Latest / Clean Power Hour / ITC Tax Credit Marketplace with Erik Underwood and Derek Silverman of Basis Climate | EP189

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ITC Tax Credit Marketplace with Erik Underwood and Derek Silverman of Basis Climate | EP189 · Clean Power Hour

• 0:50
  Eric Underwood: We definitely see that there is. There are players like banyan and we love Banyan. We think they're developing a neat product out there that's gonna really help transactions be more efficient through this broader theme that we've talked about how can you keep people and do things faster leveraging technology? You know, we're really focused on tax credit transfers, because we think that there's a lot of effort that needs to be able, that needs to be focused specifically on this issue as a wedge into climate finance, as a way to deploy more capital.
• 1:21
  intro: Are you speeding the energy transition? Here at the Clean Power Hour, our hosts, Tim Montague and John Weaver bring you the best in solar batteries and clean technologies every week, want to go deeper into decarbonisation? We do two, we're here to help you understand command the commercial, residential and utility, solar, wind and storage industries. So let's get to it.
• 1:42
  intro: Together, we can speed the energy transition.
• 1:49
  Tim Montague: Today on the Clean Power Hour, the IRA ITC, you know, the ITC, the investment tax credit was going to step down to 22% in 2023. But we got the IRA in 2022, which increased it to 30%. It's a very generous incentive. And now there's this blossoming of platforms to support that and make your life easier as a solar professional or energy professional. My guest today is basis climate, the co founders, Derek Silverman, and Eric Underwood have created a platform for tax credit for a tax credit market. Almost got it right. Anyway, welcome to the show, guys look forward to geeking out on tax credits and this platform that you've created. Do us a favor, though, and introduce yourselves? Why don't you go first, Eric, and then Derek, and how did you get interested in clean energy? And then why did you start basis?
• 2:51
  Eric Underwood: Yeah, sure thing. So I have spent my entire career working in renewable energy, I left undergrad and started as a developer at a utility scale wind and solar developer. And I quickly pivoted into project finance at that company. And so for me, you know, I was always really interested in, you know, how do you deploy more clean energy?
• 3:13
  Eric Underwood: What are the tools and players that you need to be able to do that. And so, I have worked in various roles at developers. And then I worked as an investment banker in clean energy at Marathon capital. And particularly my time there, I kind of started seeing patterns.
• 3:27
  Eric Underwood: So I started looking at, you know, that it was still a very manual process that, you know, clean energy finance still had a lot of ways that I could start leveraging, and using technology to be able to deploy capital faster, but it wasn't. And so, you know, I've been friends with Derek for a long time. And we, you know, had been talking about what we can do to sort of blend technology and energy project finance together.
• 3:56
  Tim Montague: Very good. Yeah, I
• 3:58
  Derek Silverman: come a very different background, technology background software engineer, joined my brother at a startup that was acquired by Facebook.
• 4:04
  Derek Silverman: So it's been three years to start up, and then we are acquired. We've worked on something totally different social media analytics for news organizations. And, you know, had a wild ride at Facebook. And I knew when I was done there that I wanted to get into renewables, climate change some aspects of that. And I landed a rewiring America for about a year and a half. Every wiring is, if you don't know it is an electrification nonprofit. They, the they, they really helped push various provisions into the IRA, AROUND ELECTRIC rebates, for electrification for low and middle income households, as well as more tax credits for individuals beyond just solar, but also for heat pumps for water heaters, electric water heaters, Edi chargers, like a long gamut of electrification equipment. And so they're close the policy thing, Team transferability piqued my interest. And because we're talking with Eric, as like, Eric had been identifying all these things he wanted to do with technology and proof, project finance, and transferability seemed like that wedge issue where we could really leverage technology to open up this market. And I forgot to mention Eric had known each other forever. We went to Wesleyan University together, we were undergrad, great friends in undergrad. And so, you know, we've been we've been friends ever since. And so we go back a long ways.
• 5:33
  Tim Montague: That's cool. I let's, let's just get some of the nuts and bolts on the table here. You talk about tax credit transfer. So there's a there's a capital project, let's just say a solar project, right. Let's say to small commercial project, it's, you know, $100,000 $30,000 or $33,000, give or take is, is now eligible for a tax credit.
• 6:00
  Tim Montague: And some companies cannot leverage that they don't have a tax liability. And that includes for profits and nonprofits. And so we should also discuss if this is relevant for nonprofits.
