Renewable Energy Financing ~

Forbearance Agreements in Renewable Energy Financing Transactions

With the expiration of the legislation which provided the 1603 grant in lieu of the energy investment tax credit, renewable energy developers must now “sell” the investment tax credit to a tax credit investor. Recapture of the investment tax credit to a tax credit investor occurs if the energy property is foreclosed by a lender during the 5 year tax credit compliance period. As a result, tax credit investors routinely require a lender to forbear exercising its rights against a borrower during the 5 year tax credit compliance period to avoid recapture of the investment tax credit. Obviously forbearance is contrary to the goals of a lender which wants the right to exercise any and all remedies in the event of a default by the owner of the energy property. As a result of the stress between the positions of the tax credit investor and the lender a variety of alternatives to absolute forbearance have evolved. [Read More]

Source: Duane Morris ~ Blog
Posted by Arthur J. Momjian
Partner
Duane Morris LLP
30 South 17th Street
Philadelphia, PA 19103-4196
USA