The wind tax credit is expiring, but it’s not the big deal it had been previously

by Peter Maloney, Platts, December 26, 2013 (excerpts)

…When the PTC was last extended, in January 2013, Congress changed the criteria. A project only had to be in construction before the expiration date to be eligible for the tax credit. Then in September, the IRS issued an advisory on what qualifies as “under construction.” Under the IRS guidance a project is under construction if the developer has incurred 5% of total capital costs.

That stretched the development pipeline into the future and prompted some last minute shopping on the part of some developers.

MidAmerican Energy has ordered up to 656 wind turbines, representing about 1,050 MW, from Siemens at a cost of about $1.9 billion. And NextEra Energy Resources has bought about 1,000 MW of turbines that are now in IRS “safe harbor” status.

Under the IRS rules, the turbines must be delivered by April 15, 2014, and the wind farm must be online by year-end 2015.

The IRS ruling is also prompting an uptick in M&A activity, as developers with the cash to buy turbines buy up projects from developers with sites but not enough capital to incur the minimum 5% investment.

That is not to say that there is not the usual rush under way to finance projects before December 31. Sources report the GE Energy Financial Services, among other financial institutions active in the tax equity market, are furiously working to close deals before the last day of the year….

The combination of the IRS ruling and the tail wind from utility solicitations will push wind power development well into next two years.

But as that pipeline of projects begins to clear a familiar noise could return. There is already some talk of putting together a retroactive extension of the PTC that would start the clock ticking again in 2015.

read … Platts

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