• 6:15
  Tim Montague: And, and so when you, when you can use the tax credit, you can use it in year one, or you can spread it out over 20 years. And then it is transferable meaning you can sell that tax credit to somebody else who has the tax liability and wants to reduce their tax burden and participate in the clean economy at the same time, right. It's kind of a win win. There's all kinds of tax credits, I'm sure in the world, but am I am I defining this correctly? Or what else should our listeners know about this?
• 6:54
  Eric Underwood: Yeah, I would just say generally, when we're talking about transferable tax credits, you're not talking about individuals. And so I know a lot of your listeners are out there selling installing solar equipment to individuals for homes, are you sure, you know, mental projects for these credits that are transferable, it's for corporate tax credits.
• 7:15
  Eric Underwood: And so it's in a case where there's a regional developer or installer that now wants to own the assets and may sign a lease with the the property owners.
• 7:23
  Eric Underwood: And in those cases, they can sell the attachment. So if a corporation owns the tax, owns the solar facilities in this example, they can transfer those tax credits to another corporation that has tax liability, and we're here to help make that happen between corporations.
• 7:41
  Tim Montague: But this applies to the host as well, right? If I'm buying a solar, if I'm a company buying a commercial solar facility, like I said, I have a tax credit that I may or may not be able to use, are we not talking about that?
• 7:55
  Eric Underwood: Yes, exactly. If you're a business that has the if your business that's installing, if your grocery store, and let's say in Idaho, and you're installing solar on your rooftop, you can sell the tax credit to corporate that are a business that does have that tax liability. And so that's how it can help.
• 8:12
  Tim Montague: Yeah, and historically, just to jump in, go ahead. Good. Oh, just
• 8:16
  Derek Silverman: want clarification. It's like, you know, really, it's a business tax credit. So it's really the the E the easiest buyer to sell it to is a corporation. You know, there's a lot of it's very complicated, sell it to individuals, they often won't qualify. But really, it's a business tax credit. So you can be an LLC and S Corp. Generating that credit. Yeah,
• 8:39
  Tim Montague: I don't know why you guys went to the whole personal thing. I, my audience is solar professionals, including residential installers, but but there's this whole ecosystem have my audience, which is commercial, industrial, and community solar and utility solar. So anyway.
• 8:57
  Tim Montague: And then there's and then there's direct pay for nonprofits. So nonprofits don't have a don't pay taxes. But they And historically, this was a problem, right? Because the EITC historically did not really apply to nonprofits. And so generally they were going to do third party ownership projects.
• 9:16
  Tim Montague: Now we have something called direct pay. And, and so they can just receive that tax credit as a lump sum payment. Now, obviously, if they're if they're going to receive a lump sum payment, they're not going to be interested in probably selling or trading that but I don't know, does the nonprofit world factor in here at all? So I think
• 9:39
  Derek Silverman: one of our primary purposes is to find buyers and make it trying to help with a transaction, we definitely think the work we're doing is applicable to direct pay, just making sure that those that you're getting your ducks in a row, you're setting yourself up for success when you do apply for direct pay a lot of the same paperwork and questions that buyers asks the government is going to ask for too. So we do expect to be able to support direct pay, but it's not where we're focused our attention is really discovering buyers, educating those buyers, and then really making it possible to transact with a solar developer installer of any scale with corporates around the United States.
• 10:22
  Tim Montague: Yeah. And then the other point of potential confusion is tax equity, finance. Let's distinguish the world of tax equity, finance from tax credits.
• 10:34
  Eric Underwood: Yeah, and I think this is interesting because a lot of people continue to say use tax equity for everything in this universe. And for us, we're really focused on differentiating this. I mean, a tax equity transaction is you're bringing in an equity owner into the project and you're forming a very complex partnership that has, you know, a long history of 20 years of rules and, and processes to sort of ensure that that meets all the standards and requirements that the IRS has had over the years. But it's a complicated ownership process where you're bringing in a tax equity investor, we don't do tax equity at all, because we think that there's a really great elegance in the simplicity of tax credit transfers. And so we're entirely focused on tax credit transfers, which is the simple sale of that tax credit from one business to another.
• 11:22
  Eric Underwood: It's not easy, there's a whole process that we've had to develop and standardize over the last year. But what it means is that there's a really good differentiation between tax equity, which are these more complex partnership agreements, and tax credit transfers, which is the sale of the tax credit, and there's no partnership involved.
