Avangrid Inc. and Vitol Inc. have reached a transfer agreement for an estimated $100 million of 2023 production tax credits from eight operating wind farms, totaling 1,134 MW of generating capacity.
The agreement marks one of the largest publicly announced deals to date since the passage of the Inflation Reduction Act, and it cements Avangrid as an early mover in single-year as-generated credit transfers.
“The Inflation Reduction Act offers an unprecedented stable framework, enhancing the attractiveness of renewables,” says Pedro Azagra, Avangrid CEO. “It has created a tax credit transfer process that is streamlined and removes the bottleneck that existed with the tax equity investment structure.
“We expect this transaction to serve as a reference point in this rapidly expanding market. The transfer ensures that we receive greater value from our renewable energy projects, and it will allow us to pay down debt and make further capital investments to benefit our customers.”
The IRA created a new transferable credit framework to help developers monetize PTCs. Under the IRA, renewable energy owners like Avangrid who qualify for tax credits but are not able to use them immediately can transfer credits to a third-party investor, such as Vitol. Prior to the IRA, this was only possible through a tax equity partnership, which requires a lengthy diligence and negotiation process as well as significant transaction costs.
“We are delighted to partner with Avangrid through this tax credit investment, part of Vitol’s broader strategic investment in renewable resources and the energy transition,” says Rick Evans, CFO of Vitol. “This new tax credit transfer mechanism promises to unlock significant pools of new capital to support investment in renewable resources.”
The 2023 PTCs included in the transfer agreement with Vitol are from eight of Avangrid’s wind farms: Baffin Bay, Deerfield, Desert Wind, Klondike II, La Joya, Tule, Trimont and Twin Buttes II.
The third largest wind operator in the United States, Avangrid expects to continue active participation in PTC transfers and will continue to push at the edges of this developing market.
