Financing Solar EnergyHow to Finance Your DealHow to Finance Your Deal

May 21, 2009

Bruce M. SerchukNixon Peabody LLP

401 9th Street NW, Suite 900Washington, DC 20004

(202) 585-8267bserchuk@nixonpeabody.com

Financing Options

• Clean Renewable Energy Bonds

• New Clean Renewable Energy Bonds

• Qualified Energy Conservation Bonds

• Tax-Exempt Governmental Bonds

• ARRA Options (BABs, Recovery Zone Bonds)

• Bonds and New Markets Tax Credits

Clean Renewable Energy Bonds

• Added in 2005 (Energy Policy Act of 2005)

• Supplemented in 2006 (Tax Relief and Health Care Act of 2006)

• Designed to provide an incentive for governmental bodies (including Indian tribes) and cooperative electric companies to produce renewable energy comparable to incentives available to the private sector

• Eligible projects include generally Section 45 projects, including solar

Clean Renewable Energy Bonds

• CREBs are “tax credit bonds”

• Designed to provide the borrower with a 0% loan―the Federal tax credit received by bondholder intended to be comparable to interest on interest bearing loan

• No private ownership, but no private use limits

• Subject to tax-exempt bond arbitrage rules

• Treasury sets tax credit rates daily

• Treasury sets permitted maturity daily; level principal payments are required

Clean Renewable Energy Bonds

• $1.2 billion of CREBs has been authorized, $750 million for governmental bodies, $450 million for coops

• Eligible borrowers must apply for an allocation by providing information about the project and its financing

• CREBs are allocated to applicants beginning with the project with the smallest amount requested and then the next-smallest amount, until the total is exhausted

• Must be issued before January 1, 2010

New Clean Renewable Energy Bonds

• Added in 2008 (Energy Improvement and Extension Act of 2008)

• Supplemented in 2009 (American Recovery and Reinvestment Act)

• $2.4 billion total volume

• No termination date

New Clean Renewable Energy Bonds

• Same types of projects as CREBs

• 70% tax credit

• Same final maturity, but no principal amortization

• Modified arbitrage rules

• Stripping of tax-credits

• Allocations—1/3 to munis, 1/3 to public power, 1/3 to coops

• Allocations—muni and coops (small to large), public power (pro rata)

Qualified Energy Conservation Bonds

• Added in 2008 (Energy Improvement and Extension Act of 2008)

• Supplemented in 2009 (American Recovery and Reinvestment Act)

• $3.2 billion total volume

• No termination date

Qualified Energy Conservation Bonds

• Same basic structure as new CREBs

• 70% credit

• Laundry list of permitted projects, including solar

• Up to 30% may be used for private activities, including private ownership

• Allocations—to States and Large Local Governments (>100,000 population)

Tax Exempt Governmental Bonds

• Property must be governmentally owned

• Limited private use allowed

• Property may be managed under a Qualified Management Agreements

• Prepayments

ARRA Options

• Build America Bonds

– Same general rules as tax exempt governmental bonds

– 35% tax credit to issuer or holder

• Recovery Zone Bonds

– Economic Development Bonds (45% tax credit)

– Facility Bonds (private activity bonds)

Bonds and NMTCs

• Leveraged NMTC Structure

• Eligible Bonds

– CREBs

– New CREBs

– QECBs (private activity bonds)

– Recovery Zone Facility Bonds