• 11:40
  Tim Montague: Got it. So historically, there has been a market for tax credits for transferring tax credits, but it's been managed by the banking industry as my understanding, and now in a way, built a basis Excuse me. The website, by the way, is built with basis. And so you'll you'll hear me confusing basis with builds, but anyway, build with basis. So historically, banking, the banking industry, now that we have basis, you're kind of democratizing access to this, to this phenomenon to this marketplace, right? If you have a big tax appetite. And let's say you're a solar developer, and you're an IPP, you're you're in the business of accumulating assets, then now you can just go to this platform and access credits from other projects and portfolios around the country.
• 12:45
  Tim Montague: Is that right? Yeah,
• 12:46
  Derek Silverman: I mean, I would say, you know, you referenced IPP, looking for credits, I think it's more likely to be IBP might be listing projects with us. But even more so currently, we're focusing on the full from small projects to big projects, we've done $100 million transaction down to 600,000.
• 13:03
  Derek Silverman: What we're really excited about is when, you know, a small scales developer doesn't feel the need to sell it NTP, you know, they look at the finances, and they're like, I can be a long term owner here, if especially in that with the if I can facilitate a tax transfer at x price. And I don't need to like flip it to someone else to get to scale to really interact with the tax equity market, because they can now do tax transfer at 500,000 to 5 million in that range and decide to be a long term owner. But to your point is we democratizing the access to the transfer tax credit market is 100% What we want to be doing and are doing, and it just gives a lot more optionality. And and I think one of the things that can unlock more sales, if you are an installer, and you go to that grocery store in Idaho, and they don't have a tax liability, so kind of the conversation ends, you can go back to them and be like, we actually we can we can monetize those tax credits a month after the project's placed in service at 85 cents
• 14:09
  Tim Montague: on the dollar per credit on the dollar.
• 14:12
  Derek Silverman: And, and you know, we can use that to pay down your loan. And what do you think now? And we we think that leads to a lot more deployments and more projects for, for installers.
• 14:22
  Tim Montague: Exactly. Yeah, I love that. So tell us more about the guard rails like what what is the sweet spot for the platform? What is the deal size?
• 14:29
  Tim Montague: And who is your target audience?
• 14:36
  Eric Underwood: Yeah, I mean, for us, it's interesting, because, you know, in terms of our experience, we've done like Derek said, $100 million transaction, we've done a $60 million transaction. And we've also got, you know, 600,001.2$1.534 million transaction. So for us, when you look at it, we've been doing projects of all sizes, and I think we'll continue to the key here is that we're taking the lessons learned from those large transactions that were our earliest transactions and starting to apply them to this framework that we've developed, have smaller transactions, and that helps us operate a lot more efficiently. And understand what are the key issues that a buyer on large projects is worried about? And is that going to apply to a smaller credit right?
• 15:18
  Eric Underwood: For us? You know, there are transaction costs here that are really, that are really important to manage and get down. And so, you know, our favorite credit is this $600,000 credit because it's the smallest one we've done so far. What do we need to do to establish a better framework for keeping legal legal costs under control to keeping the diligence timeline and framework process efficient so that people aren't spending extra time and getting the transaction done in a month?
• 15:49
  Eric Underwood: We've got a lot of tools that we've done establish with that.
• 15:51
  Eric Underwood: But for us, right now we're looking at any credit that's above $500,000. But we're eager to be able to go below that in time, because that allows us even more that long tail of Digi and CNI, solar and storage to be monetizing their tax credits.
• 16:09
  Tim Montague: I mean, I have to say, when you're talking there, Eric, it hearkened. It may be harken back to my conversation with Amanda Lee at Banyan infrastructure. They're kind of they're creating kind of a parallel universe of a platform to make to reduce friction in deal flow, right, a platform that allows you to store all your project information in an easy, accessible, easily shareable platform. So that, so that, yeah, the information just flows, so to speak, and doesn't get siloed. And there's an there's fewer points of friction. And you know, in the pre show, Derek, you mentioned that you that, you know, Amanda.
• 16:54
  Tim Montague: So, I guess what else should our listeners know like about this?
• 17:00
  Tim Montague: And why? Why is this a thing?
• 17:05
  Tim Montague: Like, what was the pain point that made you guys go, oh, we need a platform for transferring tax credits?
