Avangrid, Inc., a sustainable energy company and member of the Iberdrola Group, and Vitol Inc. have reached a landmark transfer agreement for an estimated $100m of 2023 production tax credits (PTCs) from eight operating wind farms, totaling 1,134 MW of generating capacity, according to a news release.
Basis Climate served as advisor to Avangrid in the transfer, according to a separate press release.
The IRA created a new transferable credit framework to help developers monetize PTCs. Under the IRA, renewable energy owners like Avangrid who qualify for tax credits but are not able to use them immediately can transfer credits to a third-party investor, such as Vitol. Prior to the IRA, this was only possible through a tax equity partnership, which requires a lengthy diligence and negotiation process as well as significant transaction costs.
“The Inflation Reduction Act offers an unprecedented stable framework, enhancing the attractiveness of renewables,” said Pedro Azagra, Avangrid CEO. “It has created a tax credit transfer process that is streamlined and removes the bottleneck that existed with the tax equity investment structure. We expect this transaction to serve as a reference point in this rapidly expanding market. The transfer ensures that we receive greater value from our renewable energy projects, and it will allow us to pay down debt and make further capital investments to benefit our customers.”
“We are delighted to partner with Avangrid through this tax credit investment, part of Vitol’s broader strategic investment in renewable resources and the energy transition,” said Rick Evans, CFO of Vitol Inc. “This new tax credit transfer mechanism promises to unlock significant pools of new capital to support investment in renewable resources.”
In its press release, Basis Climate noted that the seller had multiple potential buyers, while a simple 10-page contract reduced friction and costs.
