Page 316 - Fluid Power Engineering

282 Chapter Thirteen

1. Accelerated depreciation of assets. In the United States, the In-
ternal Revenue Service (IRS) allows for 5-year accelerated
depreciation of renewable energy assets. In Mexico, a 1-year
accelerated depreciation is allowed and the tax credits may be
rolled over. The depreciation charges reduce taxable income.
2. Production tax credit (PTC). In the United States, this has be-
come the primary incentive. In 2009, for every kilowatt-hour
of renewable energy produced and delivered to the utility,
the wind project owner gets a tax credit in the amount of
2.1c/kWh. This tax credit can be applied to offset tax on other
income. The advantage of PTC is that it provides an incentive
to produce energy, as opposed to an investment incentive in
an energy project that may or may not produce.
3. Investment tax credit. In this case, the owner of a wind project
is issued a tax credit that is based on the investment in the
project. Note this tax credit is oblivious to amount of energy
production. In 2009, as a part of the stimulus package, the
United States offered a 30% ITC. A project owner can avail of
either production tax credit or investment tax credit, but not
both.

Financial Statements
Three types of financial statement are covered: Income statement, cash
flow statement, and balance sheet. In wind projects, the income state-
ment and cash flow may be combined. The combined statement con-
veys majority of the information.

Income Statement and Cash Flow for a Wind Project
Table 13-3 contains the income statement along with after-tax cash
flow. A 20-year pro forma income statement will contain 20 columns
containing values for each year. In addition to the above, a cash flow
statement will normally include an accumulated liquidity line item,
which aggregates all the cash flows for previous years. Some invest-
ment houses may request monthly pro forma income statements for
the first few years.

Balance Sheet for a Wind Project
In a wind project, the balance sheet is not as interesting as the income
statement. The elements of a balance sheet are in Table 13-4. In this ta-
ble, dividend payments at the end of the life of the project are assumed.
Annual dividend payments would involve appropriate adjustment to
cash flow.