By Matt Davis | April 16, 2025
Three musts for a successful tax equity raise
One of the topics Pivotal180 clients ask us about the most is tax equity. Often the largest and always the most complex piece of the capital stack for renewable energy investments, our team provides training and advisory services to developers, IPPs, infrastructure funds and even tax equity investors on this topic each year.
Our training focuses on the modeling of tax equity deals and the impacts of changes in model assumptions and actual project performance – topics that are often misunderstood and which are critical to the structuring of a successful tax equity partnership. But a great financial model is just one piece of the puzzle for completing a tax equity raise. Here are three tips for getting the most out of your next tax equity transaction.
CIM it to win it
A confidential information memorandum, or CIM, will be potential tax equity investors’ introduction to your project. A high quality CIM will contain a full suite of information about the deal: sponsor experience, design and EPC plans, offtake, and more. It should also lay out a timeline for completing your tax equity capital raise as well as other milestones for project financing, construction and completion.
Critically, the CIM is your first chance to tell the story of your deal, and making a good first impression is paramount. As such, it’s important to work with your team and advisors to create a CIM that is clear, concise, informative, and that presents your project in the best possible light. That means highlighting your team’s and project’s unique competitive advantages as well as identifying risks and the work you’ve done – and are doing – to mitigate them.
While your CIM should provide the ‘glow-up’ your project deserves, it’s also important to be complete and honest. Omitting key information or providing overly optimistic financial projections with an aim of wooing investors is a recipe for disaster down the line. Tax equity investors will complete thorough diligence before investing, so there’s no use hiding things.
One important part of your CIM will be a summary of indicative project economics. In order to make sure those look their best, you’ll need a great financial model.
Get the deluxe model
(What, you thought we’d leave this one out?)
If your CIM piques the interest of potential tax equity partners, one of the next things they’ll want to see is a financial model. Tax equity models are complex and require accurate forecasts of project operations, partnership benefit allocations, capital accounts and more. A well-built, best-practice model will not just help investors understand the value of your project and how much they’ll invest, but also demonstrate your firm’s competence and readiness to complete a tax equity raise.
Because these models require such complexity, they need to be well designed and clearly laid out. Your model should include clearly defined sections for inputs, schedules, construction costs, sources and uses of funding, project operations, depreciation and tax, partnership calculations, investment sizing and partner returns. It should also include excellently designed annual summaries and outputs (including charts) that can be easily reviewed before digging into the nitty gritty details.
Models that are poorly designed, hard to understand or full of errors are a surefire turnoff for tax equity providers. Avoid overly complex formulas, inconsistent formatting and hardcodes that may compromise model functionality or accuracy. Make it easy for investors to run upside and downside scenarios and curves to make their lives easier and show that you understand what matters to them.
Given the importance of the CIM and model, we recommend enlisting some help to make sure those – and your other project documents – are in tip-top shape.
Trust the experts
Any successful financing requires some reliance on advisors and consultants to confirm modeling assumptions, negotiate contracts, and provide comfort to all parties in the transaction. This is especially true for tax equity deals, where critical model inputs underpinning value to all parties must be verified by experts.
Independent engineers, energy market and transmission experts, environmental advisors, appraisers, insurance consultants, transaction and modeling advisors, and legal counsel are among the many professional specialists you should expect to engage to support your transaction. The reports, forecasts and advice they provide will be required by tax equity investors, and their expertise will be relied upon by the teams that structure and negotiate their investments.
Many of the outputs from expert reports – such as merchant energy price forecasts, fair market value assessments, and cost segregations – will directly influence tax equity’s capital sizing. Others, like tax opinions and insurance reports, must be satisfactory for tax equity to invest at all.
If you want to get the most out of your deal, choosing the right advisors matters.
Thanks for the tips – anything else I should know?
Want to truly understand the structure, value drivers, and process of a successful tax equity raise? Enroll in Pivotal180’s upcoming Tax Equity Essentials course! Distilling the most important aspects of tax equity into just two, three-hour sessions, you’ll gain the knowledge and skills to transact in one of project finance’s most complex capital markets.
The course will include content from Pivotal180 trainers along with leading advisors and service providers, including
Tax Equity Essentials is a must for executives and new market entrants for whom an understanding of tax equity is critical.
We also offer a range of training programs for modelers of different backgrounds and experience levels. Check out the links below to learn more about Pivotal180 including all of our financial modeling courses and services. Come model with us!
- Renewable Energy Project Finance Modeling
- Infrastructure & Project Finance Modeling
- Introduction to Project Finance Modeling
- Advanced Project Finance Debt Modeling
- Tax Equity Modeling
- Intro to Battery Storage & Financial Modeling
