Risk Management Team of the Year: Summit Ridge Energy/Marsh/Everest Insurance
Summit Ridge Energy LLC was planning a solar power development that would serve the energy needs of low-income residents in Virginia when a funding kink threatened to stall the project.
Such renewable energy work is often partially funded by transferring tax credits to investors who take an equity stake in the project. This allows developers to raise cash, while investors — typically financial institutions — gain future credits to offset federal taxes. The cash and credits become available after the project is completed.
“We needed a lender to bridge that investment, to lend against the commitment of the tax equity investor,” said Jake Compton, senior director of project finance at Arlington, Virginia-based Summit Ridge.
Jake Compton, Senior Director of Project Finance at Summit Ridge Energy
Project lenders, however, require that tax equity investors carry an investment-grade credit rating from a rating agency. In Summit Ridge’s case, one of the investors did not meet that requirement.
Summit Ridge turned to Marsh LLC for ideas on how to solve the problem, which asked Summit Ridge to act as a pilot case for a solution it had in mind.
The broker’s credit, tax and renewable energy practices then worked with Summit Ridge’s finance team to host a session with more than 50 underwriters to discuss risks associated with tax credit transferability and whether insurance products could address the issue.
Marsh ultimately began work with Everest Insurance to design a default insurance policy, which satisfied the lender’s concerns and provided funding to begin the solar energy project.
###
Excerpt: “We had our first conversations about it in late third-quarter 2023,” Mr. Compton said of the work to explore an insurance solution. Around six months later, the deal was done.
“They understood intuitively what we were trying to do,” Mr. Compton said of Marsh and Everest.
Read more: Business Insurance, by Michael Bradford.
Related links: