An idea getting attention now is giving the renewables sector the right to access “master limited partnerships” -- just like oil, natural gas and coal can now do. Simply, that is a business structure that has limited liability while allowing investors to be taxed at their personal rate on dividends.
Right now, the fossil fuels can set up those partnerships but the green fuels cannot. Such deals are able to attract capital because profits are only taxed once -- when the dividends are distributed, and not at the corporate level. Those investments are liquid and they can be traded, making them a valuable part of building long-term energy infrastructure projects.
Dan Reicher, former director of climate change and energy at Google, raised this issue during an EnergyBiz conference in Washington on Friday. He said that those master limited partnerships could supply “hundreds of millions of dollars” to renewable energy projects by appealing to investors who seek an attractive dividend payment, which could be around 6 percent.
“Because master limited partnerships are so attractive to investors, they have been proven to bring new capital into American energy projects,” says Senator Chris #$%$, D-Del., who is sponsoring a bill to apply such business structures equally across all energy types. “This is especially important in the case of renewable energy generation, where it is harder for investors to see as quick a return compared to fossil fuel-based energy generation, for which much of the process and transportation infrastructure was built decades ago.”
I had bought shares of pw it is a railroad reit that says it wants to buy the land underneith a solar plant. I think it is mainly a lawsuit play though (with a dividend). If they own the land underneith a geothermal plant maybe they could spin it off as a reit, I would suspect it is best not to do that though.
I know there has been disussion of Renewable related REITS, and they would seem to provide a means of financing renewable projects. A partnership where unit holders receive K-1's instead of 1099-Divs's adds tax complexity to the for some share/unit owners. I recall ORA had various debt covenants which limited their dividend. I would think (I'm not an expert) the limitation would limit partnership distribtions., as well. There's some diversification benefit to owning operating facilities as well as designing/manufacturing equipment. There is an interceding party in the form of an Israeili investment fund which has some, unknown to me, percentage of ORA shares, and I recall that enitity is party to a shareholders agreement with ORA's founders.
Good comments sunfund.....thanks.
I own a couple of MLPs both in my brokerage and IRA. Even though the distributions are taxed as ordinary income, and you have to file a K-1 instead of a 1099, the fact that any MLP has to distribute (I think) 90% of its profits to its unit holders, makes them attractive to investors looking for income.
The creation of MLPs has created a boom in energy infrastructure in this country. Without the tax benefits of an MLP, this country would not have been able to handle the massive increase in nat. gas supplies.
I think MLPs for alt energy (including goethermal, which I have not heard mentioned, although I would be VERY surprised if it wasnt eventually included) would create a similar boom for large-scale alt energy projects.