Issues and Problems in Negotiating Hydro Financingby Peter A. McGrath, American Hydro Power Co, Bala, Cynwyd, PA, USA,
Abstract: Two basic approaches have been used to finance privately sponsored hydro projects: a sale-leaseback transaction, and a limited partnership. Both structures involve the transfer of the project's tax benefits to a third party as an important component of the financing. Three key problems are common to both structures: obtaining construction financing, determining project insurance coverage, and negotiating who bears the risk of tax law changes. There are other issues which are specifically related to the sale-leaseback and the limited partnership structure. An alternative financing method is direct internal funding by the developer. A major factor is the tax reform proposals now under consideration.
Subject Headings: Financing | Taxation | Negotiation | Hydro power | Private sector | Public private partnership | Insurance
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