time-based” partnership flip structures used in some solar

projects, a decrease in the tax rate would not change the flip date, so

the detriment or benefit of a lower tax rate would be borne by the

tax equity investor

In “yield-based” partnership flip structures used in all wind projects

and many solar projects, the tax rate used in tracking tax equity’s

running IRR may be a “Fixed Tax Assumption”

– If so, the flip IRR is calculated using the tax rate set out in the

Fixed Tax Assumption (e.g. 35%) even if the actual tax rate

changes. Therefore, any benefit or detriment from a change in tax

rates would be borne by the tax equity investor

– If there is not a Fixed Tax Assumption, a change in the actual tax

rate would either accelerate or push out the flip date. Therefore,

any benefit or detriment from a change in tax rates would be

borne by the sponsor

Importance of Tax Rate Change Timing Risk Allocation

The impact of a change in tax rates on an operating project’s economics depends on the point in a project’s life that the tax rate change occurs. A tax rate decrease after the majority of Non-Tax Credit Tax Benefits have been realized would have either a neutral

or positive impact on a project’s economics

How Will Tax Equity Investors React to a Tax Rate Decrease?

As a result of the disproportionate allocation of taxable income before and after the flip date, negative tax rate exposure naturally rests on the tax

equity investor because the tax equity investor is typically allocated 99% of tax losses during the MACRS period and only 5% of positive taxable

income after the flip date

Given the stability in corporate tax rates since 1986, tax equity investors have not typically been overly concerned with the risk of a change in tax

rates. In some cases, the risk has been absorbed by the tax equity investor through the use of Fixed Tax Assumptions, while in others, the risk has

been allocated to the sponsor through the use of actual tax rates when calculating the flip date

We anticipate that heightened expectation of tax reform and the potential negative impact of a tax rate decrease on tax equity investor returns

would motivate tax equity investors to either reduce their upfront investment, increase their pre-flip cash distributions, or insist on full

indemnification from the sponsor in order to maintain their target return and/or flip date

– The detailed analyses in Appendix II and Appendix III consider how much of a reduction in upfront investment or increase in pre-flip cash

distributions tax equity investors would need in order to maintain current return levels

• Appendix II - Detailed Wind Project Analysis:

– Tax equity’s upfront investment would decrease by ~5% to ~10% of total cost under a 25% and 15% tax rate, respectively; or,

– Increase tax equity’s pre-flip cash distributions by an incremental ~18% to ~37% under a 25% and 15% tax rate, respectively

• Appendix III - Detailed Solar Project Analysis:

– Tax equity investment would decrease by ~2% to ~4% of total cost under a 25% and 15% tax rate, respectively; or,

– Increase tax equity’s pre-flip cash distributions by an incremental ~10% to ~18% for the Solar PPA Project and ~3% to ~5% for the Solar

SREC Project under a 25% and 15% tax rate, respectively

Electing bonus depreciation for a 2017 COD project could be an effective strategy to reduce tax rate risk. The impact of a tax rate decrease in 2018

or beyond is effectively eliminated given that most of the valuable tax depreciation would be claimed in year one at the 35% tax rate. However,

electing bonus depreciation may require tax equity investors to take on larger deficit restoration obligations, which could create structuring

issues

11

In response to either expectation of a tax rate decrease or an actual tax rate decrease, tax equity investors may decrease their investment size, increase their share of cash flow, or request full indemnification from the sponsor for a resulting decrease to their

after-tax cash flow

How Will Tax Equity Investors React to a Tax Rate Decrease? (Cont’d)

12

For wind projects, where the impact of a tax rate decrease on tax

equity investment performance is more pronounced, some investors

may size their upfront tax equity investment based on a lower tax

rate assumption

If a tax equity investor sizes their investment based on a lower tax

rate, but rates either do not actually decrease or do not decrease as

much as expected, how can the structure be tailored to prevent flip

date acceleration and a “stranding” of PTCs?

– We anticipate seeing more deferred tax equity investment

structures. For example, “Pay Go” structures could be used in

wind projects to increase “out year” tax equity contributions and

push the actual flip date back to the target date

If the tax rate decreases, tax equity investors would likely either

decrease their upfront investment or increase their share of pre-flip

cash, both of which would increase the sponsor’s required

investment

– For wind projects, this would cause the sponsor’s after-tax IRR to

decrease by either ~80 to ~240 basis points

– For solar projects, the sponsor’s required investment would also

increase, but the cost of the higher investment would largely be

offset by the benefits of a lower tax rate applied to the sponsor’s

share of taxable income. As a result, the sponsor’s after-tax IRR

would experience a neutral to positive impact

Overall, we expect that increased sponsor investment requirements,

driven even by the expectation of a tax rate decrease, and the

potential increased indemnity requirements associated with

prospective tax reform would incentivize tax equity investors to

focus on the larger, better-capitalized sponsors, and increase

consolidation in the wind business

A decrease in the tax equity investment or increase in tax equity share of pre-flip cash distributions would

trigger an increase in the sponsor’s required investment and reduce the sponsor’s return on wind projects

What type of deals would be most significantly impacted? How would sponsor economics be impacted?

Impact of a Tax Rate Decrease on the Supply of Tax Equity

A decrease in the tax rate would, on its face, reduce the aggregate U.S. corporate tax liability by as much as 28% or 57% in 25% and 15% tax rate cases,

respectively

Both the Blueprint and President-elect Trump’s tax reform proposal include tax changes that would have both negative and positive impacts on aggregate U.S.

corporate income tax liabilities:

– Taxation of non-repatriated foreign earnings at a reduced rate

• Currently, earnings of non-U.S. subsidiaries are not subject to U.S. income tax until the earnings are repatriated to the U.S. The Blueprint calls for a one-

time tax on overseas earnings of either 8.75% or 3.5% (depending on the type of earnings) payable over an 8-year period. Similarly, the Trump proposal

calls for a one-time tax on overseas earnings of 10%. Although the Trump proposal would eliminate deferrals of undistributed earnings of foreign

affiliates, by moving to a “territorial” tax system, it would limit the long-term increase in taxes on non-U.S. earnings

• Impact on the Supply of Tax Equity: This change would generate more taxable income and increase the supply of tax equity

– 100% expensing of capital expenditures in the first year

• Impact on the Supply of Tax Equity: This change would reduce corporate tax liabilities and decrease the supply of tax equity

– Elimination of net interest expense deductions by corporations

• Impact on the Supply of Tax Equity: This change would increase corporate income tax liabilities and increase the supply of tax equity

In the Blueprint, 100% expensing of capital expenditures in the first year and elimination of net interest expense deductions are presented as a “package” and

are intended to largely offset each other

Our expectation is that aggregate U.S. corporate tax liabilities would decrease to some extent. However, it would be challenging to pass a tax reform package

through the budget reconciliation process (i.e. with only Republican support) that results in a material permanent revenue loss. Tax reform enacted outside of

the budget reconciliation process would require a minimum of 60 votes in the Senate and therefore the support of at least eight Democrats. A bi-partisan tax

reform package could look significantly different than either the Blueprint or Trump proposals

The numerous proposed changes to the tax code could shift the tax burden amongst corporate taxpayers and therefore the tax equity investor landscape

– While the impact of the Blueprint’s proposal for 100% expensing of capital expenditures and elimination of net interest deductions are designed to offset on

a macro level, the corporations with the largest capital expenditures are not necessarily the ones with the highest interest deductions

– Taxation of non-repatriated foreign earnings would significantly increase the tax liabilities of technology companies relative to financial companies, since

they typically derive a larger proportion of their earnings from non-U.S. businesses

13

If tax rates decrease, would the aggregate U.S. corporate tax liability decrease to the point where both the number

of potential tax equity investors decreases and the supply of tax equity contracts?

Impact of a Tax Rate Decrease on the Capital Stack

In order to maintain the target tax equity flip date for a 2017 COD project in light of a 2017 tax rate decrease, or the expectation of a decrease, tax equity

investors would either need to decrease their upfront investment or increase their share of project cash flow

We expect that the share of cash required to be distributed to tax equity (i.e. 60-80%) in order to preserve the flip date would present too much project exposure

for most tax equity investors. It is more likely that most investors would prefer to reduce their upfront investment

If a tax equity investor assumes in their financial structuring evaluation that the tax rate will be reduced to 15% in 2017, the tax equity upfront investment

would need to decrease by ~10% of total capital costs for a wind project and ~4% of total capital costs for a solar project to keep tax equity yields constant

A reduction in the upfront tax equity investment by ~10% would in turn reduce a construction lender’s advance against the tax equity takeout. This creates a

“funding gap” for the sponsor, even before a tax rate decrease has occurred, which would require more sponsor equity or a backstop such as a corporate

guaranty or letter of credit to bridge the difference

14

Even with just the possibility of a tax rate decrease, sponsor equity requirements could increase for wind

projects, either through a higher direct investment or corporate guarantees and letters of credit

66%

14%

69%

14%

20% 17%

Notice to Proceed Commercial Operation Date

56%

14%

59%

14%

20% 17%

10% 10%

Notice to Proceed Commercial Operation Date

35% Tax Rate in 2017

Table 1 – Sample Wind Project – Impact of a Tax Rate Decrease on the Capital Stack

Sample Wind Project Capital Stack Funding Gap

Construction Tax Equity Bridge Loan

Tax Equity Investment

Sponsor Equity

Sponsor Equity Funding Gap

Construction to Back Leverage Term Loan

Back Leverage

15% Tax Rate in 2017

How Will Wind Sponsors React to a Tax Rate Decrease?

If either a tax rate decrease occurs or tax equity investors adjust their pricing in expectation of a tax rate decrease, would sponsors be able to restore returns to levels under the current 35% corporate tax rate market conditions?

This will likely be a more significant question on wind projects where the benefit of a lower tax rate once the project turns tax positive does not naturally restore the sponsor’s economics. Sponsors on wind projects could have significant exposure and may need to focus on lowering capital costs and/or increasing power prices

In the tables below, we quantified the adjustment to the following variables needed to restore unlevered after-tax IRRs:

– Build Cost: What is the required decrease in build costs should tax rates drop to 25% or 15% in 2017?

– Off-Take Rate: What is the required increase in off-take rates should tax rates drop to 25% or 15% in 2017?

