PFR Quotes Shariff Barakat on Increase in Solar Tax Equity Investor Buyouts

Power Finance & Risk has quoted Akin Gump tax and global project finance partner Shariff Barakat in its article “Solar tax equity investor exits ramp up.” The article discusses the increase of tax equity investor buyouts or third-party replacements in solar investment projects.

Barakat, who joined Akin Gump last month (learn more here), confirms that this has become a more common trend, particularly for dealmakers looking to flip early or down to a 5 percent cash interest. He added, “There is one structure out in the market where the buyout value plays into the overall pricing of the deal significantly and the buyout value has become a point of focus for the investors who use this structure.”

However, Barakat explains a tax equity buyout is less likely in a majority of the “dollar volume” and “megawatt volume” that utilize yield-based flip structures with no put options but with the sponsor having a call option. He noted, “Some of the buyout pricing mechanisms in the documents for those deals are very uneconomic to execute because of accounting constraints included by the tax equity investors, thus it becomes effectively a negotiated buyout.”

Barakat concludes the article, noting that tax equity buyouts are generally beneficial for the sponsor, adding “There are some deals where the tax equity investor maintains the whole suite of veto consent rights post-flip, making the need to buyout the tax equity investor more important.”