US investor group clinches tax credit deal for $1.5 billion renewable power acquisition

By Isla Binnie

NEW YORK (Reuters) – Invenergy Renewables, Blackstone (NYSE:) and Canada’s second-largest pension fund said on Wednesday they struck a deal with Bank of America (NYSE:) to help buy wind and solar plants worth $1.5 billion, capitalising on a new tax structure included in President Joe Biden’s landmark climate law.

Developers and investors are working on ways to take advantage of a provision in the 2022 Inflation Reduction Act(IRA) which gives companies tax breaks for funding the clean energy projects which can help wean the world off fossil fuels.

Invenergy said in a statement it agreed to sell tax credits worth $580 million to Bank of America, and put those funds towards buying 14 projects from American Electric Power (NASDAQ:).

Policymakers hope the new system will bring more money from fresh sources into renewables projects which have long relied on a limited group of large banks which can handle the process of buying equity stakes and taking the associated tax breaks.

This is the first large-scale transaction of its kind to be publicly announced, Bank of America’s global head of sustainable finance Karen Fang said in the statement.

It “creates a financeable transferability product that will be used to scale the growth of renewable energy,” Fang said.

Around $4 trillion will need to be spent on clean energy development globally each year by 2030 to allow the world’s economies to cut greenhouse gas emissions to net zero, meaning no more than can be captured by natural sinks like forests or using technology, the International Energy Agency said.

Analysts at investment bank Credit Suisse have estimated the IRA could lead to the generation of tax credits worth $576 billion by 2031.

Treasury Department and Internal Revenue Service published rules on how to regulate tax credit transfers in June, and they are expected to launch an online registry by the end of 2023.

Private equity firm Blackstone has invested around $4 billion in Invenergy. Its fellow investors include Canada’s Caisse de depot et placement du Quebec.