Build costs would need to decrease by ~8%, while PPA prices would need to increase by ~10%, to maintain the unlevered after-tax IRR. If the tax rate decreases, we predict that there would be market pressure to increase off-take rates or significant upstream pressure from sponsors to decrease project costs or costs of capital

15

2017 Wind Project Breakeven Build Cost ($/kW) 2017 Wind Project Breakeven Off-Take Price ($/MWh)

$1,500

$1,450

$1,415

$1,500

$1,435

$1,380

35% Tax Rate 25% Tax Rate 15% Tax Rate

Hedge Project PPA Project

Off-Take Arrangement Hedge PPA

Base Case Build Cost ($/kW) $1,500 $1,500

25% Tax Rate

Breakeven Build Cost ($/kW) $1,450 $1,435

% Change Relative to Base Case (3.3%) (4.3%)

15% Tax Rate

Breakeven Build Cost ($/kW) $1,415 $1,380

% Change Relative to Base Case (5.7%) (8.0%)

Off-Take Arrangement Hedge PPA

Base Case Off-Take Rate ($/MWh) $24.00 $30.75

25% Tax Rate

Breakeven Off-Take Rate ($/MWh) $26.50 $32.50

% Change Relative to Base Case +10.4% +5.7%

15% Tax Rate

Breakeven Off-Take Rate ($/MWh) $28.25 $33.85

% Change Relative to Base Case +17.7% +10.1%

$24.00 $26.50

$28.25 $30.75

$32.50 $33.85


Hedge Project PPA Project

Table 2 – Sample Wind Projects – Breakeven Build Costs Table 3 – Sample Wind Projects – Breakeven Off-Take Price

Other Potential Tax Reform Considerations

On its face, 100% expensing of capital expenditures in the first year should provide a benefit to renewable energy projects, given the incremental time value

benefit of the immediate full tax deduction versus depreciation deductions that are predominately claimed over five years. That benefit, however, is limited by

two factors:

– A tax rate decrease lowers the time value benefit of the acceleration of the deductions, as the deductions are inherently less valuable at lower tax rates

– In the current tax regime, accelerated depreciation creates an economic advantage for renewable energy projects over conventional power plants, which are

depreciated over a 15 to 20 year period. Under the Republican tax reform proposals, renewable energy projects would lose this advantage as all capital

expenditures would be expensed in the first year

The elimination of net interest expense deductions (i.e. interest expense in excess of interest income) would raise the after-tax cost of debt, and therefore

increase the cost of capital for renewable energy projects. However, the increase in the cost of debt would be mitigated by the following factors:

– The elimination of net interest expense deductions becomes less of an economic detriment at reduced tax rates

– In wind tax equity partnerships, the leverage component comprises a relatively small portion of the capital stack, so the impact on sponsor economics is

quite modest

Table 4 below illustrates the net impact of a tax rate decrease, 100% expensing of capital expenditures in the first year, and the loss of net interest expense

deductions:

– At a 25% tax rate, 100% expensing of capital expenditures in the first year more than makes up for the tax rate decrease on an unlevered basis in all projects

– At a 15% tax rate, 100% expensing of capital expenditures in the first year does not make up for the tax rate decrease, except for the Solar SREC Project

because of heavy, near-term taxable income generated by the high SREC prices

– The levered returns show a decrease at a 25% rate in the Wind PPA and Solar PPA Projects, due to the loss of the net interest expense deduction. At a 15%

tax rate, the levered returns decrease across the board

16

While a tax rate decrease is a cornerstone of both major tax reform proposals, 100% expensing of capital expenditures and

the elimination of net interest expense deductions would also have a significant impact on renewable energy projects

Impact on Project Returns Sample Wind Projects Sample Solar Projects

Wind PPA Wind Hedge Solar PPA Solar SREC

Other Potential Tax Reform Case Unlevered After-Tax

Levered After-Tax

Unlevered After-Tax

Levered After-Tax

Unlevered After-Tax

Levered After-Tax

Unlevered After-Tax

Levered After-Tax

35% Tax Rate, MACRS, Interest Deducted 8.0% 9.1% 12.0% 12.7% 7.0% 10.8% 7.0% 11.3%

25% Tax Rate, 100% Expensing, No Interest Deducted 8.1% 8.8% 12.5% 13.1% 7.5% 9.8% 7.9% 13.3%

15% Tax Rate, 100% Expensing, No Interest Deducted 7.2% 7.5% 11.7% 12.1% 7.0% 8.8% 7.5% 9.4%

Table 4 – Other Potential Tax Reforms – Impact on Sample Project Returns

Other Potential Tax Reform Considerations (Cont’d)

Impact on deficit restoration obligations (“DROs”) in tax equity partnerships

– Under U.S. tax rules, partners generally cannot receive allocations of tax losses in excess of their equity investment in the partnership (subject

to a number of adjustments and exceptions)

– One exception is if a partner agrees to contribute additional capital if the partnership liquidates at a time when the partner has a negative

capital account. Such an agreement, referred to as a DRO, allows the tax equity investor to receive allocations of tax losses in excess of their

equity investment and up to the amount of the DRO

– In the current market, tax equity investors in most wind and solar tax equity partnerships agree to DROs ranging from 10% to 40% of the tax

equity investor’s upfront investment

If the full cost of an asset is expensed in year one, the allocation of 99% of the resulting tax loss to the tax equity investor would be well in excess

of the tax equity investor’s upfront investment. In order to achieve the desired tax allocations (i.e. allocation of 99% of tax losses and credits to

the tax equity investor), the tax equity investor would have to agree to a much larger DRO

– Wind PPA Project: the required DRO would increase from 18% to 50% in the 25% tax rate case and from 28% to 65% in the 15% tax rate case

– Wind Hedge Project: the required DRO would increase from 15% to 51% in the 25% tax rate case and from 26% to 69% in the 15% tax rate case

– Solar PPA Project: the required DRO would increase from 20% to 161% in the 25% tax rate case and from 20% to 175% in the 15% tax rate case

– Solar SREC Project: the required DRO would increase from 20% to 96% in the 25% tax rate and from 20% to 104% in the 15% tax rate case

There is an open question as to how tax equity investors would view the higher level of contingent liability associated with higher DROs. Some

potential mitigants include the following:

– For wind projects, tax equity investors could “sacrifice” some level of year one PTCs by receiving less than 99% of year one taxable income

allocations (e.g. 70-80%), which would decrease the DRO requirement

– For solar projects, tax equity investors could use a sale leaseback structure which does not require a DRO. However, sale leaseback structures

are not available for PTC projects due to the “own and operate” requirements of Internal Revenue Code Section 45

17

Although 100% expensing of capital expenditures in the first year has a modest, positive impact on project

returns, it may raise significant partnership structuring issues with tax equity investors

Conclusions

If the tax rate decreases within the first three years of a project’s life, the Non-Tax Credit Tax Benefits component of renewable energy projects

becomes less valuable. The loss in value would be more pronounced in projects that rely more heavily on Non-Tax Credit Tax Benefits, such as

wind projects

In tax equity partnerships, absent any contractual mechanisms to the contrary, the tax equity investor bears the exposure to a tax rate decrease as

they receive the majority of tax depreciation benefits. Tax equity investors may insist on smaller upfront investments, larger shares of project

cash flow, or full indemnification from the sponsor for change in tax rate risk in response to an actual tax rate decrease or even the expectation of

a tax rate decrease

Wind projects would be much more adversely impacted by a tax rate decrease than solar projects. If tax equity investor economics are

maintained, wind sponsors would have to look to other sources such as reducing capital costs or increasing off-take prices in order to preserve

economics available under current market conditions:

– We estimate that wind project build costs would need to decrease by either ~4% or ~8% (25% or 15% tax rate in 2017 cases, respectively) in

order to keep sponsor after-tax IRRs at the same levels as in the current 35% tax rate environment

– Alternatively, we estimate that wind PPA prices would need to increase by either ~6% or ~10% (25% or 15% tax rate in 2017 cases,

respectively) in order to keep sponsor after-tax IRRs at the same levels as in the current 35% tax rate environment

Sponsors of solar projects would be impacted as well, but the benefit of having a lower tax rate once a project turns tax positive would generally

outweigh the loss in yield due to more expensive tax equity financing

While a decrease in the tax rate would have an impact on the aggregate U.S. corporate tax liability, we believe that the pressure to avoid

significant reductions in overall corporate taxes would result in a package of reforms that would not result in a material decrease in demand for

tax oriented investments. The final package could, however, shift tax burden amongst corporate investors

Structuring transactions and allocating tax reform risk between the tax equity investor and sponsor from now and until tax law actually changes

without knowing what a tax reform package would look like, when it would be implemented, and what type of transition rules would apply

presents a non-trivial challenge to the renewable energy market

Overall, we expect that the increase in sponsor investment requirements driven by the expectation of a tax rate decrease, as well as the potential

increase in indemnity requirements associated with prospective tax reform, would incentivize tax equity investors to place capital with larger,

better-capitalized sponsors which in turn should drive consolidation in the U.S. renewable energy sector

18

Appendix I

Tax Rate Sensitivity Analysis on the

Sample Projects

19

Sample Project Tax Rate Sensitivity

U.S. renewable energy projects typically have three sources of value:

Our analysis of the Sample Projects highlights that the level of impact of a tax rate decrease is a function of how much of the project return is

driven by Non-Tax Credit Tax Benefits, which we have defined as a project’s “Tax Rate Sensitivity”

In order to build a quantitative framework around the concept of Tax Rate Sensitivity, we calculated the present value of each source of value on

a per kW basis to generate the Tax Rate Sensitive Value. Note that we used a lower discount rate for the solar projects than for the wind projects

(7% versus 10%) due to the lower operating risk and commensurate lower market returns inherent in solar projects

We then calculated the portion of a project’s value, assuming a 35% tax rate, created by Non-Tax Credit Tax Benefits

– The Tax Rate Sensitive Values are equal to the present value of the Non-Tax Credit Tax Benefits, divided by the total value, which is expressed

as the sum of the present values of the three value buckets

The Wind PPA Project, Wind Hedge Project, Solar PPA Project, and Solar SREC Project each have different Tax Rate Sensitive Values as

illustrated in Table 5 below (detailed assumptions for each project can be found in Appendix II and Appendix III)

