Investor Presentaiton
ALLETE
clean energy.
SMART. POWERFUL. AHEAD.
Tax equity arrangement - illustration
$ millions
ACE After-Tax Profile: 100% PTC, 100 MW Project
Average Net Income
Annual Net Income w/HLBV
$9
$8
$7
$6
$5
$4
$3
$2
$1
Year 1
Year 2
Year 4
Year 5
•
•
Year 3
Gradual slope upward as tax equity investor progresses toward achieving its yield
Allocations of pre-tax gain are larger to tax equity in earlier periods and decrease as yield is achieved
Year 6
Year 7
Year 8
Year 9 Year 10
Tax Equity Structure
Pre-flip
Sponsor
ACE
Tax Equity
Partner
Tax 1%
Cash 80%
Post-flip
Tax 95%
Cash 95%
Wind Project,
LLC
Pre-flip
Tax 99%
Cash 20%
Post-flip
Tax 5%
Cash 5%
Offtaker
Pre-Flip Period - 9.5-10 Years
Investor Pre-Flip Yield - 5.75-6.5%
Partners tax, cash, & PTC allocation percentages will change
over the course of the deal
HLBV method of accounting for allocation of GAAP earnings
Individual project structures and tax equity arrangement terms are unique, provided they comply with IRS regulations.
Allocations of income and loss and cash distributions are dependent on deal terms and structure agreed upon with tax equity investor including liquidation provisions. As with any wind facility, revenue
and PTCs are dependent on wind resources.
Non-cash benefits (PTC and MACRS depreciation) allocated to the tax equity investor will be accretive to ACE over the yield term.
The tax equity partner is in a preferred position until its yield is achieved and there may be cash sweep mechanisms in certain periods to achieve or maintain the tax equity partner's yield.
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