New bioenergy financing mooted, as MLP legislation readied for US Senate

June 7, 2012 |

In Washington, Senator Chris Coons (D-DE) is expected to introduce legislation shortly to allow master limited partnerships in renewable energy, according to a report in the New York Times.

When the legislation is introduced, it will have bipartisan support in the Senate, although no action is expected on the Senate floor this year on the bill, owing to the upcoming election season.

As the NYT article written by Felix Mormann and former Assistant Secretary for Renewable Energy Dan Reicher details, “Master limited partnerships carry the fund-raising advantages of a corporation: ownership interests are publicly traded and offer investors the liquidity, limited liability and dividends of classic corporations. Their market capitalization exceeds $350 billion. With average dividends of just 6 percent, these investment vehicles could substantially reduce the cost of financing renewables.”

The legislation will provide the Senate with two options – one, a bill from Bernie Sanders of Vermont banning MLPs for fossil energy, one extending the MLP structure from fossil energy to renewable energy.

The move to bring the structure into renewable energy, which counts among its architects one of Bioenergy’s Top 100 Personalities, Mark Reidy at Mintz Levin, will be especially valuable if Congress does not extend the investment tax credit or production tax credit.

Master Limited Partnerships, under which structure allow assets to be contributed to a partnership (and taxed once, instead of being taxed twice as in the case of a corporation-owned asset), and can be taken public via IPO. It is a structure successfully utilized by Rentech for its fossil nitrogen fertilizer business in the past year.

MLPs have skyrocketed in popularity  in recent years, growing from $20B in 2006 to $350B last year. MLPs, along with REIT (Real Estate Investment Trusts) are currently believed to be the best candidates for the long-term expansion of advanced biofuels. Last year, REITs reached $440 billion in total market size, based on activity in other sectors.

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