20

The impact of a tax rate decrease on project level returns is materially more pronounced for wind projects as opposed to

solar projects, and more for PPA projects as opposed to hedge projects in the current market environment

Table 5 – Sample Project Tax Rate Sensitive Values

35% Tax Rate Sample Wind Projects Sample Solar Projects

Contracted Revenue Arrangement PPA Hedge PPA SREC

Present Value @ 10% 10% 7% 7%

Cash Flow 664 986 975 983

Net Tax Benefit / (Liability) 204 90 18 5

Tax Credit 568 676 378 379

Total Present Value 1,435 1,752 1,370 1,367

Delta from Tax Rate Decrease More Less More Less

Tax Rate Sensitive Value (% of Present Value) 14.2% 5.1% 1.3% 0.4%

Source of Project Economics Impact to Value as a Result of a Tax Rate Decrease

Cash Distributions No Impact to Value

Non-Tax Credit Tax Benefits Value Decreases

Tax Credits No Impact to Value

Sample Project Tax Rate Sensitivity (Cont’d)

We summarized the net impact of a 2017 tax rate decrease to either 25% or 15% on each of the Sample Projects in Table 6 on the following page. We measured

the impact on the project, the tax equity investor, and the sponsor

– In all cases, the tax equity investor’s upfront investment was held constant relative to the base case

– The impact of a tax rate decrease to a tax efficient sponsor owning a project without third party tax equity is depicted in the “Unlevered Project Level”

column. The impact to tax equity investors and sponsors in typical tax equity partnership structures is depicted in the “Tax Equity” and “Sponsor Equity”

columns

One key metric to focus on is the change in the present value on a per kW basis and that change as a percentage of the total present value under the 35% tax

rate base case (“Delta from Tax Rate Decrease”)

– The Delta from Tax Rate Decrease is closely related to the Tax Rate Sensitive Value. Projects that rely more heavily on tax benefits see a more pronounced

change in value as a result of changes in tax rates (i.e. projects with a higher Tax Rate Sensitive Value have a larger pronounced Delta from Tax Rate

Decrease)

21

For all of the Sample Projects, a tax rate decrease would cause a decrease in the project value for a tax efficient sponsor owning 100% of a project. In tax equity partnerships, a tax rate decrease would cause a decrease in the tax equity investor’s value and an increase in the sponsor’s value

Wind Projects

The Delta from Tax Rate Decrease to the tax equity investor is about the same in both the Wind PPA Project and Wind Hedge Project (i.e. 7% and 15% under the 25% and 15% tax rate scenarios, respectively)

– However, the increase in the sponsor’s value is much higher in the Wind Hedge Project than in the Wind PPA Project due to the higher post-flip taxable income to the sponsor from the reset to market power prices after the hedge expires in year 12

The net impact on the wind projects would be an overall decrease in value, but the Wind Hedge Project would not decrease as severely as there is more of a benefit associated with a lower tax liability related to the sponsor’s taxable income

Solar Projects

The solar projects have lower Tax Rate Sensitive Values than wind, with the decrease in tax equity investor value either largely offset or more than offset by the increase in sponsor value. We expect solar projects to present less structuring challenges than wind due to the overall neutral or positive impact on value due to a tax rate decrease

Methodology

Wind projects generally have higher Tax Rate Sensitive Values than solar projects. Therefore, we expect to see

more pressure for wind projects on tax equity investment sizing, sponsor investment levels, and sponsor returns

Observations

Sample Project Tax Rate Sensitive Values

22

Table 6 – Impact of 2017 Tax Rate Decrease on Sample Project Tax Rate Sensitive Values

Sample Wind Projects

Wind PPA Project Unlevered Project Level Tax Equity Sponsor Equity

Figures in $/kW; Present Value @ 10.0% 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate

Cash Flow 664 664 664 212 212 212 452 452 452

Net Tax Benefit / (Liability) 204 145 87 261 186 112 (63) (45) (27)

PTC 568 568 568 546 546 546 18 18 18

Total 1,435 1,377 1,319 1,018 944 869 407 425 443

Delta from Tax Rate Decrease ($/kW | %) ($58) | (4%) ($116) | (8%) ($74) | (7%) ($149) |(15%) $18 | 4% $36 | 9%

Tax Rate Sensitive Value (% of PV) 14.2% 25.6% (15.5%)

Wind Hedge Project Unlevered Project Level Tax Equity Sponsor Equity


Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate

Cash Flow 986 986 986 114 114 114 872 872 872


PTC 676 676 676 647 647 647 25 25 25

Total 1,752 1,726 1,701 1,031 954 877 708 762 816



Sample Solar Projects

Solar PPA Project Unlevered Project Level Tax Equity Sponsor Equity


Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate

Cash Flow 975 975 975 115 115 115 860 860 860


ITC 378 378 378 374 374 374 2 2 2

Total 1,370 1,365 1,360 562 541 520 744 777 811

Delta from Tax Rate Decrease ($/kW | %) ($5) | (0.4%) ($10) | (1%) ($21) | (4%) ($42) | (7%) $34 | 5% $67 | 9%


Solar SREC Project Unlevered Project Level Tax Equity Sponsor Equity


Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate

Cash Flow 983 983 983 245 245 245 737 737 737


ITC 379 379 379 375 375 375 3 3 3

Total 1,367 1,366 1,364 683 665 664 682 699 715

Delta from Tax Rate Decrease ($/kW | %) ($1) | (0.1%) ($3) | (0.2%) ($18)| (3%) ($36) | (5%) $16 | 2% $33 | 5%


Appendix II

Detailed Wind Project Analysis

23

Base Case Wind Project & Partnership Structuring Assumptions

24

Wind Project Overview Partnership Summary

In order to test the impact of a tax rate decrease on different types of wind projects, we chose two wind projects with varying cash flow and

taxable income profiles:

– The Wind PPA Project has a moderate NCF with 20-year PPA resulting in a project with a relatively lower yield and less cash flow

– The Wind Hedge Project has a high NCF and a 12-year hedge resulting in a project with a relatively higher yield and more cash flow

Project Inputs & Assumptions Off-Take Arrangement

PPA Hedge

Project Size 100 MW 100 MW

Net Capacity Factor (%) 42% 50%

Placed In-Service / COD 6/30/2017 6/30/2017

Capital Cost ($/kW) $1,500 / kW $1,500 / kW

Total Project Costs ($MM) * $156MM $155MM

Off-Take Rate ($/MWh) $30.75 $24.00

Escalation 1.0% --

Off-Take Term (Yrs) 20 12

2017 Production Tax Credit ($/MWh) $23.00 $23.00

Base Case Tax Rate 35% 35%

Unlevered Project Pre-Tax IRR 0.8% 6.0%

Unlevered Project After-Tax IRR 8.0% 12.0%

Partnership Structuring Assumptions Off-Take Arrangement

Yield Based Flip PPA Hedge

Tax Equity After-Tax Flip Yield 7.25% 8.25%

Target Flip Date (Yrs) 9.50 9.50

Tax Equity Pre-Flip Cash Allocations 45.0% 20.0%

Tax Equity Post-Flip Cash Allocations 5.0% 5.0%

Unlevered Sponsor Pre-Tax IRR 9.3% 15.7%

Unlevered Sponsor After-Tax IRR 7.9% 13.8%

Back Leverage Sizing Term (Yrs) 10 10

P50 Debt Service Coverage Ratio 1.45x 1.45x

Starting All-In Interest Rate 5.00% 5.00%

Levered Sponsor Pre-Tax IRR 10.3% 17.0%

Levered Sponsor After-Tax IRR 8.9% 15.0%

* Includes market placement and structuring fees

The economic profile of the Wind PPA Project is characterized by a mid-range net capacity factor, while the economic profile of the

Wind Hedge Project is characterized by a high net capacity factor

(7.8%) (6.0%)

0.2%

3.4%

(14.6%)

(11.2%)

0.3%

6.5%

(20%)

(15%)

(10%)

(5%)

–

5%

10%

15%

2017 2018 2019 2020

% C

han

ge

in I

RR

Re

lati

ve

to B

ase

Cas

e

25% Tax Rate 15% Tax Rate

7.4% 7.5% 8.0% 8.3%

6.8% 7.1% 8.0% 8.5%

–

4%

8%

12%

16%

20%

2017 2018 2019 2020

Un

lev

ered

Aft

er-T

ax I

RR


Wind Project Return Comparison Relative Impact of a Tax Rate Decrease on Project Returns Depends on Tax Rate Sensitive Value

25

Wind Hedge Project

The Wind PPA Project and Wind Hedge Project would be negatively impacted by a tax rate decrease in the first two years of the project life, when depreciation deductions are highest. The Wind PPA Project would be more negatively impacted given that it has

a higher Tax Rate Sensitive Value. Both projects benefit relative to the base case as a result of a tax rate decrease in 2019 or 2020

% Change Relative to Base Case IRR % Change Relative to Base Case IRR

Wind PPA Project

(3.5%) (2.4%)

1.3% 3.2%

(6.5%) (4.4%)

2.5%

6.9%

(20%)

(15%)

(10%)

(5%)

–

5%

10%

15%

2017 2018 2019 2020

% C

han

ge

in I

RR

Re

lati

ve

to B

ase

Cas

e


11.6% 11.7% 12.1% 12.4% 11.2% 11.5%

12.3% 12.7%

–

4%

8%

12%

16%

20%

2017 2018 2019 2020

Un

lev

ered

Aft

er-T

ax I

RR


Base Case 8.0% Project ULAT IRR Base Case 12.0% Project ULAT IRR

Wind PPA Project Pro Forma & Tax Rate Sensitive Value

26

Wind PPA Project Pro Forma

Unlevered Calendar Year

Figures in $/kW Total 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042

Cash Flow 1,724 38 69 70 70 71 71 72 72 73 73 71 60 62 64 65 65 66 67 68 69 69 70 70 70 70 37

Taxable Income 170 (128) (437) (237) (117) (94) (48) 62 62 63 63 61 51 52 54 55 58 64 65 66 66 68 71 71 71 71 38

PTC 896 41 81 85 85 88 88 92 92 95 99 49 – – – – – – – – – – – – – – –

Sponsor Equity Calendar Year


Cash Flow 1,365 21 38 38 39 39 39 39 40 40 40 67 57 58 61 62 62 63 63 64 65 66 67 67 67 67 35

