10 Tax Credit Transfer Lessons from 2024: a Letter from Reunion

Dear Reunion clients and partners,

2024 was a breakout year for Reunion; we facilitated over $3.5 billion in tax credit transfers with a small but dedicated team of technology and clean energy finance experts. We are proud to have played a key role on the three of the largest tax credit transfers of 2024, including the sale of up to $870 million in 45X credits from First Solar to Visa.

We have ambitious plans for 2025. We will double our headcount, driven by growth in our core tax credit transfer business. In parallel, we will launch several new products aimed at improving the tax credit transfer process. Next up is a software product that we will announce later this month - stay tuned!

While policy uncertainty has been in the headlines, we recently conducted a tax credit buyer survey and the vast majority of our clients have not changed their tax credit purchase plans for 2025. We’ll share more data from our survey, along with updated pricing charts, in February.

Over the last year we spent a lot of time working with and learning from tax credit buyers and sellers, which has shaped our approach to the tax credit market. In the spirit of transparency and continuous improvement, we’d like to share ten lessons we learned in 2024.

Finally, we are grateful for all of our colleagues and peers in the industry— from solar developers and battery manufacturers, to tax directors at leading corporations— working hard to increase adoption of clean energy. We look forward to working with you in 2025.

Andy Moon, Billy Lee, and the Reunion team

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10 Lessons from 2024

Direct relationships with tax credit buyers is our secret weapon

Reunion works directly with buyers to ensure they are “ready to transact”; this typically means that the right stakeholders are on board, and internal approvals are in place.

If buyers start engaging on tax credits opportunities before they are ready, there is a high risk that the deal falls apart later in the process.

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Producing a diligence memo within a week of term sheet execution greatly reduces the potential for 11th hour surprises

On one of our very first deals in 2023, the seller unexpectedly walked away from the deal at the last minute due to a dispute around the calculation of the tax credit amount. This was a bad experience for the buyer, particularly because they had already paid a law firm to start diligence and draft contracts.

We changed how we do business as a result: as part of our offering, Reunion produces a diligence memo within a week of signing a term sheet. This enables the buyer to quickly understand the key issues before spending significant time and expense on the deal.

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Understanding “what is market” can help buyers and sellers move deals forward

Negotiations can go off the rails if buyers and sellers are far apart on key terms. The most contentious terms are related to tax proceedings, indemnities, and tax credit insurance.

Reunion keeps a database of anonymous key terms from 100+ transactions to help buyers and sellers reach a common understanding of “what is market.”

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Even on complex deals, there are ways to streamline the transaction process

Choosing the right legal counsel can make a world of difference. Select counsel with relevant transactional experience; recommendations from trusted sources can help. Some buyers involve accounting firms as an extra layer of diligence, and Reunion’s work is complementary. We efficiently prepare the data room and summary due diligence memo as a starting point, saving time and expense.

Reunion is more involved in the transaction process compared to typical brokers or marketplaces. Our hands-on approach has been important in driving our average time from term sheet to close to below 45 days.

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Very few buyers are committing to purchase tax credits generated in future years

Sellers with projects being placed into service in future years have a major pain point, given the lack of buyers willing to forward commit to tax credit purchases. Lenders are providing low advance rates on tax credit transfer bridge loans that do not have a creditworthy buyer in place (”naked TRABLs”).

Reunion is developing an offering to address this financing constraint; stay tuned for more details.

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Not all bids are equal; sellers should be cautious of anonymous bids

There are a lot of bids flying around the market. However, a proposal from a named counterparty with an outline of key terms is far more likely to close than an anonymous bid with only indicative pricing. Sellers should ask for more information during the bid stage; some anonymous bids do not have a committed buyer on the other end, or involve multiple intermediaries which impact price or certainty of close.

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Transactions with step-ups above 30% are becoming increasingly challenging to execute

In the world where there is lots of credit supply, insurers are choosing to focus their risk appetite on projects with lower step ups. Sellers with with high step-ups should think creatively about ways to insulate buyers from risk and be realistic about what the current market will bear.

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There are often multiple paths to satisfying a buyer’s diligence requirements

We worked on a PTC transaction where more than a dozen of the seller entities were JVs, and the buyer requested specific documentation from each JV that was not practical to collect. We offered a different approach that satisfied the buyer's diligence efforts in a way that was much less burdensome on the parties.

On multiple large transactions, the seller (or buyer) stated: “If Reunion was not involved, there was no way that we would have been able to satisfy the buyer’s diligence requirements and get the deal done.”

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Buyers must be ready to move quickly, as coveted opportunities are highly competitive

A buyer that has to wait for internal approvals will often lose fast-moving deals. It is critical for buyers to agree with internal stakeholders what criteria need to be satisfied for a transaction to be approved

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Prevailing wage and apprenticeship (PWA) documentation and compliance is complicated, frustrating, and expensive

An increasing number of projects require PWA compliance, which results in a large documentation burden and in some cases, an unexpectedly large compliance expense.

Reunion sees a big opportunity to simplify and reduce the cost of PWA compliance using software; stay tuned for our product launch in February.