Reunion

Corporate taxpayers should begin looking at 2025 clean energy tax credits now to avoid a highly competitive year-end market. Reunion saw this seasonal dynamic play out in 2023, and we are experiencing it again in 2024. We believe this emerging pattern of seasonality in the clean energy tax credit market reflects a general supply-demand imbalance toward year-end. As corporations get a clearer sense of their tax liability in Q3 and Q4, they enter a market that is relatively short on supply, resulting in higher pricing for remaining credits. While pricing has increased across all credit types, the most marked increase has been with large, straightforward ITC projects that are coveted by large buyers. Opportunities that traded in the $0.92 to $0.93 range for most of the year, for example, are now receiving bids of $0.94 or even $0.95. To avoid “chasing credits,” buyers should begin exploring 2025 tax credit opportunities now. They have several strategies at their disposal: ?? Execute tax credit transfer agreements early: Buyers who are able to commit to 2025 credits now will enjoy less competition and potentially better pricing. ?? Be willing to go slightly out of pocket: Buyers who are willing to go slightly “out of pocket” — for example, willing to pay for an ITC in Q1, Q2, or even Q3 — will enjoy a larger discount to compensate for timing of payment. ?? Consider smaller projects: Focusing on a single, large transaction places most buyers in a highly competitive segment of the market. Moving from a single transaction of $80M to two transactions of ~$40M can meaningfully improve deal economics. Corporations who are comfortable with their 2025 tax liability should begin shifting their attention to 2025. Q4 2024 is a good time to lock in some of the most attractive 2025 deals, particularly for larger ITC, PTC, and AMPC opportunities. https://lnkd.in/gv2Aecdx

As a long-time listeners of Norton Rose Fulbright's Currents podcast, we are very excited that our co-founders Andy Moon and William Lee were able to share insights on the market for clean energy tax credits. Since this episode was recorded in August, there has been one notable shift in the market. An unexpectedly high volume of taxpayers with $200M to $1B+ in tax appetite have entered the market for 2024 credits, and they are all looking for large, straightforward opportunities above $75 to $100M in volume. At this point in the year, there are not many large 2024 credit opportunities left. This has resulted in significant upward pressure on pricing, with buyers willing to bid $0.94, $0.95 or even slightly higher for these ITCs. This is a marked increase from the $0.92 to $0.93 range we were seeing earlier in the year for large, straightforward ITCs.?Stay tuned for a more detailed analysis of this market dynamic!

Reunion celebrated an exciting milestone this month: we have facilitated over $1.6 billion in clean energy tax credit transfers through the first three quarters of 2024. We are on track to facilitate over $3 billion in transfers by year end — a significant share of the estimated $21B to $24B market for transferable tax credit transfers. Every corner of the market has accelerated. We’ve supported buyers who invested in tax equity long before transitioning to transferability, just as we’ve supported buyers who made their first clean energy investment with a transferable tax credit purchase this year. We attribute a large portion of our success to our direct relationships with buyers and sellers. By minimizing fees and ensuring all parties are “transaction ready,” we can meaningfully increase certainty of close. If you’re buying or selling clean energy tax credits, we hope you’ll get in touch. #transferability #cleanenergy #taxcredits #inflationreductionact https://lnkd.in/gMWn7gds

Over the past 12 months, Reunion has directly engaged over 250 corporate taxpayers who have purchased, or are planning to soon purchase, clean energy tax credits. When viewed by sector, Reunion’s pool of tax credit buyers parallels the broader U.S. corporate landscape (as represented by the S&P 500). This is an exciting testament to the effectiveness of the Inflation Reduction Act’s transferability mechanism, which was intended to broaden the pool of companies who could invest in clean energy. There are exceptions, of course. Energy and consumer discretionary companies have played an outsized role, while utility and healthcare companies have played a more modest role. What’s clear, though, is that companies of all stripes are thoughtfully entering the market. #transferability #cleanenergy #inflationreductionact

Certainty and speed of close have become increasingly important factors for clean energy developers and manufacturers looking to sell tax credits. Reunion has repeatedly observed tax credit sellers favor offers that come from a buyer whom the seller feels is likely to get to the finish on a reliable timeline, even if another party is offering a higher price. We see this trend in our transactions data. Since Q4 2023, the average duration of a tax credit transfer - from signing a term sheet to signing a tax credit transfer agreement - has fallen from over 100 days to right around 45 days. We typically see exclusivity periods of 30 to 60 days; sellers who feel they have the most leverage (these are often sellers with the largest, most straight-forward projects) demand the shortest exclusivity periods. To be well positioned in this market, first-time buyers should: ? Have internal approval(s) lined up, including approval to hire external counsel and other required advisors ? Know who has signing authority and to what extent. A VP or Director of Tax often has signing authority, although certain transactions require approval from the CFO, CEO, or Board. If a transaction requires committee and/or board approval, it’s ideal to get pre-approval on deal parameters or have the ability to get approval without needing to wait for a formally scheduled board meeting ? Differentiate between must-haves and nice-to-haves with respect to acquisition requirements - and assume both will shift through time We are hearing of an increasing number of situations where sellers are presented with a buyer, but the deal falls apart after a term sheet is signed. We believe that a lot of effort is required to get buyers “transaction-ready” - particularly if this is a buyer’s first clean energy transaction. Reunion invests significant time working with a buyer’s tax, treasury, legal, finance and other teams to get them transaction-ready, resulting in higher certainty and speed of close for sellers.