Taxable Income * 904 – – – – – – – – – – 44 47 48 50 51 54 60 61 61 62 63 67 67 67 67 35

PTC * 52 – – – – – – – – – – 16 16 17 3 – – – – – – – – – – – –

* Represents realized taxable income or PTC utilization after self-sheltering tax losses

Tax Equity Calendar Year


Cash Flow 358 17 31 31 32 32 32 32 32 33 33 4 3 3 3 3 3 3 3 3 3 3 4 4 4 4 2

Taxable Income (722) (128) (433) (236) (117) (94) (16) 60 61 61 62 8 3 3 3 3 3 3 3 3 3 3 4 4 4 4 2

PTC 844 40 80 84 84 87 87 91 91 94 98 6 – – – – – – – – – – – – – – –

Tax Rate Sensitive Values

Present Value @ 10.0% Unlevered Project Level Tax Equity Sponsor Equity

Figures in $/kW 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate

Cash Flow 664 664 664 212 212 212 452 452 452


PTC 568 568 568 546 546 546 18 18 18

Total 1,435 1,377 1,319 1,018 944 869 407 425 443



The tables above summarize the pro forma and Tax Rate Sensitive Value for the Wind PPA Project, including each member’s share

of cash flow, taxable income, and tax credits

Wind Hedge Project Pro Forma & Tax Rate Sensitive Value

27

Wind Hedge Project Pro Forma



Cash Flow 3,677 35 68 68 68 69 69 69 70 70 70 68 57 116 182 189 194 200 207 215 223 231 239 246 254 262 138

Taxable Income 2,093 (131) (435) (237) (118) (95) (49) 61 61 62 62 57 46 105 170 177 185 196 204 211 219 227 237 244 252 260 123

PTC 1,066 48 97 101 101 105 105 109 109 114 118 59 – – – – – – – – – – – – – – –



Cash Flow 3,394 28 54 54 55 55 55 55 56 56 56 64 54 110 173 179 185 190 197 204 212 219 227 234 241 249 131

Taxable Income * 2,904 – – – – – – – – – 19 64 54 110 173 179 185 196 204 211 219 221 227 233 240 247 123

PTC * 69 – – – – – – – – – 7 20 19 23 – – – – – – – – – – – – –

* Represents realized taxable income or PTC utilization after self-sheltering tax losses



Cash Flow 282 7 14 14 14 14 14 14 14 14 14 3 3 6 9 9 10 10 10 11 11 12 12 12 13 13 7

Taxable Income (763) (130) (432) (236) (118) (95) (36) 59 60 60 60 (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) 5 9 11 13 13 6

PTC 997 48 96 100 100 104 104 108 108 112 117 – – – – – – – – – – – – – – – –



Figures in $/kW 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate

Cash Flow 986 986 986 114 114 114 872 872 872


PTC 676 676 676 647 647 647 25 25 25

Total 1,752 1,726 1,701 1,031 954 877 708 762 816

Delta from Tax Rate Decrease ($/kW | %) ($26) | (2%) ($15) | (3%) ($77) | (7%) ($155( |(15%) $54 | 8% $108 | 15%


The tables above summarize the pro forma and Tax Rate Sensitive Value for the Wind Hedge Project, including each member’s

share of cash flow, taxable income, and tax credits

Impact on Tax Equity Partnership Flip Dates & Returns

The decrease in tax equity value from a tax rate decrease manifests in a partnership flip structure as either a decrease in yield or a

deferral of the flip date

In Tables 7 and 8 below, we summarize the impact on the flip date for the Wind PPA Project and Wind Hedge Project if the tax rate is

reduced to either 25% or 15%, assuming that the tax equity investment is sized at a 35% rate

As expected, the Wind PPA Project is more adversely impacted than the Wind Hedge Project given the higher Tax Rate Sensitive Value

– The Wind PPA Project flip date moves out as far as 24 years (15% tax rate in 2017 case)

– The Wind Hedge Project flip date moves out as far as 17 years (15% tax rate in 2017 case)

28

A tax rate decrease has a significant negative impact on tax equity flip periods for investments sized at a 35% tax

rate, pushing flips dates out to as far as 24 years

Flip Date Sensitivity Project

Economics Tax Equity Structuring & Economics Unlevered Sponsor Economics Back Levered Sponsor Economics

Tax Rate Case Unlevered

After-Tax IRR Upfront

Investment Flip

Period After-Tax Flip Yield

Pre-Flip Cash Share

Class B Gross Equity

Pre-Tax After-Tax Carryforward

Class B Back Leverage

Class B Net Equity


Base Case (35%) 8.0% 69% 9.50 7.25% 45% 31% 9.3% 7.9% 14% 17% 10.3% 8.9%

Year 2017 (25% | 15%) 7.4% | 6.8% 69% 15.25 | 24.00 7.25% 45% 31% 7.9% | 6.2% 7.1% | 5.9% ~14% ~17% 8.5% | 6.4% 7.6% | 6.1%

Year 2018 (25% | 15%) 7.5% | 7.1% 69% 14.00 | 20.25 7.25% 45% 31% 8.2% | 6.9% 7.3% | 6.6% ~14% ~17% 8.9% | 7.3% 7.9% | 7.0%

Year 2019 (25% | 15%) 8.0% | 8.0% 69% 10.50 | 12.00 7.25% 45% 31% 9.0% | 8.7% 8.1% | 8.2% ~14% ~17% 9.9% | 9.4% 8.9% | 8.9%

Year 2020 (25% | 15%) 8.3% | 8.5% 69% 9.75 | 10.00 7.25% 45% 31% 9.3% | 9.2% 8.5% | 8.8% ~14% ~17% 10.3% | 10.1% 9.5% | 9.8%





Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 12.0% 67% 9.50 8.25% 20% 33% 15.7% 13.8% 9% 23% 17.0% 15.0%

Year 2017 (25% | 15%) 11.6% | 11.2% 67% 14.00 | 17.00 8.25% 50% 33% 14.8% | 14.0% 13.6% | 13.5% ~9% ~23% 15.9% | 15.0% 14.7% | 14.5%

Year 2018 (25% | 15%) 11.7% | 11.5% 67% 13.50 | 15.75 8.25% 50% 33% 14.9% | 14.3% 13.7% | 13.8% ~9% ~23% 16.0% | 15.4% 14.9% | 14.8%

Year 2019 (25% | 15%) 12.1% | 12.3% 67% 11.75 | 13.00 8.25% 50% 33% 15.4% | 15.1% 14.2% | 14.5% ~9% ~23% 16.6% | 16.2% 15.3% | 15.6%

Year 2020 (25% | 15%) 12.4% | 12.7% 67% 10.00 | 10.25 8.25% 50% 33% 15.6% | 15.8% 14.4% | 15.2% ~9% ~23% 16.9% | 17.2% 15.6% | 16.5%

Table 7 – Wind PPA Project – Impact to Flip Date as a Result of a Tax Rate Decrease

Table 8 – Wind Hedge Project – Impact to Flip Date as a Result of a Tax Rate Decrease

Wind PPA Project Impact on Tax Equity Upfront Investment & Share of Pre-Flip Cash

Given that tax equity investors are unlikely to accept significant deferrals in their flip dates, what is the decrease in upfront investment or increase in share

of pre-flip cash distributions required to maintain the original 9.5 year flip date?

For the Wind PPA Project, holding the tax equity investor’s upfront investment constant, the tax equity investor’s share of pre-flip cash distributions would

need to increase from 45% to either 65% or 80% (25% or 15% tax rate in 2017 cases, respectively) in order to maintain the 9.5 year flip date (see Table 9 below)

– The sponsor’s unlevered after-tax IRR decreases from 7.9% to either 6.3% or 5.5% (25% or 15% tax rate in 2017 cases, respectively)

Alternatively, holding the tax equity investor’s share of pre-flip cash distributions constant, the tax equity investor’s upfront investment would need to

decrease from 69% to either 64% or 59% (25% or 15% tax rate in 2017 cases, respectively) in order to maintain the 9.5 year flip date (see Table 10 below)


In order to keep returns constant in light of a tax rate decrease, tax equity investors in projects similar to the Wind PPA

Project would have to make the most significant adjustments to their terms of any of the Sample Projects

29

Pre-Flip Cash Sensitivity

Project Economics

Tax Equity Structuring & Economics Unlevered Sponsor Economics Back Levered Sponsor Economics



Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 8.0% 69% 9.50 7.25% 45% 31% 9.3% 7.9% 14% 17% 10.3% 8.9%

Year 2017 (25% | 15%) 7.4% | 6.8% 69% 9.50 7.25% 65% | 80% 31% 7.3% | 6.0% 6.3% | 5.5% 9% | 6% 21% | 25% 7.5% | 6.0% 6.5% | 5.5%

Year 2018 (25% | 15%) 7.5% | 7.1% 69% 9.50 7.25% 61% | 74% 31% 7.6% | 6.5% 6.6% | 6.0% 10% | 7% 20% | 23% 7.9% | 6.6% 6.9% | 6.0%

Year 2019 (25% | 15%) 8.0% | 8.0% 69% 9.50 7.25% 51% | 55% 31% 8.7% | 8.2% 7.6% | 7.6% 13% | 12% 18% | 19% 9.3% | 8.7% 8.3% | 8.1%

Year 2020 (25% | 15%) 8.3% | 8.5% 69% 9.50 7.25% 45% | 46% 31% 9.2% | 9.2% 8.4% | 8.9% 14% | 14% 17% | 17% 10.2% | 10.2% 9.4% | 9.8%

Upfront Investment Sensitivity

Project Economics




Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 8.0% 69% 9.50 7.25% 45% 31% 9.3% 7.9% 14% 17% 10.3% 8.9%

Year 2017 (25% | 15%) 7.4% | 6.8% 64% | 59% 9.50 7.25% 45% 36% | 41% 7.4% | 6.2% 6.4% | 5.7% 14% 22% | 27% 7.8% | 6.3% 6.7% | 5.8%

Year 2018 (25% | 15%) 7.5% | 7.1% 65% | 61% 9.50 7.25% 45% 35% | 39% 7.7% | 6.6% 6.6% | 6.1% 14% 21% | 25% 8.2% | 6.8% 7.1% | 6.3%