• 17:13
  Eric Underwood: Yeah, I mean, I think for from our side, we definitely see that there is, there are players like Daniel, and we love and we think they're developing a neat product out there, that's gonna really help transactions be more efficient through this broader theme that we've talked about how can you keep people and do things faster leveraging technology, you know, we're really focused on tax credit transfers, because we think that there's a lot of effort that needs to be able, that needs to be focused specifically on this issue as a wedge into climate finance, as a way to deploy more capital for for tax credit transfers, there's a lot of processes that are out there, and that there's a lot of players that are in the space already. But you have to get them to change gears a little bit to be more efficient.
• 17:57
  Eric Underwood: And so, you know, we leverage stuff on our platform, we leverage stuff on other platforms. For us, it's all about thinking, how can we get this transaction really fast, faster and more efficient.
• 18:10
  Derek Silverman: And I'll just jump in and say like, we're using our tools right now to market these credits, really get them in front of people, buyers, tax directors, CFOs, of of mid sized to large scale corporations, and to get them to start, like learning and understand the credits. Now over time, we'd love for them to focus more of their attention on an insurance product that we're which is taking a lot of the risk, but they do need to know, you know, we want them to kind of feel and understand the projects. And that's when we can do through our listing pages.
• 18:38
  Derek Silverman: And then next it's like, how do we get these transactions to be more efficient? And right now lawyers send back checklists. I mean, this is Amanda Lee's point, it's like they they all have a unique Excel document.
• 18:51
  Derek Silverman: That's, that is not up to date, that's not dynamic, that gets stale within 12 minutes. And they're just kind of floating around. And they are charging an arm and a leg to manage those transactions. So we're trying to like, you know, pull a bunch of that back out of the, from the lawyers and manage that more efficiently with technology.
• 19:09
  Derek Silverman: Now, lawyers are still very important to these transactions, but we want to focus like were on, on the documents on like, existential problems in in agreements or guarantees or identifications, not on the management of the transaction.
• 19:25
  Derek Silverman: We think we can do that better.
• 19:28
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• 20:56
  Tim Montague: Yeah, I'm curious, you know, you, Derek, you come from the software side. And and you worked in, you know, big companies like Facebook, what's going on in the world of software? Because I've had some conversations recently that, you know, kind of were eye opening for me like that world is also quickly evolving. And what can you say? I'm not asking you to give away any trade secrets here. But what can you say about building a software as a service that is different today than it was 510 years ago?
• 21:37
  Derek Silverman: Yeah, I mean, I don't we wouldn't see ourselves as like truly software as a service like in a business model. Right, we're not charging a SaaS fee to use us we ultimately now are we're very focused on the transactions. And so it's a success fee based off of matchmaking and a deal close.
• 21:55
  Derek Silverman: But yes, I think your point is, is that thing you know, it's building a successful SAS business is harder than ever.
• 22:04
  Derek Silverman: There's the platform's eat up the point solutions, and you people have raised way too much money. So you know, we're not we're not aggressively raising funds, nor do we think it needs lots, we don't need to spend $20 million or $30 million dollars to build a software, we think you need to spend, you know, real money, but it's a it's you can do it in a more efficient manner. And I think what you're also getting at is like, where's AI? Going to play a role here?
• 22:28
  Derek Silverman: And, you know, I think, long term we see, AI playing a role at the simplest level is like, can we run through every project, every document you're building? If you're buying a portfolio of 50, residential, rooftop leases and the ITC is coming off that? Can we check that every signatures there without doing it manually? That should be something we could do in the next year to run through, like, Has everything been signed, signed by the right person? Great. And the next phase is, you know, what contextual awareness? Can we build into an AI model to cut down on legal costs? And I'm not sure it's not gonna replace legal lawyers, but it can definitely make things more efficient. Yes, but there's, it's an evolving space. And we want to, we're trying to keep up with what's happening in AI, legal, and the whole industry to, to be able to take advantage that, yeah.
• 23:25
  Tim Montague: So let's walk, it means having a lot of data.
• 23:28
  Tim Montague: Ultimately,
• 23:28
  Derek Silverman: we need to also capture a lot of data around these projects. And there's so many different forms to make, to be really to be able to execute and actually have the aI mean, something, do something meaningful.
• 23:41
  Tim Montague: So let's walk our listeners through a transaction.
• 23:46
  Tim Montague: You know, you've got you've got sellers, you've got buyers, but from when a seller posts something for sale, so to speak, what happens? How long does it take? And I, you know, I'm very keen to set expectations for potential users of the platform.
