acCOUNTing for Renewable Energy

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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, NM

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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

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Renewable Energy Related Services

• Transaction Advisory
• Transaction Structuring
• Project Finance Advisory
• Due Diligence
• Compliance
• Mergers and Acquisitions
• Implementation

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Renewable Energy Related Services

• Project Financial Feasibility
• Financial Projections and Analysis
• Investment Plan Development
• Analysis of Workflow Efficiency and Business
  Processes

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Renewable Energy Related Services

• Tax Credit Syndication Consulting
• Evaluation of Equity Investment Proposals
• Minimize Risk
• Timely Execution Close

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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

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Benefits for Financial Investor

• General business tax credit used to offset tax
  liability
• Accelerated tax depreciation

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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

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Financial Investment Structure
Project Partnership (LP or LLC)
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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?

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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

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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

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Five Questions every CFO will ask

• What happens when performance varies from
  forecast?
• Impairment

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Five Questions every CFO will ask

• Do I have any future financial obligations or
  risks?
• Asset Retirement Obligations

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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

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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
• [phone]
• matt.ferguson_at_reznickgroup.com

• Paul S. Mazurek
• Manager
• National Renewable Energy
• Reznick Group, P.C.
• 2002 Summit Blvd.
• Suite 1000
• Atlanta, GA 30319
• [phone]
• paul.mazurek_at_reznickgroup.com