Year 2019 (25% | 15%) 8.0% | 8.0% 68% | 66% 9.50 7.25% 45% 32% | 34% 8.7% | 8.2% 7.8% | 7.8% 14% 18% | 20% 9.5% | 8.8% 8.5% | 8.4%

Year 2020 (25% | 15%) 8.3% | 8.5% 69% | 69% 9.50 7.25% 45% 31% | 31% 9.2% | 9.2% 8.4% | 8.9% 14% 17% | 17% 10.2% | 10.2% 9.4% | 9.9%

Table 9 – Wind PPA Project – Increase to Tax Equity Investor Pre-Flip Cash Distributions

Table 10 – Wind PPA Project – Decrease in Tax Equity Upfront Investment

Wind PPA Project Impact of a 2017 Tax Rate Decrease on Sponsor Economics

30

Unlevered Sponsor Yield Unlevered Sponsor Yield Unlevered Sponsor Yield

In order to keep the tax equity flip IRR and flip date constant relative to the base case, the tax equity upfront investment would need to decrease by ~5% to ~10% of total cost (25% or 15% tax rate in 2017 cases, respectively). Alternatively, if the tax equity partnership structuring parameters were held constant, the

flip date would move out from 9.50 years to either 15.25 years or 24.00 years (25% or 15% tax rate in 2017 cases, respectively)

Levered Sponsor Yield Levered Sponsor Yield Levered Sponsor Yield

Flip Date Sensitivity (1) Upfront Investment Sensitivity (3) Pre-Flip Cash Sensitivity (2)

9.3%

7.9%

6.2%

7.9% 7.1%

5.9%

9.50

15.25

24.00

–

5

10

15

20

25

–

4%

8%

12%

16%

20%


Fli

p P

erio

d (

Yrs

)

Un

lev

ered

Sp

on

sor

IRR

Pre-Tax After-Tax Flip Date

9.3%

7.3% 6.0%

7.9%

6.3% 5.5% 45%

65%

80%

–

20%

40%

60%

80%

100%

–

4%

8%

12%

16%

20%


Tax

Eq

uit

y S

har

e o

f P

re-F

lip

Cas

h (

%)

Un

lev

ered

Sp

on

sor

IRR

Pre-Tax After-Tax TE Pre-Flip Cash

9.3%

7.4% 6.2%

7.9%

6.4% 5.7%

31% 36%

41%

–

20%

40%

60%

80%

100%

–

4%

8%

12%

16%

20%


Up

fro

nt

Sp

on

sor

Eq

uit

y (

%)

Un

lev

ered

Sp

on

sor

IRR

Pre-Tax After-Tax Upfront Sponsor Equity

10.3%

8.5%

6.4%

8.9% 7.6%

6.1%

9.50

15.25

24.00

–

5

10

15

20

25

–

4%

8%

12%

16%

20%


Fli

p P

eri

od

(Y

rs)

Le

ve

red

Sp

on

sor

IRR


10.3%

7.5%

6.0%

8.9%

6.5% 5.5% 45%

65%

80%

–

20%

40%

60%

80%

100%

–

4%

8%

12%

16%

20%


Tax

Eq

uit

y S

har

e o

f P

re-F

lip

Cas

h (

%)

Lev

ered

Sp

on

sor

IRR


10.3%

7.8%

6.3%

8.9%

6.7% 5.8%

17% 22%

27%

–

20%

40%

60%

80%

100%

–

4%

8%

12%

16%

20%


Up

fro

nt

Sp

on

sor

Eq

uit

y (

%)

Le

ve

red

Sp

on

sor

IRR


(1) Tax equity receives 45% of cash distributions (2) Initial flip period of 9.50 years (3) Tax equity receives 45% of per-flip cash distributions for an initial period of 9.50 years

Wind Hedge Project Impact on Tax Equity Upfront Investment & Share of Pre-Flip Cash Given that tax equity investors are unlikely to accept significant deferrals in their flip dates, what is the decrease in upfront investment or increase in share


For the Wind Hedge Project, holding the tax equity investor’s upfront investment constant, the tax equity investor’s share of pre-flip cash distributions would

need to increase from 20% to either 38% or 57% (25% or 15% tax rate in 2017 cases, respectively) in order to maintain the 9.5 year flip date (see Table 11 below)


Alternatively, holding the tax equity investor’s share of pre-flip cash distributions constant, the tax equity investor’s upfront investment would need to

decrease from 67% to either 62% or 57% (25% or 15% tax rate in 2017 cases, respectively), in order to maintain the 9.5 year flip date (see Table 12 below)

– The sponsor’s unlevered after-tax IRR decreases from 13.8% to either 12.8% or 11.8% in (25% or 15% tax rate in 2017 cases, respectively)

In all cases, the impact is reduced as the tax rate decrease moves out from 2017

Tax equity investors in wind projects would seek to maintain their flip dates and return targets, either through a lower upfront investment or a direct indemnity from the sponsor. In addition, tax equity investors might not be comfortable with the levels of

pre-flip cash distributions required to maintain the flip date

31


Project Economics




Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 12.0% 67% 9.50 8.25% 20% 33% 15.7% 13.8% 9% 23% 17.0% 15.0%

Year 2017 (25% | 15%) 11.6% | 11.2% 67% 9.50 8.25% 38% | 57% 33% 14.2% | 12.9% 13.0% | 12.1% 7% | 5% 25% | 27% 15.0% | 13.2% 13.7% | 12.4%

Year 2018 (25% | 15%) 11.7% | 11.5% 67% 9.50 8.25% 35% | 51% 33% 14.5% | 13.3% 13.3% | 12.5% 8% | 6% 25% | 27% 15.3% | 13.8% 14.1% | 12.9%

Year 2019 (25% | 15%) 12.1% | 12.3% 67% 9.50 8.25% 26% | 31% 33% 15.2% | 14.8% 14.0% | 14.2% 9% | 8% 24% | 24% 16.3% | 15.7% 15.0% | 15.1%

Year 2020 (25% | 15%) 12.4% | 12.7% 67% 9.50 8.25% 21% | 22% 33% 15.6% | 15.5% 14.4% | 14.9% 9% | 9% 23% | 23% 16.9% | 16.7% 15.6% | 16.1%


Project Economics




Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 12.0% 67% 9.50 8.25% 20% 33% 15.7% 13.8% 9% 23% 17.0% 15.0%

Year 2017 (25% | 15%) 11.6% | 11.2% 62% | 57% 9.50 8.25% 20% 38% | 43% 13.9% | 12.5% 12.8% | 11.8% 9% 28% | 34% 14.8% | 13.1% 13.6% | 12.4%

Year 2018 (25% | 15%) 11.7% | 11.5% 63% | 59% 9.50 8.25% 20% 37% | 41% 14.2% | 13.0% 13.0% | 12.4% 9% 27% | 32% 15.1% | 13.7% 13.9% | 13.0%

Year 2019 (25% | 15%) 12.2% | 12.3% 66% | 64% 9.50 8.25% 20% 34% | 36% 15.1% | 14.5% 13.9% | 14.0% 9% 25% | 26% 16.2% | 15.6% 15.0% | 15.0%

Year 2020 (25% | 15%) 12.4% | 12.7% 67% | 67% 9.50 8.25% 20% 33% | 33% 15.6% | 15.4% 14.4% | 14.9% 9% 23% | 24% 16.8% | 16.7% 15.6% | 16.1%

Table 11 – Wind Hedge Project – Increase to Tax Equity Investor Pre-Flip Cash Distributions

Table 12 – Wind Hedge Project – Decrease in Tax Equity Upfront Investment

Wind Hedge Project Impact of a 2017 Tax Rate Decrease on Sponsor Economics

32


In order to keep the tax equity flip IRR and flip date constant relative to the base case, the tax equity upfront investment needs to decrease by ~5% or ~10% of total cost (25% or 15% tax rate in 2017 cases, respectively). Alternatively, if the tax equity partnership structuring parameters were held constant, the flip date

would move out from 9.50 years to either 14.00 years or 17.00 years (25% or 15% tax rate in 2017 cases, respectively)



15.7% 14.8%

14.0% 13.8% 13.6% 13.5%

9.50

14.00

17.00

–

5

10

15

20

25

–

4%

8%

12%

16%

20%


Fli

p P

erio

d (

Yrs

)

Un

lev

ered

Sp

on

sor

IRR


15.7%

14.2% 12.9%

13.8% 13.0%

12.1%

20%

38%

57%

–

20%

40%

60%

80%

100%

–

4%

8%

12%

16%

20%


Tax

Eq

uit

y S

har

e o

f P

re-F

lip

Cas

h (

%)

Un

lev

ered

Sp

on

sor

IRR


15.7%

13.9%

12.5% 13.8%

12.8% 11.8%

33% 38%

43%

–

20%

40%

60%

80%

100%

–

4%

8%

12%

16%

20%


Up

fro

nt

Sp

on

sor

Eq

uit

y (

%)

Un

lev

ered

Sp

on

sor

IRR


17.0% 15.9%

15.0% 15.0% 14.7% 14.5%

9.50

14.00

17.00

–

5

10

15

20

25

–

4%

8%

12%

16%

20%


Fli

p P

eri

od

(Y

rs)

Le

ve

red

Sp

on

sor

IRR


17.0%

15.0%

13.2%

15.0% 13.7%

12.4%

20%

38%

57%

–

20%

40%

60%

80%

100%

–

4%

8%

12%

16%

20%


Tax

Eq

uit

y S

har

e o

f P

re-F

lip

Cas

h (

%)

Lev

ered

Sp

on

sor

IRR


17.0%

14.8%

13.1%

15.0%

13.6% 12.4%

23% 28%

34%

–

20%

40%

60%

80%

100%

–

4%

8%

12%

16%

20%


Up

fro

nt

Sp

on

sor

Eq

uit

y (

%)

Le

ve

red

Sp

on

sor

IRR


(1) Tax equity receives 20% of cash distributions (2) Initial flip period of 9.50 years (3) Tax equity receives 20% of pre-flip cash distributions for a initial period of 9.50 years

Other Potential Tax Reform Considerations Impact of 100% Expensing & Loss of Net Interest Expense Deductions on Wind Projects

