If you’re new to the solar industry, go to the Solar 101 Reading list. It has free tools and articles on solar design and installation, sales and marketing, policy, finance and best practices.
In the last post we discussed the 5 elements needed to finance any solar project. Often times, the last step in the process is creating a the legal structure that maximizes all of the financial benefits for investors, the project team, and the owners.
I have three great resources for you if you’re very serious about financing commercial projects
- Read the List of Everything You Need to Understand to Finance Commercial Solar Projects
- Download the 27 page Beginners Guide to Financing Commercial Solar Projects.
- Click here to sign up for our Solar MBA and Learn how to Finance Commercial Solar PPAs from A to Z. Click here to test drive the Solar MBA for free.
- Click here to join our Linkedin group “Best Practices for Financing Commercial PPAs Between 200kW and 5MW” and continue the conversation about best practices.
- How to Finance Non-Profit Solar Projects – 50 Minute Session Answering 5 Key Questions
- Listen to 60 Minute Interview: Advice from a $20MM Solar Tax Equity Investor to Commercial Solar Installers – Focus on a Niche, Be Fast, and Standardize your Operations
- 60 Minutes of Video Answer 7 Questions on Best Practices for Setting up Commercial Solar Power Purchase Agreements.
There are 4 ownership structures used for solar projects.
- Owner Financed
- The partnership flip
- The sale-leaseback
- The lease-passthrough
For this article, we’ll focus on the very basics of the partnership flip.
The partnership flip was created for developments in the wind industry and is now being applied to the solar industry. Read below for more details. If you have any questions or feel I left something out leave a comment in the post HeatSpring’s linkedin group: “Best Practices for Financing Commercial PPAs Between 200kW and 5MW”
Tax Equity Investor. The tax equity investor is the investor on the right hand side that will put in the majority of the investment and then be the first to receive their returns by taking advantage of the A) tax credits B) Depreciation C) sale of electricity D) SRECs. When they have received the amount needed for their yield the ownership will flip to the second partner.
General Fund Partner. The general fund partner is the second party that owns that solar plant. The general fund partner could be the owner of the land or property, but also could be the solar developer or EPC contractor.
Solar Field LLC. The solar project that is owned by the partners is where the legal structure will actually be created and it will specify the ownership between two groups and when the ownership will flip. Solar Field LLC will collect and then distribute all the revenues from the project, SRECs, power sales, depreciation, tax credits, and will also have to cover operations and maintenance of the facility.
When It’s Used
- Developers who want interest in the project but don’t have the balance sheet to finance the project
- Good for investors who want the tax equity benefits then to get out of the deal
- Typically a 6 – 7 year investment before the flip happens.
- Short term tax equity mindset.