Reunion recently announced that we have facilitated over $1.5 billion in tax credit transfers so far in 2024! We work closely with dozens of Fortune 500 clients and leading clean energy companies to buy and sell clean energy tax credits. Please get in touch if you'd like to learn more about how to get started with Reunion. #ira #taxcredits #reunion #climate

Earlier this year, Reunion partnered with Summit Ridge Energy, the leading commercial solar company in the United States, to facilitate the sale of approximately $40 million of transferable tax credits from a portfolio of community solar projects in Virginia. ? The sale of these credits will immediately enable Summit Ridge to expand its footprint of clean energy assets in disadvantaged communities across the United States. ?? Congratulations to the entire SRE team, including Phil Schapiro, Jake Compton, and Adam Kuehne. (Fun fact: Jake and Adam are both former Naval submarine officers - impressive). I enjoyed working with them on this transaction and look forward to future deals together. ?? Our collaboration with Summit Ridge Energy was one of a rapidly growing number of tax credit deals that Reunion facilitated in 2024, and is indicative of the increasing adoption and demand for IRA tax credits by corporate tax teams. If you are a clean energy developer or manufacturer that would like to sell tax credits, please get in touch! Reunion works directly with dozens of Fortune 500 companies actively looking to purchase 2024 and 2025 tax credits. https://lnkd.in/gZupVUe3 #IRA #taxcredits #climate #communitysolar #reunion #SRE

Today marks the launch of version 3.0 of Reunion’s 140-page transferable tax credit handbook - a comprehensive guide to sourcing, diligencing, and buying clean energy tax credits. The handbook has been downloaded by 4,000+ tax credit buyers, sellers, and professional advisors. We’ve received fantastic feedback from our readers so far, and we hope that you’ll give it a read as well. We revisited every section and added a significant amount of new content, including: ?? Final transferability regulations ?? Final PWA regulations ?? Due diligence considerations for §45, §45X, and §48 credits ?? 2024 pricing and market trends ?? Domestic content safe harbor ?? Indemnification and insurance considerations ?? Detailed discussion of the §45X advanced manufacturing production credit Please get in touch if you have questions or comments! #taxcredits #law #climate https://lnkd.in/gkES_dpZ

Reunion has been heads-down lately on hiring, building, and facilitating tax credit transfers. In the last few weeks alone, we: ?? Added two new team members (welcome, Robby Riley and Connor Danik) ?? Released a set of foundational enhancements to our marketplace (thank you, Danny Robinson and Alex Melehy) ?? Closed four tax credit transfers on behalf of public and private companies, adding to the hundreds of millions of dollars of tax credit transfers we've proudly facilitated over the past year (thank you, Connie Chern and William Lee) The rest of the summer should be just as exciting. Soon, we'll release the latest version of our indispensable transferable tax credit handbook, which has been downloaded by over 3,000 tax credit buyers, sellers, and professional advisors. Stay tuned! https://lnkd.in/gahSu7JR

In May, Reunion completed a $200M+ tax credit transfer between two publicly traded companies, which was a milestone transaction in the market for clean energy #taxcredits. The buyer wanted to be “audit-ready,” and have detailed documentation available in the event of an IDR (information document request) from the IRS. Reunion’s transactions team had to be creative in conducting thorough but efficient due diligence, which included: ??Validating tax credit qualification for dozens of energy facilities ??Confirming the beginning of construction, to determine the correct PTC rates and exemption from prevailing wage requirements ??Substantiating the generation and sale of electricity to third parties, which involved the analysis of thousands of settlement files from multiple grid operators After we completed this transaction, we rushed back to work on the 15+ other deals in our pipeline. To be honest, we didn’t savor the moment! As a result, we recently added a new company value: “Don’t Skip Lunch.” It’s a reminder to ourselves to celebrate our wins, and enjoy the journey of building Reunion. The photo below is our belated team celebration. Our team has grown rapidly since May, and we are looking to hire more renewable energy experts to join our mission. We are particularly focused on growing our sales, marketing, and transaction teams - we would love your help getting the word out! Our open roles: https://bit.ly/3U8UGgD William Connie Danny Alex Maria Denis Michael David Joe Kristina Paul Leslie Lisa Michael