Both major Republican tax reform proposals call for replacement of the current tax depreciation system with a full expensing of capital

expenditures in the year incurred and elimination of net interest expense deductions

At face value, the acceleration of cost recovery deductions should provide a time value of money benefit. However, it may also create structuring

issues in tax equity partnerships

The elimination of net interest expense deductions would raise the after-tax cost of debt, and thereby increase the cost of capital for renewable

energy projects

The table below summarizes the impact both 100% expensing of capital expenditures in the first year and the disallowance of net interest

expense deductions would have on the wind Sample Projects

If capital expenditures become fully deductible in the first year and net interest expense becomes non-deductible, project level economics would be moderately improved if tax rates also decrease to either 25% or 15%. However, tax equity investors would have

to take on much larger DROs in order to prevent reallocations of tax credits to the sponsor due to capital account limitations

33

Wind PPA Project Project

Economics Tax Equity Economics Sponsor Economics

Unlevered After-Tax IRR

Flip Period

After-Tax Flip Yield

Pre-Flip Cash Share

DRO Class B

Gross Equity Back

Leverage Net Equity

Unlevered Pre-Tax

IRR

Unlevered After-Tax

IRR

Levered Pre-Tax

IRR Levered

After-Tax IRR

2017 25% Tax Rate 8.1% 9.50 7.3% 45% 50% 35.0% 14.0% 21.0% 7.9% 5.9% 8.4% 7.2%

Delta from MACRS Case 0.7% 32% (1.5%) 0.0% (1.5%) 0.4% (0.5%) 0.6% 0.4%

2017- 15% Tax Rate 7.2% 9.50 7.3% 45% 65% 41.0% 14.0% 27.0% 6.4% 5.9% 6.5% 5.9%

Delta from MACRS Case 0.3% 37% (0.7%) 0.0% (0.7%) 0.2% 0.2% 0.2% 0.1%

Wind Hedge Project Project



Flip Period


Pre-Flip Cash Share

DRO Class B

Gross Equity Back

Leverage Net Equity

Unlevered Pre-Tax

IRR

Unlevered After-Tax

IRR

Levered Pre-Tax

IRR Levered

After-Tax IRR

2017 25% Tax Rate 12.5% 9.50 8.3% 20% 51% 35.8% 9.5% 26.3% 14.6% 13.3% 15.6% 14.2%


2017- 15% Tax Rate 11.7% 9.50 8.3% 20% 69% 42.3% 9.5% 32.8% 12.7% 12.0% 13.4% 12.6%


Table 13 – Other Potential Tax Reforms – Impact on Wind PPA Project

Table 14 – Other Potential Tax Reforms – Impact on Wind Hedge Project

Appendix III

Detailed Solar Project Analysis

34

Base Case Solar Project & Partnership Structuring Assumptions

In order to test the impact of a tax rate decrease on different types of solar projects, we chose two solar projects with varying cash

flow and taxable income profiles:

– The Solar PPA Project has a long-term PPA with a relatively more linear cash flow stream

– The Solar SREC Project has a long-term off-take agreement and a 5-year strip of contracted SREC revenues. The project has the same yield but

more cash flow in the earlier operating years

35

* Includes market placement and structuring fees

Project Inputs & Assumptions Off-Take Arrangement

PPA SREC

Project Size 50 MW 50 MW

Production Factor (MWh/MW) 1,600 1,600

Placed In-Service / COD 6/30/2017 6/30/2017

Capital Cost ($/W) $1.30/W $1.30/W

Total Project Costs ($MM) * $67MM $68MM

Off-Take Rate ($/MWh) $55.00 $25.60

Escalation 1.0% 1.0%

Off-Take Term (Yrs) 20 20

SREC Rate & Term n/a $100 / 5-Yr

Base Case Tax Rate 35% 35%

Unlevered Project Pre-Tax IRR 4.2% 1.7%

Unlevered Project After-Tax IRR 7.0% 7.0%

Partnership Structuring Assumptions Off-Take Arrangement

PPA SREC

Tax Equity After-Tax Flip Yield 7.50% 7.50%

Target Flip Date (Yrs) 5.50 5.50

Tax Equity Pre-Flip Cash Allocations 25.0% 30.0%

Tax Equity Post-Flip Cash Allocations 5.0% 5.0%

Unlevered Sponsor Pre-Tax IRR 7.4% 8.0%

Unlevered Sponsor After-Tax IRR 6.0% 6.4%

Back Leverage Sizing Term (Yrs) 15 15

P50 Debt Service Coverage Ratio 1.35x 1.35x

Starting All-In Interest Rate 4.25% 4.25%

Levered Sponsor Pre-Tax IRR 8.5% 10.2%

Levered Sponsor After-Tax IRR 7.0% 8.8%

Solar Project Overview Partnership Summary

The economic profile of the Solar PPA Project is characterized by a consistent revenue stream, whereas the economic profile of the

Solar SREC Project is frontloaded as a result of SREC revenues

(0.1%)

2.8%

7.5% 9.5%

(0.5%)

5.1%

13.8%

18.1%

(10%)

(5%)

–

5%

10%

15%

20%

25%

2017 2018 2019 2020

% C

han

ge

in I

RR

Re

lati

ve

to B

ase

Cas

e


7.0% 7.2%

7.5% 7.7%

7.0%

7.4%

8.0% 8.3%

5%

6%

7%

8%

9%

10%

2017 2018 2019 2020

Un

lev

ered

Aft

er-T

ax I

RR


Solar Project Return Comparison Relative Impact of a Tax Rate Decrease on Project Returns Depends on Tax Rate Sensitive Value

36

Solar SREC Project

Solar projects would generally not be negatively impacted by a tax rate decrease. In contract to Wind Projects, given the timing of the ITC versus the 10 year PTC, the returns for solar projects with lower tax sensitivity (e.g. Solar SREC Project) increase more

relative to projects with less tax intensity

% Change Relative to Base Case IRR % Change Relative to Base Case IRR

Solar PPA Project

(0.4%)

3.9%

9.2% 10.2%

(0.8%)

7.3%

17.8% 19.6%

(10%)

(5%)

–

5%

10%

15%

20%

25%

2017 2018 2019 2020

% C

han

ge

in I

RR

Re

lati

ve

to B

ase

Cas

e


7.0% 7.3%

7.7% 7.7%

7.0%

7.5%

8.3% 8.4%

5%

6%

7%

8%

9%

10%

2017 2018 2019 2020

Un

lev

ered

Aft

er-T

ax I

RR


Base Case 7.0% Project ULAT IRR Base Case 7.0% Project ULAT IRR

Solar PPA Project Pro Forma & Tax Rate Sensitive Value

37

Solar PPA Project Pro Forma


Figures in $/kW Total 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2042 2047 2052

Cash Flow 2,563 36 72 72 72 72 72 72 73 73 73 73 73 73 73 73 73 73 73 74 74 74 369 370 332

Taxable Income 1,333 (92) (313) (161) (71) (55) (21) 63 63 63 63 63 63 63 63 63 65 68 68 70 71 72 367 368 329

ITC 378 378 – – – – – – – – – – – – – – – – – – – – – – –



Cash Flow 2,356 27 54 54 54 54 54 69 69 69 69 69 69 69 69 70 70 70 70 70 70 70 351 351 316

Taxable Income * 1,541 – – – – – – – – – – – – 16 60 60 62 65 65 66 67 68 349 349 314

ITC * 4 – – – – – – – – – – – – 4 – – – – – – – – – – –

The tables above summarize the pro forma and Tax Rate Sensitive Value for the Solar PPA Project, including

each member’s share of cash flow, taxable income, and tax credits

* Represents realized taxable income or ITC utilization after self-sheltering tax losses



Cash Flow 207 9 18 18 18 18 18 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 18 18 17

Taxable Income (133) (91) (224) 18 18 18 18 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 18 18 17

ITC 374 374 – – – – – – – – – – – – – – – – – – – – – – –



Figures in $/kW 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate

Cash Flow 975 975 975 115 115 115 860 860 860


ITC 378 378 378 374 374 374 2 2 2

Total 1,370 1,365 1,360 562 541 520 744 777 811

Delta from Tax Rate Decrease ($/kW | %) ($5) | (0.4%) ($10) | (1%) ($21) | (4%) ($42) | (7%) $34 | 5% $67 | 9%


Solar SREC Project Pro Forma & Tax Rate Sensitive Value

38

Solar SREC Project Pro Forma



Cash Flow 1,563 92 184 183 182 181 103 24 24 24 24 24 23 23 23 23 23 23 22 22 22 22 106 100 84

Taxable Income 395 (36) (202) (51) 40 56 12 19 19 19 19 18 18 18 18 18 20 22 22 22 22 21 104 98 80

ITC 379 379 – – – – – – – – – – – – – – – – – – – – – – –



Cash Flow 1,253 65 129 128 128 127 72 23 23 23 22 22 22 22 22 22 22 22 21 21 21 21 101 95 80

Taxable Income * 560 – – – – – – 16 18 18 18 17 17 17 17 18 22 22 21 21 21 21 101 95 80

ITC * 4 – – – – – – 4 – – – – – – – – – – – – – – – – –

The tables above summarize the pro forma and Tax Rate Sensitive Value for the Solar SREC Project, including

each member’s share of cash flow, taxable income, and tax credits

* Represents realized taxable income or ITC utilization after self-sheltering tax losses



Cash Flow 310 28 55 55 55 54 31 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 5 5 4

Taxable Income (162) (35) (200) (50) 39 55 12 1 1 1 1 1 1 1 1 – – 1 1 1 1 1 3 3 2

ITC 375 375 – – – – – – – – – – – – – – – – – – – – – – –



Figures in $/kW 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate 35%

Tax Rate 25%

Tax Rate 15%

Tax Rate

Cash Flow 983 983 983 245 245 245 737 737 737


ITC 379 379 379 375 375 375 3 3 3

Total 1,367 1,366 1,364 683 665 664 682 699 715

Delta from Tax Rate Decrease ($/kW | %) ($1) | (0.1%) ($3) | (0.2%) ($18)| (3%) ($36) | (5%) $16 | 2% $33 | 5%


