Project Development

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Syndicated term loans can be a significant piece of the capital stack when financing renewable energy projects; however, a crucial pending case in the U.S. Court of Appeals for the Second Circuit could complicate the use of these types of loans going forward. The case—Kirschner v. JP Morgan Chase—will seek to answer the central question at play: are syndicated term loans subject to federal and state securities laws?  The eventual ruling in this case could potentially impact any borrower or lender issuing or holding a term loan in a syndicated facility.

On May 12, 2023, in Notice 2023-38 (the “Notice”), the IRS published rules intended for inclusion in forthcoming regulations regarding domestic content bonus credit amounts.

The Inflation Reduction Act of 2022 amended §§ 45 and 48 of the Internal Revenue Code (the “Code”) to provide a domestic content bonus credit amount for certain qualified facilities or energy projects placed in service after December 31, 2022, and added new Code §§ 45Y and 48E, which include a domestic content bonus credit amount for certain investments in qualified facilities or energy storage technologies placed in service after December 31, 2023.

To claim a domestic content bonus credit amount, a taxpayer must establish that the “Domestic Content Requirement” is satisfied with respect to an “Applicable Project” by certifying to the Secretary of the Treasury that any steel, iron, or manufactured product which is a component of the Applicable Project (upon completion of construction) was produced in the United States. The Notice provides guidance on what is required to meet the Domestic Content Requirement and the procedures for reporting and claiming domestic content bonus credit amounts.

Over the past decade, Missouri has experienced steady growth in utility-scale solar projects[1] and developers have benefited from a property tax exemption under Section 137.100(10) of the state’s tax code. Since the statutory property tax exemption was passed in 2013, solar facilities have leveraged the tax exemption to offset development and operations costs. Until recently, the solar facility tax exemption had flown largely under the radar, as even the largest solar facilities to come online in Missouri have been smaller than 15 megawatts[2]. Over the last few years, however, Missouri counties have started to see the kind of interest from large utility-scale solar developers that states in the south have been experiencing. But in August of 2022, the Missouri Supreme Court bucked the state’s solar-friendly trend in Johnson v. Springfield Solar 1, LLC, 648 S.W.3d 101 (Mo. 2022), unanimously finding the exemption for “solar energy systems not held for resale” under Section 137.100(10) unconstitutional. The case involved a small solar facility that supplied energy to Springfield, Missouri. The Missouri Supreme Court’s decision means that Springfield Solar 1, LLC could owe Greene County, Missouri more than $400,000 in back property taxes, and more generally, that developers who installed solar equipment in Missouri since 2013 will not be able to rely on the property tax exemption as they had anticipated under the tax code.

The siting of renewable energy infrastructure remains a contentious issue in some communities. Throughout the United States — both on the coasts and in the Midwest — new renewable energy development pits unlikely advocates against unlikely opposition. That said, more and more State governments that are looking to grow their renewable energy industries and meet climate goals are implementing legislative solutions to these renewable energy siting issues.

In Texas, title insurance forms are promulgated by the Texas Department of Insurance (the “TDI”), with policy types, premium amounts, and the issuance of endorsements being regulated by standardized procedural and rate rules. Thus, title deliverables required for debt and equity financing transactions tend to be generally uniform in Texas renewable energy transactions.

The Texas legislature recently passed House Bill 2845 (“HB 2845”) imposing specific requirements on wind energy leases and wind developers’ decommissioning obligations for wind energy projects. While wind leases typically impose obligations on project companies relating to the removal of wind projects, HB 2845 mandates that wind leases must include specific provisions describing such obligations.