Private Equity Roll Ups for Small Scale Renewable Energy Projects

Renewable Energy projects can be viewed as falling into one of three categories. A large and growing industry is the residential solar project market. This market consists of large operators which through their dealer networks have developed a very popular and profitable model for homeowner installation. A well-established market is the utility-scale projects. This market benefits from the demand from traditional owners of energy plants, infrastructure funds and private-equity funding. The third category is the small scale commercial market. While the economics of the small scale market are strong, the market suffers from the inability of sponsors to access the debt and tax credit markets for small commercial projects. In addition, the complexity of renewable energy projects generates substantial transactional costs which are more difficult to be absorbed by smaller commercial projects. Attorneys in the interdisciplinary renewable energy group at Duane Morris are working with middle-market renewable energy sponsors to aggregate small scale renewable energy projects to a critical mass. These projects will then be rolled up to a private equity fund which has access to capital at very favorable interest rates. In addition, the aggregation of the projects generates a larger renewable energy investment tax credit which is more attractive to tax credit investors.

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