• 24:05
  Tim Montague: Yeah,
• 24:05
  Eric Underwood: so I could take that long, I think for us, you know, we spent a lot of time with both sides of the market, the buyers and the sellers, with the buyers, there's a lot of time spent educating them, getting them to understand the transaction process and framework and risk profile of these credits, how to apply them to their, to their tax liability. But, you know, for for us to be able to present those buyers with a standardized, you know, approach of opportunities. It's really providing a framework for sellers. So, you know, when we're meeting with new clients, we, you know, sign an NDA, we send out, you know, a request for, you know, summary information on the projects that are generating these credits to be able to be, you know, understand the profile, the valuation methods, looking at the timing of the credits, is the project already under construction or not a summary of things there that can let us present those opportunities of tax credits, in a sort of very standardized approach to sellers or buyers on our platform. Then the buyers are, yeah, and they're anonymized as well. So we'll say, you know, we won't say here's a Dixieland, you know, solar, it will say, there's a solar project here in Missouri or something like that.
• 25:16
  Eric Underwood: And then it talks about the general size and timing that those credits will be available.
• 25:23
  Eric Underwood: Once they complete construction, buyers that are able to look at all the credits on their platform, and be able to sort of filter for whatever ones they'd like in terms of size, either timing, or pricing as well. And then they're able to request more information, in which case, they would be able to get access to more information with sellers approval, on details of the project, and be able to then provide a term sheet and submit the term sheet for the sellers.
• 25:48
  Eric Underwood: Were there throughout the entire process. So we're helping the buyers understand what the term should look like what we can do there, we're trying to leverage check as much as possible to keep this as smooth of a process as possible. And then once the seller agrees to those terms, you know, we do think it's a very quick process, working to get that to be done in a month really presenting the tax credit, you know, the terms from once they're signed to getting the diligence and the documentation all sorted. And again, we're there throughout the entire process, because I think you have somebody needs to keep people focused on execution of the transaction. We're going fast and efficient manner. And you know, once the tax credits signed, there's can be some differences in payment timing if the projects are already operational yet. You'll have post closing payment commitments for when those projects are operational or if there's a different commercial agreement that's met. And then of course, we have the IRS registration process, all of these tax credits need to be registered on the IRS website. We think we registered one of the earliest ones on the website. And so we're still working through that registration number process, but it's now live for this tax season. And so that's been another big thing to sort of see the government support its framework so that we can interact with that with our transactions as well. But then after that, it's done the taxman is transferred, you don't have that ongoing equity partnership.
• 27:12
  Eric Underwood: And so some buyers would like to know that the projects are still operating, and owner and qualified, these are key things.
• 27:19
  Eric Underwood: And we're here to help prepare that, you know, we're here to help with that awareness, information transfer over the next few years during the recapture period, but generally, it's a much faster and more efficient process than large, complex tax equity deal.
• 27:35
  Tim Montague: And soup to nuts.
• 27:35
  Tim Montague: What what what should a user what should the expectation be that they might be able to make, you know, complete a transaction, assuming everybody's ducks are in a row, so to speak, like a best case scenario? How long does this take?
• 27:51
  Eric Underwood: Yeah, we're really trying to get these done within a month, we think that once you have the buyer identified, and battling with the credits, the credits are available, it can be done within a month, because the diligence process again, it's quite streamlined. We've got great tools, we have an eight page Tax Credit Transfer Agreement that we've been working on. I mean, this is significantly smaller than the multi 100 Page Tax Equity partnerships. But again, it's still a very solid agreement that's been transacted on, and that is doable. And so for us being able to keep people focused to what are the key aspects of a tax sort of transfer and how to get that done is, is important.
• 28:29
  Tim Montague: So what are the additional pain points that you're tackling? Because you mentioned an insurance product?
• 28:33
  Tim Montague: I don't know what that's about.
• 28:33
  Tim Montague: But where how does this evolve as time goes on?
• 28:39
  Derek Silverman: Yeah, great.
• 28:39
  Derek Silverman: Bringing up insurance, I wanted to bring it up earlier. Yeah, what buyers coming to these transactions, wanting almost no risk. They're like, we're giving your tax liability, and we're gonna give you cash, and we're not, you know, we're not investing in you we are, we are buying these tax credits. So they want is, they really want to de risk this as much as possible. And on smaller credits, where we're focused on attention, the counterparties, the business, or the developer installer is often not, you know, rarely investment grade.
