Today, Reunion celebrates an exciting milestone: we have facilitated the purchase and sale of over $1.5 billion in clean energy tax credits for the 2024 tax year! Our transactions span solar, wind, battery storage, fuel cells, biomass, and advanced manufacturing components.
Reunion now works directly with dozens of Fortune 500 tax credit buyers and leading clean energy companies, and we have observed several emerging trends:
📍 Speed is a critical factor in winning deals: An increasing number of deals are competitive bidding situations. Buyers should have a clear sense from relevant stakeholders (e.g., CFO, legal, board of directors) on what deal terms are acceptable and what specific approvals are required prior to starting the negotiation process, as delays can be the difference between winning and losing a deal
📍 Very large credits carry premium pricing: There has been increased interest in tax credit purchases from major corporations that pay $500M to $1B or more in annual taxes, resulting in more competition for large credit opportunities. As a result, these opportunities tend to trade at a premium
📍 Increased buyer interest in ITCs: many buyers were reluctant to pay for ITCs early in the year, because it required “pre-paying” for taxes. As a result, buyers willing to purchase ITCs in Q1 or Q2 were rewarded with deeper discounts. Now that we are solidly in Q3 and payments for ITCs will not occur until later in the year, buyer interest has increased
📍 Pricing on ITCs, PTCs, and AMPCs has trended upwards in Q3: buyers, particularly ones that have bid and lost on tax credit opportunities, want to make sure that they lock in credits in time to offset Q3 and / or Q4 estimated tax payments
📍 However, there is a price ceiling on ITC transactions: ITCs are still expected to trade at a wider discount compared to production credits. Although sellers often ask for mid-$0.90s pricing for ITCs, buyers typically push back since lower risk PTCs or AMPCs would be available at similar pricing
📍 Scope and coverage of insurance is a focus of deal negotiation: initially, tax credit buyers demanded tax credit insurance to cover 100% or more of the tax credit value. We are seeing more flexibility in structures, whereby insurance may not cover the full tax credit amount due to presence of other risk mitigants such as portfolio diversification, creditworthy seller indemnities or parent guaranties
You can read about a selection of our transactions here (https://bit.ly/3AubPJW). If you are looking to buy or sell clean energy tax credits, or if you would like to join our rapidly growing team - please get in touch!
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