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AcCOUNTing for Renewable Energy Tax and Accounting Issues Financing Wind Power: The Future of Energy July 25-27, 2007 Eldorado Hotel and Spa Santa Fe,

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Presentation on theme: "AcCOUNTing for Renewable Energy Tax and Accounting Issues Financing Wind Power: The Future of Energy July 25-27, 2007 Eldorado Hotel and Spa Santa Fe,"— Presentation transcript:

1 acCOUNTing for Renewable Energy Tax and Accounting Issues Financing Wind Power: The Future of Energy July 25-27, 2007 Eldorado Hotel and Spa Santa Fe, NM

2 Reznick Group Building Business Value 1 Reznick Group Public Accounting, Tax, and Business Advisory Firm Registered With the PCAOB SEC Practice for Public Companies Atlanta, Austin, Baltimore, Bethesda, Charlotte, Chicago, Los Angeles, Sacramento

3 Reznick Group Building Business Value 2 Renewable Energy Related Services Transaction Advisory Transaction Structuring Project Finance Advisory Due Diligence Compliance Mergers and Acquisitions Implementation

4 Reznick Group Building Business Value 3 Renewable Energy Related Services Project Financial Feasibility Financial Projections and Analysis Investment Plan Development Analysis of Workflow Efficiency and Business Processes

5 Reznick Group Building Business Value 4 Renewable Energy Related Services Tax Credit Syndication Consulting Evaluation of Equity Investment Proposals Minimize Risk Timely Execution & Close

6 Reznick Group Building Business Value 5 What do Investors Want? Investment that is managed like a publicly traded stock Stable and predictable benefits stream like a bond Make money Avoid negative press No surprises

7 Reznick Group Building Business Value 6 Benefits for Financial Investor General business tax credit used to offset tax liability Accelerated tax depreciation

8 Reznick Group Building Business Value 7 Risks Business Issues/Risks –Wind does not blow –Sale of Electricity - Power Purchase Agreement –Project risk - construction, operations, maintenance, warranties Tax Issues/Risks –Partnership formation –Economic substance –Capital account issues related to front-loaded losses

9 Reznick Group Building Business Value 8 Financial Investment Structure General Partner Corp. (Affiliate of Developer) 1% Corporate Investor (Limited Partner) 99% Project Partnershi p (LP or LLC)

10 Reznick Group Building Business Value 9 Five Questions every CFO will ask How do I record the transaction on my books? Will I have to consolidate the business on my books? What happens when performance varies from forecast? Do I have any future financial obligations or risks? Does the structure or operation create tax risk that impacts my books?

11 Reznick Group Building Business Value 10 Five Questions every CFO will ask How do I record the transaction on my books? Methods of Accounting Equity Method –Not in control but able to exert significant influence –Hypothetical Liquidation Book Value (HLBV) Consolidation Method –Investor is the controlling party Cost Method –No ability to exercise control over operating activities –Investments of more than 3% to 5% are not minor - SEC

12 Reznick Group Building Business Value 11 Five Questions every CFO will ask Will I have to consolidate the business on my books? Consolidation of Variable Interest Entities (VIE) –Equity at risk is insufficient to self finance activities –Equity holders lack any one of the following: Ability to make decisions about activities that significant impact Obligation to absorb losses Residual ownership –Varying voting rights

13 Reznick Group Building Business Value 12 Five Questions every CFO will ask What happens when performance varies from forecast? Impairment

14 Reznick Group Building Business Value 13 Five Questions every CFO will ask Do I have any future financial obligations or risks? Asset Retirement Obligations

15 Reznick Group Building Business Value 14 Five Questions every CFO will ask Does the structure or operation create tax risk that impacts my books? Accounting for uncertainty in income taxes –Whether transaction will more likely than not succeed upon IRS audit assuming full knowledge

16 Reznick Group Building Business Value 15 To request a copy of Whitepaper: GAAP Considerations for Investing in Wind Power Partnerships Matt Ferguson Principal & Practice Leader of National Renewable Energy Reznick Group, P.C. 8045 Leesburg Pike Suite 240 Vienna, VA 22182 (703) 744-7424 matt.ferguson@reznickgroup.com Paul S. Mazurek Manager National Renewable Energy Reznick Group, P.C. 2002 Summit Blvd. Suite 1000 Atlanta, GA 30319 (404) 497-8954 paul.mazurek@reznickgroup.com


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