Impact on Tax Equity Partnership Flip Dates & Returns

As with the wind projects, the decrease in tax equity value from a tax rate decrease manifests in a partnership flip structure as either a decrease

in yield or a deferral of the flip date. Note that we assumed a 50% cash sweep to the tax equity investor from the target flip date until the flip

yield is attained

In Tables 15 and 16 below, we summarize the impact on the flip date for the Solar PPA Project and Solar SREC Project if the tax rate is reduced to

either 25% or 15%, assuming that the tax equity investment is sized at a 35% rate

– The Solar PPA Project flip date moves out as far as 8 years (15% tax rate in 2017 case)

– The Solar SREC Project flip date moves out as far as 12 years (15% tax rate in 2017 case) *

Although the flip date moves out, the impact on the sponsor’s yield is much less extreme than in the sample wind projects

Similar to wind projects, if a tax equity investment is sized assuming a 35% tax rate, a tax rate decrease would

push out the flip date from the 5.50 year target out to as far as 12.00 years

39





Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 7.0% 39% 5.50 7.50% 25% 61% 7.4% 6.0% 37% 23% 8.5% 7.0%

Year 2017 (25% | 15%) 7.0% | 7.0% 39% 6.75 | 8.00 7.50% 50% | 50% 61% 7.1% | 6.8% 6.2% | 6.3% 36% | 34% 25% | 27% 8.0% | 7.5% 7.0% | 7.0%

Year 2018 (25% | 15%) 7.2% | 7.4% 39% 6.50 | 7.00 7.50% 50% | 50% 61% 7.1% | 7.0% 6.2% | 6.5% 36% | 35% 25% | 25% 8.0% | 7.9% 7.1% | 7.3%

Year 2019 (25% | 15%) 7.5% | 8.0% 39% 5.50 | 5.50 9.0% | 10.5% 25% | 25% 61% 7.4% | 7.4% 6.5% | 6.8% 37% | 37% 23% | 23% 8.5% | 8.5% 7.5% | 7.9%

Year 2020 (25% | 15%) 7.7% | 8.3% 39% 5.50 | 5.50 8.6% | 9.7% 25% | 25% 61% 7.4% | 7.4% 6.4% | 6.8% 37% | 37% 23% | 23% 8.5% | 8.5% 7.5% | 7.9%





Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 7.0% 49% 5.50 7.50% 30% 51% 8.0% 6.4% 39% 12% 10.2% 8.8%

Year 2017 (25% | 15%) 7.0% | 7.0% 49% 8.75 | 12.00 7.50% 50% | 50% 51% 7.4% | 7.0% 6.4% | 6.5% 38% | 37% 14% | 15% 8.6% | 7.5% 7.7% | 7.0%

Year 2018 (25% | 15%) 7.3% | 7.5% 49% 8.00 | 10.50 7.50% 50% | 50% 51% 7.5% | 7.2% 6.6% | 6.7% 38% | 37% 13% | 14% 8.9% | 7.9% 8.0% | 7.5%

Year 2019 (25% | 15%) 7.7% | 8.3% 49% 5.50 | 5.50 8.1% | 8.6% 30% | 30% 51% 8.0% | 8.0% 6.9% | 7.4% 39% | 39% 12% | 12% 10.2% | 10.2% 9.3% | 9.7%

Year 2020 (25% | 15%) 7.7% | 8.4% 49% 5.50 | 5.50 8.7% | 9.8% 30% | 30% 51% 8.0% | 8.0% 6.9% | 7.4% 39% | 39% 12% | 12% 10.2% | 10.2% 9.3% | 9.7%

Table 15 – Solar PPA Project – Impact to Flip Date as a Result of a Tax Rate Decrease

Table 16 – Solar SREC Project – Impact to Flip Date as a Result of a Tax Rate Decrease

* Although the Solar PPA Project has a higher Tax Rate Sensitive Value than the Solar SREC project, the flip date moves out further in the Solar SREC Project because there is considerably less cash generated by the project as the SREC contract rolls off and the tax equity investor’s share of the cash sweep is considerably less than for the Solar PPA Project

Solar PPA Project Impact on Tax Equity Upfront Investment & Share of Pre-Flip Cash Given that tax equity investors are unlikely to accept significant deferrals in their flip dates, what is the decrease in upfront investment or increase in share


For the Solar PPA Project, the tax equity investor’s share of cash would need to increase from 25% to either 35% or 43% (25% or 15% tax rate in 2017 cases) in

order to maintain the 5.5 year flip date (see Table 17 below)

– The sponsor’s unlevered after-tax IRR increases from 6.0% to either 6.1% or 6.3% (25% or 15% tax rate in 2017 cases, respectively)

Alternatively, holding the tax equity investor’s share of pre-flip cash distributions constant, the tax equity investor’s upfront investment would need to increase

from 39% to either 37% or 35% (25% or 15% tax rate in 2017 cases) in order to maintain the 5.5 year flip date (see Table 18 below)

– The sponsor’s unlevered after-tax increases from 6.0% to either 6.1% or 6.3% (25% or 15% tax rate in 2017 cases, respectively)

Compared to the base case, the sponsor’s after-tax IRR increases in all cases where the tax rate decreases after 2017

We believe that tax equity investors in solar projects would also seek to maintain their flip dates and return targets, either through lower upfront investments, higher shares of pre-flip cash flow, or through direct indemnities from sponsors. Unlike wind projects, the sponsor’s

after-tax IRRs do not experience a material adverse impact from either a lower tax equity investment or a smaller share of cash distributions

40


Project Economics




Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 7.0% 39% 5.50 7.50% 25% 61% 7.4% 6.0% 37% 23% 8.5% 7.0%

Year 2017 (25% | 15%) 7.0% | 7.0% 37% | 35% 5.50 7.50% 25% 63% | 65% 7.1% | 6.8% 6.1% | 6.3% 38% | 38% 26% | 27% 7.9% | 7.5% 7.0% | 7.0%

Year 2018 (25% | 15%) 7.2% | 7.4% 38% | 37% 5.50 7.50% 25% 62% | 63% 7.2% | 7.0% 6.3% | 6.5% 37% | 38% 25% | 26% 8.1% | 7.9% 7.2% | 7.3%

Year 2019 (25% | 15%) 7.5% | 8.0% 40% | 40% 5.50 7.50% 25% 60% | 60% 7.5% | 7.6% 6.5% | 7.0% 37% | 37% 23% | 22% 8.6% | 8.8% 7.7% | 8.3%

Year 2020 (25% | 15%) 7.7% | 8.3% 40% | 40% 5.50 7.50% 25% 60% | 60% 7.4% | 7.5% 6.5% | 7.0% 37% | 37% 23% | 22% 8.6% | 8.7% 7.6% | 8.2%


Project Economics




Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 7.0% 39% 5.50 7.50% 25% 61% 7.4% 6.0% 37% 23% 8.5% 7.0%

Year 2017 (25% | 15%) 7.0% | 7.0% 39% 5.50 7.50% 35% | 43% 61% 7.0% | 6.8% 6.1% | 6.3% 36% | 34% 25% | 27% 7.9% | 7.5% 6.9% | 6.9%

Year 2018 (25% | 15%) 7.2% | 7.4% 39% 5.50 7.50% 31% | 36% 61% 7.2% | 7.0% 6.2% | 6.5% 36% | 35% 24% | 25% 8.1% | 7.8% 7.1% | 7.3%

Year 2019 (25% | 15%) 7.5% | 8.0% 39% 5.50 7.50% 25% | 25% 61% 7.4% | 7.4% 6.5% | 6.8% 37% | 37% 23% | 23% 8.5% | 8.5% 7.5% | 7.9%

Year 2020 (25% | 15%) 7.7% | 8.3% 39% 5.50 7.50% 25% | 25% 61% 7.4% | 7.4% 6.4% | 6.8% 37% | 37% 23% | 23% 8.5% | 8.5% 7.5% | 7.9%

Table 17 – Solar PPA Project – Increase to Tax Equity Investor Pre-Flip Cash Distributions

Table 18 – Solar PPA Project – Decrease in Tax Equity Upfront Investment

Solar PPA Project Impact of a 2017 Tax Rate Decrease on Sponsor Economics

41


In order to maintain the tax equity flip IRR and flip date relative to the base case, the tax equity upfront investment would need to decrease by ~2% to ~4% of total cost (25% or 15% tax rate in 2017 cases, respectively). Alternatively, if the tax equity partnership structuring parameters were held constant, the flip date would move out from 5.50 years to either 6.75 years or 8.00 years (25% or 15% tax rate in 2017 cases, respectively). The higher sponsor investment causes the pre-tax IRR to decrease in most cases, but the lower

future tax liability results in a higher after-tax IRR



7.4% 7.1% 6.8%

6.0% 6.2% 6.3%

5.50 6.75

8.00

–

5

10

15

20

25

–

3%

6%

9%

12%


Fli

p P

erio

d (

Yrs

)

Un

lev

ered

Sp

on

sor

IRR


7.4% 7.0% 6.8%

6.0% 6.1% 6.3%

25%

35%

43%

–

20%

40%

60%

80%

100%

–

3%

6%

9%

12%


Tax

Eq

uit

y S

har

e o

f P

re-F

lip

Cas

h (

%)

Un

lev

ered

Sp

on

sor

IRR


8.5% 8.0%

7.5% 7.0% 7.0% 7.0%

5.50 6.75

8.00

–

5

10

15

20

25

–

3%

6%

9%

12%


Fli

p P

eri

od

(Y

rs)

Le

ve

red

Sp

on

sor

IRR


8.5% 7.9%

7.5% 7.0% 6.9% 6.9%

25%

35%

43%

–

20%

40%

60%

80%

100%

–

3%

6%

9%

12%


Tax

Eq

uit

y S

har

e o

f P

re-F

lip

Cas

h (

%)

Lev

ered

Sp

on

sor

IRR


8.5% 7.9%

7.5% 7.0% 7.0% 7.0%

23% 26% 27%

–

20%

40%

60%

80%

100%

–

3%

6%

9%

12%


Up

fro

nt

Sp

on

sor

Eq

uit

y (

%)

Le

ve

red

Sp

on

sor

IRR


(1) Tax equity receives 25% of cash distributions (2) Initial flip period of 5.50 years (3) Tax equity receives 25% of pre-flip cash distributions for an initial period of 5.50 years

7.4% 7.1% 6.8%

6.0% 6.1% 6.3%

61% 63% 65%

–

20%

40%

60%

80%

100%

–

3%

6%

9%

12%


Up

fro

nt

Sp

on

sor

Eq

uit

y (

%)

Un

lev

ered

Sp

on

sor

IRR


Solar SREC Project Impact on Tax Equity Upfront Investment & Share of Pre-Flip Cash Given that tax equity investors are unlikely to accept significant deferrals in their flip dates, what is the decrease in upfront investment or increase in share of pre-flip cash distributions required to maintain the original 5.5 year flip date?