• 29:12
  Derek Silverman: And even even in the upscale, the bigger markets, you still have a lot of midsize shops who are doing hundreds of millions of dollars a year, they're just not investment grade. So they the buyers are seeking identifications and guarantees.
• 29:25
  Derek Silverman: And this, the smaller shops really can't offer that. So that's where insurance steps ends, you do a risk transfer to an insurance product. There's it's a robust market to date, again, but it's been it's kind of built around larger transactions, it's really historically been there to do to the numbers to work on $10 million plus transactions. Now the market is starting to evolve the insurance market. But we we were working on allowing to do one off transactions at the 500,000 million dollar level where it can be insured. And at a at a reasonable within reasonable premium. That insurance I think is key.
• 30:07
  Derek Silverman: Because the counterparties are often weak. Just they're just they aren't. It's not Google or Microsoft, or anyone like that.
• 30:14
  Derek Silverman: They if something there because of what could go wrong and recapture the project go offline, where there's a sale to assets, they really want to be able to look to something to to fill that hole, if there's a recapture. So we see insurance as almost required on most of these transactions. And if you talk to anyone who wanted to transfer this year, there's insurance was likely involved.
• 30:42
  Tim Montague: When you say recapturing the market. You mean when you say recapture? You mean the IRS is calling back the credit or? Yeah, yeah,
• 30:51
  Derek Silverman: I was gonna say recapture can happen for a number of reasons. If the project goes offline, you're technically in, you're in a state of recapture, it needs to stay on for five years. And every year the the percentage that can be recaptured goes by by 20%. So but it goes offline in the final years, only 20% of your credit is at risk. You cannot sell the asset and that means it cannot be foreclosed on. So people will will diligence your your debt to make sure you're gonna stay way above that. And that's that's a low risk or seek a foreclosure, sorry, a forbearance. And then just you know, they're, as you're an expert IRS, this is the government's money, they they're going to want to know that it qualifies and that the valuation of the project is correct. So those things kind of happen upfront and those are And don't like literally wouldn't, you know, wouldn't happen four years later. But these are things that you're worried about the IRS saying, you owe us that money back. And the buyers definitely are.
• 31:57
  Tim Montague: Cool. I wonder if we could talk about a couple of case studies. Yeah, you got some nice case studies on your on your website. But what give us an example of a concrete project that your platform was successful in? transacting?
• 32:13
  Eric Underwood: Yeah, I can go.
• 32:13
  Eric Underwood: I mean, I think for us, it's two that I'd like to talk about a larger one. And then we would you want to talk about a smart one. So we transacted a $60 million ITC investment tax credit from a storage project that was built in California, that's public, the seller, it's on our website as well had electric, that was a great transaction, because we were able to match them with a buyer who was looking for, you know, a large tax credit purchase this year that was looking for a project that was nearing the end of its construction period. And that was able to sort of dig in and diligence what that project looks like. But knowing that a lot of the risk around construction timing and costs are down, or cost variability of the construction was, was down.
• 32:57
  Eric Underwood: And so that transaction was quite smooth for us, we were able to get it done. In a few weeks, it was more longer than our four week target. But you know, we're working on bringing that down. And that transaction was great, because it allowed them to, you know, really define that tax credit transfer. And we're also really happy because we're able to then leverage the experience there with different lawyers and sort of think about how do we make that faster? What do we do more efficiently here on the next ones that we work on? I'd love Derek to want to talk about the smaller credit transaction that we're working on as well right now, because that was really exciting.
• 33:33
  Derek Silverman: Yeah, I mean, it's always a joke that there's the big credit person having worked in investment bank, and I'm Mr. Small credit. But yeah, so we have a $600,000 loan. And we've referenced before, it's between a relatively small buyer, who I think it's working with some taxable tax liability from individuals. And a and the seller is a, based in Florida, it's a ground mount solar project, the real estate firm, built it for their tenants, who had a large energy profile, and they signed a behind the meter PPA. So you know, they, they came to us with this project, it's, you know, very clean in a lot of ways. There's, it's, it's at cost it, they have a strong guarantee in the real estate company. And, you know, they really were, you know, they weren't super focused on price, they just really wanted to get a transaction done as fast as possible. And so it took until the portal open, the seller, or the buyer wasn't keen to sign any term sheets until the IRS portal open. But the moment that portal opened in December term sheet got signed, and we're very close to financial close legal costs, looks like they're gonna stay under $30,000. The there's been very minimal markup on the agreement itself. And, you know, all the signs we're hoping for, and like getting on this learning curve to making this a rinse and repeat small transaction. Process is is barren. Is bearing out. hasn't closed quite yet. But we're, you know, I think we're within a week.
