A couple weeks ago I asked Mike Lichtenfeld, a deal associate with MMA Renewable Ventures what the impact was on the Project Finance business was after the first bailout package wasn’t approved. Here is a synopsis of his written response:
“Credit contraction, if sustained, will hurt the clean energy sector as much as any other industry – our projects, our manufacturing capacity, our corporate development and expansion all depend on access to debt capital. That much is clear. In addition, we know that the bailout debacle has stalled negotiations on an energy bill that would include extension of critical tax incentives for clean energy. However, even under a scenario in which the credit markets open and tax incentives are extended, the financial distress experienced market-wide to date has probably changed the landscape of tax equity investors for the worse, not only by reducing the numbers of players through outright institutional failure, but also by drastically reducing the tax equity appetite among those players still standing.
Financial institutions large and small that have been active in renewable energy from a tax advantaged equity position have recently underperformed or experienced losses in the economic maelstrom. The outlook for the US economy – even under a bailout scenario – is at best a mild and short-term recession, so a constricted tax equity universe could continue for 12-18 months or more….