Sale Leaseback interest rates

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mcs41
Sale Leaseback interest rates

Hello,
I have noticed that the Sale Leaseback financial model does not include the option of applying interest rates. Is there some way of including debt into the equation? If not why is it set up like this?
Thank you for your time,
Mahayla

Paul Gilman

Dear Mahayla,

That is correct. SAM's sale leaseback financial model does not consider project term debt. SAM assumes that the tax investor (lessor) purchases 100% of the project from the developer (lessee), and then leases it back to the developer. In your scenario, which partner is borrowing money for the project?

Best regards,
Paul.

mcs41

Hello Paul,
I was interested in a scenario where the tax investor acquires financing for the project. Or are the sale leaseback projects usually internally financed?
Thank you for your response.
Mahayla

mcs41

Also, what do the costs of acquiring financing refer to in this scenario? Does that category apply to acquiring the construction phase financing?
Thanks again,
Mahayla

Paul Gilman

The "cost of acquiring financing" for the sale leaseback model is for cost of securing the participation of tax investors.

Construction financing is treated as part of the investment cost.

There are a few articles on the web that discuss some of the details of these financial structures that might be helpful. For example:

https://woodlawnassociates.com/tax-equity-101/

https://www.wsgr.com/PDFSearch/ctp_guide.pdf

https://www.greenbiz.com/blog/2014/04/07/4-ways-make-solar-financing-less-weird

Best regards,
Paul.

mcs41

Hello again Paul,
I am still confused why there isn't an option for the tax equity partner to finance their purchase of the project from the developer. This seems like a concern because all equity projects tend to result in significantly higher LCOEs than at least partially financed projects.
thank you,
Mahayla

Paul Gilman

Dear Mahayla,

There is an option for debt with the partnership flip financial models in SAM, but not for the sale leaseback model. These models were developed based on the most popular structures in 2010.

Best regards,
Paul.

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