For the Solar SREC Project, the tax equity investor’s share of cash would need to increase from 30% to either 33% or 35% (25% or 15% tax rate in 2017 cases, respectively) to maintain the 5.5 year flip date (see Table 19 below)

– The sponsor’s unlevered after-tax IRR remains at 6.4% for both the 25% and 15% tax rate in 2017 cases

Alternatively, holding the tax equity investor’s share of pre-flip cash distributions constant, the tax equity investor’s upfront investment would need to decrease from 49% to either 47% or 46% (25% or 15% tax rate in 2017 cases) in order to maintain the 5.5 year flip date (see Table 20 below)

– The sponsor’s unlevered after-tax IRR remains at 6.4% for both the 25% and 15% 2017 tax rate cases

Unlike in the Solar PPA Project, the sponsor’s levered after-tax IRR experiences a decrease of 150+ basis points for both the 25% and 15% tax rate in 2017 cases

– The cause of this difference between the Solar PPA Project and Solar SREC Project is the pattern of the sponsor’s taxable income. Taxable income in SREC projects is front loaded due to the higher near-term SREC prices. The post-flip taxable income, 95% of which is allocated to the sponsor, is typically lower in an SREC project than in a PPA project, and the sponsor therefore receives less of a benefit from a tax rate decrease

We believe that tax equity investors in solar projects would also seek to maintain their flip dates and return targets, either through a lower upfront investment, a higher share of pre-flip cash flow, or a direct indemnity from the sponsor. Unlike wind projects, the sponsor’s after-tax IRRs are not materially adversely impacted by either the lower tax equity investment or a higher share of cash

42


Project Economics




Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 7.0% 49% 5.50 7.50% 30% 51% 8.0% 6.4% 39% 12% 10.2% 8.8%

Year 2017 (25% | 15%) 7.0% | 7.0% 47% | 46% 5.50 7.50% 30% 53% | 54% 7.5% | 7.0% 6.4% | 6.4% 39% | 39% 14% | 15% 8.9% | 7.7% 7.9% | 7.3%

Year 2018 (25% | 15%) 7.3% | 7.5% 48% | 46% 5.50 7.50% 30% 52% | 54% 7.6% | 7.2% 6.5% | 6.6% 39% | 39% 13% | 14% 9.1% | 8.2% 8.2% | 7.7%

Year 2019 (25% | 15%) 7.7% | 8.3% 49% | 49% 5.50 7.50% 30% 51% | 51% 8.1% | 8.2% 7.0% | 7.6% 39% | 39% 12% | 12% 10.5% | 10.9% 9.6% | 10.3%

Year 2020 (25% | 15%) 7.7% | 8.4% 49% | 50% 5.50 7.50% 30% 51% | 50% 8.2% | 8.4% 7.1% | 7.8% 39% | 39% 12% | 11% 10.9% | 11.7% 9.9% | 11.2%


Project Economics




Investment Flip


Pre-Flip Cash Share




Class B Net Equity


Base Case (35%) 7.0% 49% 5.50 7.50% 30% 51% 8.0% 6.4% 39% 12% 10.2% 8.8%

Year 2017 (25% | 15%) 7.0% | 7.0% 49% 5.50 7.50% 33% | 35% 51% 7.4% | 6.9% 6.4% | 6.4% 38% | 37% 13% | 14% 8.8% | 7.6% 7.9% | 7.2%

Year 2018 (25% | 15%) 7.3% | 7.5% 49% 5.50 7.50% 32% | 34% 51% 7.6% | 7.1% 6.5% | 6.6% 38% | 37% 13% | 14% 9.1% | 8.1% 8.1% | 7.6%

Year 2019 (25% | 15%) 7.7% | 8.3% 49% 5.50 7.50% 30% | 29% 51% 8.1% | 8.2% 7.0% | 7.6% 39% | 40% 12% | 12% 10.6% | 10.9% 9.6% | 10.4%

Year 2020 (25% | 15%) 7.7% | 8.4% 49% 5.50 7.50% 29% | 28% 51% 8.2% | 8.4% 7.1% | 7.8% 40% | 40% 12% | 11% 11.0% | 11.7% 10.0% | 11.2%

Table 19 – Solar SREC Project – Increase to Tax Equity Investor Pre-Flip Cash Distributions

Table 20 – Solar SREC Project – Decrease in Tax Equity Upfront Investment

Solar SREC Project Impact of a 2017 Tax Rate Decrease on Sponsor Economics

43


In order to hold maintain the tax equity flip IRR and flip date relative to the base case, the tax equity upfront investment would need to decrease by ~2% to ~3% of total cost (25% or 15% tax rate in 2017 cases, respectively). Alternatively, if the tax equity partnership structuring parameters were held constant, the

flip date would move out from 5.50 years to either 8.75 years or 12.00 years (25% or 15% tax rate in 2017 cases, respectively)



8.0% 7.4%

7.0% 6.4% 6.4% 6.5%

5.50

8.75

12.00

–

5

10

15

20

25

–

3%

6%

9%

12%


Fli

p P

erio

d (

Yrs

)

Un

lev

ered

Sp

on

sor

IRR


8.0% 7.4%

6.9% 6.4% 6.4% 6.4%

30% 33% 35%

–

20%

40%

60%

80%

100%

–

3%

6%

9%

12%


Tax

Eq

uit

y S

har

e o

f P

re-F

lip

Cas

h (

%)

Un

lev

ered

Sp

on

sor

IRR


8.0% 7.5%

7.0% 6.4% 6.4% 6.4%

51% 53% 54%

–

20%

40%

60%

80%

100%

–

3%

6%

9%

12%


Up

fro

nt

Sp

on

sor

Eq

uit

y (

%)

Un

lev

ered

Sp

on

sor

IRR


10.2%

8.6%

7.5%

8.8%

7.7% 7.0%

5.50

8.75

12.00

–

5

10

15

20

25

–

3%

6%

9%

12%


Fli

p P

eri

od

(Y

rs)

Le

ve

red

Sp

on

sor

IRR


10.2%

8.8%

7.6%

8.8%

7.9% 7.2%

30% 33% 35%

–

20%

40%

60%

80%

100%

–

3%

6%

9%

12%


Tax

Eq

uit

y S

har

e o

f P

re-F

lip

Cas

h (

%)

Lev

ered

Sp

on

sor

IRR


10.2%

8.9%

7.7%

8.8%

7.9% 7.3%

12% 14% 15% –

20%

40%

60%

80%

100%

–

3%

6%

9%

12%


Up

fro

nt

Sp

on

sor

Eq

uit

y (

%)

Le

ve

red

Sp

on

sor

IRR


(1) Tax equity receives 30% of cash distributions (2) Initial flip period of 5.50 years (3) Tax equity receives 30% of pre-flip cash distributions for an initial period of 5.50 years

Other Potential Tax Reform Considerations Impact of 100% Expensing & Loss of Net Interest Expense Deductions on Solar Projects

Both major Republican tax reform proposals call for replacement of the current tax depreciation system with a full expensing of capital

expenditures in the year incurred and elimination of net interest expense deductions

At face value, the acceleration of cost recovery deductions should provide a time value of money benefit. However, it would create significant

structuring issues with solar projects owned by tax equity partnerships

In order for 99% of the ITC to be allocated to a tax equity investor in year one, the tax equity investor would need to take on a DRO much larger

than what is acceptable under current market conditions. Otherwise, the tax equity investor’s capital account would be driven negative in year

one by the capital expenditure expense and a portion of the losses and tax credit would be reallocated to the sponsor

If capital expenditures become fully deductible in the first year and net interest expense becomes non-deductible, tax equity investors would have to take on much larger DROs in order to prevent reallocations of tax credits. In the Solar PPA Project, the DRO would need to be as high as 175% of the tax equity investment, and in the Solar SREC Project, the DRO would need to be as high as 104% of the tax equity investment

44

Solar PPA Project Project



Flip Period After-Tax Flip Yield

Pre-Flip Cash Share

DRO Class B

Gross Equity Back

Leverage Net Equity

Unlevered Pre-Tax

IRR

Unlevered After-Tax

IRR

Levered Pre-Tax

IRR

Levered After-Tax

IRR

2017 - 25% Tax Rate 7.5% 5.50 7.5% 25% 161% 63.0% 37.0% 25.0% 7.1% 6.2% 8.0% 6.7%

Delta from MACRS Case 0.5% 141% (0.3%) 0.0% (0.3%) 0.1% 0.1% 0.1% (0.3%)

2017- 15% Tax Rate 7.0% 5.50 7.5% 25% 175% 65.0% 38.0% 27.0% 6.6% 6.1% 7.2% 6.5%

Delta from MACRS Case - 155% 0.1% 0.0% 0.1% (0.2%) (0.2%) (0.3%) (0.5%)

Solar SREC Project Project



Flip Period


Pre-Flip Cash Share

DRO Class B

Gross Equity Back

Leverage Net Equity

Unlevered Pre-Tax

IRR

Unlevered After-Tax

IRR

Levered Pre-Tax

IRR

Levered After-Tax

IRR

2017 25% Tax Rate 7.9% 5.50 7.5% 30% 96% 51.9% 39.3% 12.6% 7.7% 6.8% 9.8% 7.7%


2017- 15% Tax Rate 7.5% 5.50 7.5% 30% 104% 53.8% 39.3% 14.5% 7.1% 6.6% 8.1% 7.1%


Table 21 – Other Potential Tax Reforms – Impact on Solar PPA Project

Table 22 – Other Potential Tax Reforms – Impact on Solar SREC Project

u.s. federal corporate tax reform: potential …...corporate income tax rate to be reduced...

Documents