• 35:17
  Tim Montague: Cool. Yeah, I mean, I love stuff. That's real.
• 35:21
  Tim Montague: Like, when people, a lot of people approached me with early stage companies and ideas. And I'm like, Well, you know, call me back when you've got something coming out of the ground. That's proof is in the pudding. Like when you can actually get stuff done and built or transacted, then that's validation that there's a there there. And it sounds like you guys are off to the races. What else should our listeners know about basis? Like, where are you going? What do you need? Well, who are you hiring? And what else should our listeners know?
• 36:00
  Eric Underwood: Yeah, I think, you know, the one thing that's really interesting here, and you know, we're basis climate, so we're not just basis, solar or basis, you know, storage tax credits, its basis climate because the IRA also has a lot of different tax credits that are applying there. So for people that are in the broader space, you know, we're starting to work with more and more different types of credits, you're starting to see 45x domestic advanced clean energy manufacturing tax credits.
• 36:23
  Eric Underwood: There's a lot of buzz right now about the new hydrogen guidance rules for those hydrogen tax credits. So we're excited to because in 2023, we were focused on more core traditional areas of clean energy, which was wind, solar and storage. We are excited to now expand beyond that into other areas. of clean energy Ira qualifying tax credits. And so we're very open to having people come to us. Our team is growing, we have more than a half dozen people now.
• 36:52
  Eric Underwood: And you know, we're really excited to bring solutions to the market that are point solutions to problems that are there. So that insurance product is a really big one that we're working on right now. We're here to help people with the traditional insurance market as well. We're also here to look at what is your tax credit timing?
• 37:09
  Eric Underwood: And how can you bring yourself to the market? When is the right time? And how do we help you think about the economics of the tax credit transfer earlier on?
• 37:20
  Eric Underwood: So our doors are open? We're really excited to talk to people as they, as they have opportunities that they're looking at monetizing.
• 37:29
  Tim Montague: Well said, and I want to give us time to talk to,
• 37:32
  Derek Silverman: oh, it's just gonna jump and say the best time to talk to us is like maybe right after NTP, like you're really moving forward are the projects being built? You know, if it's too early in the process, we don't have that much to talk about if it's 912 months out into $2 million project. And the last thing is, I'm particularly excited about how you qualify heat pumps plus solar. That's a another, again, a new novel kind of ITC where you can where we think is going to be an you know, from my experience that rewiring America and what it can do for electrification, it's like if you can qualify the heat pump for as ITC ITC eligible because it's being powered by heat pumps, you're unlocking more projects, more electrification, and it's I think it's a boon to like the installer installer base, who, you know, have had, it's been a tough year last year with interest rates and in giving them more equipment to sell. That's, that's good, good for climate.
• 38:31
  Tim Montague: Absolutely. And that, and that, and that's a good reference point to my conversation with Jamie score, who was who is the gentleman who introduced us. So thank you, Jamie. And this episode will drop slightly after my interview with with Jamie. But I want to thank Derek and Eric with Basis Climate for coming on the show today, check out all of our content at Cleanpowerhour.com.
• 38:53
  Tim Montague: Please give us a rating and a review on Apple and Spotify. And tell a friend about the show today. You can find me on LinkedIn or a cleanpowerhour.com. I love to hear from my listeners. So please connect with me reach out to me. I'm going to be in San Diego. So hope to see all of you there at InterSolar and Ari plus community power and without How can our listeners find you guys Eric and Derek?
• 39:21
  Eric Underwood: Yeah, we're basis climate. But you can go to our website at buildwithbasis.com. And we've got firms out there to get in touch with us.
• 39:29
  Tim Montague: Excellent. Well, I'm Tim Montague, let's grow solar and storage.
• 39:32
  Tim Montague: Hey, listeners. This is Tim, I want to give a shout out to all of you. I do this for you twice a week. Thank you for being here. Thank you for giving us your time. I really appreciate you and what you're all about.
• 39:46
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• 40:43
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• 40:56
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• 41:01
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• 41:06
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• 41:43
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