Issues and Problems in Negotiating Hydro Financing

by Peter A. McGrath, American Hydro Power Co, Bala, Cynwyd, PA, USA,

Document Type: Proceeding Paper

Part of: Waterpower '85


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: Negotiation | Financing | Hydro power | Taxation | Private sector | Public private partnership | Insurance | Laws

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