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CHICAGO — E.On Climate & Renewables North America announced Monday that it has secured $150 million of institutional equity financing from Bank of America Merrill Lynch in exchange for a partial interest in its Pioneer Trail Wind Farm near Paxton.
Through what is commonly known as “tax equity financing,” Bank of America Merrill Lynch will provide the $150 million up front and will be reimbursed through federal production tax credits (PTCs) that the 150-megawatt wind farm receives, according to Matt Tulis, communications manager for E.On Climate & Renewables North America, a Chicago-based subsidiary of Germany-based E.On.
Tulis explained that the financing investment helps the firm because “we don’t have a big enough tax liability to use all the tax credits the wind farm generates.
“It allows us to monetize the value of the tax credit so we’re able to use that money to invest in other wind farms,” Tulis said.
The federal production tax credit gives wind farm developers about $22 per megawatt-hour of energy produced, Tulis said.
The tax credit is due to expire this year in the U.S., and the wind energy industry has been lobbying Congress in recent weeks to extend it. A recent study found that extending the tax credit will allow the industry to grow to 100,000 jobs in just four years, while an expiration will cause the loss of 37,000 jobs, according to the American Wind Energy Association’s website.
“It’s a pretty big deal for us,” Tulis said. “We’re definitely keeping close tabs on all the developments there in Washington, D.C., and hoping that it will be extended.”
E.On’s Pioneer Trail Wind Farm, built last fall in eastern Ford and southern Iroquois counties, features 94 1.6-megawatt turbines capable of supplying clean power to more than 45,000 households. It is the second wind farm the company has built in Illinois, as E.On last year also completed its 150-megawatt Settlers Trail Wind Farm near Sheldon in Iroquois County.
In February, E.On secured $122.2 million of institutional equity financing from JPM Capital Corporation (JP Morgan) and Wells Fargo Wind Holdings LLC in exchange for a partial interest in the Settlers Trail Wind Farm. JP Morgan acted as lead investor in the financing.
“JP Morgan and Wells Fargo were natural partners due to their leadership and experience in the tax equity market,” said Steve Trenholm, chief executive officer for E.On Climate & Renewables North America.
Trenholm on Monday also welcomed Bank of America Merrill Lynch as an investor in the Pioneer Trail Wind Farm. Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corp.
Dr. Verena Volpert, senior vice president of finance of E.On Ag, said the firm “closely analyzes the specific aspects of each project to find a customized transaction tailored for the best fit,” and she said “we look forward to a mutually beneficial, long-term relationship with (Bank of America) Merrill.”
“Our investment in the Pioneer Trail Wind Farm is another step in Bank of America’s 10-year, $20 billion environmental business commitment,” said Todd Karas, president of Bank of America Public Capital Corp., which includes Bank of America Merrill’s Renewable Energy Finance Group.
“E.ON is a significant (Bank of America) Merrill institutional client, and we are pleased to have expanded our relationship through this renewable energy project that also supports the local Illinois economy.”
The Pioneer Trail Wind Farm is expected to generate more than $29 million in local taxes, pay $8 million in local salaries, and earn landowners more than $50 million over its 25-year lifespan. The Pioneer Trail Wind Farm is the 15th operational wind farm in North America for E.On, giving the company more than 2,200 MW online.