Five key players in financings of US offshore wind projects talked at the annual offshore wind conference organized by the American Wind Energy Association in October about the expected terms for US financings, the hot-button issues for lenders, tax equity investors and project developers and how much deal flow to expect in the next 12 to 24 months.

The panelists are Clay Coleman, director of finance for Avangrid Renewables, developer of the Vineyard project that was in the market last year seeking financing, Martin Pasqualini, a managing director of CCA Group, a tax equity advisory shop, Joel Spenadel, executive director on the tax equity team at JPMorgan, the largest US tax equity investor, Alberto Garcia, a managing director and head of energy for the project and acquisition part of Spanish bank Santander, and Chris Moscardelli, a managing director at French bank Société Générale.

Current financing efforts

MR. MARTIN: There are two kinds of projects taking shape off the Atlantic coast.

Some are owned by joint ventures that have plenty of capital. There could be a joint venture, for example, between an oil company and a utility that plans to allocate the tax benefits to one of the partners and give the other partner cash to equalize returns. The tax benefits on an offshore wind project amount to anywhere from 26¢ to 44¢ per dollar of capital cost, depending on when the project started construction. That's a lot of money for a $3 to $6 billion project.

There are other projects that will need to tap external debt and tax equity. This latter type of project is our main focus today.

No project in federal waters is in a position to start construction in the water today. The Bureau of Ocean Energy Management has had a hold on issuing construction permits since August 9, 2019. A decision is expected on the first permit around December 18. [Editor's note: This was later moved to January 15, 2021.]

With that background, Marty Pasqualini, to what extent are financing efforts currently on hold?

MR. PASQUALINI: For the most advanced project, we had gotten to an executed term sheet with tax equity investors and had awarded all of the top ticket for the debt side of the transaction before BOEM essentially stood us down.

As we approach what we hope to be an official go ahead in December, we have started to gear ourselves back up again and have had our first few calls to reorient the working group about the project timeline. Once we get a go ahead, that will be time for us to start polling the market again, putting the band back together to a large extent and moving forward while we wait out the comment period on the permit. For other projects, it is obviously difficult to do much more than inform the market about the project and the expected timeline in advance of receiving a blessing from BOEM.

MR. MARTIN: So things are on hold, but gearing up in the hope that financings will start rolling soon after December 18.

MR. COLEMAN: We should be ready to start within minutes after receiving the BOEM permit.

MR. PASQUALINI: The plan is to issue a full notice to proceed on the updated construction schedule with a full raft of project counterparties identified and contracted by the middle of 2021.

MR. MARTIN: The "we" to which Clay Coleman referred is the Vineyard project, which is roughly an 800-megawatt project off the Massachusetts coast. Joel Spenadel, you are part of the tax equity for that project. Is the timeline that Marty Pasqualini described consistent with your own planning?

MR. SPENADEL: Yes. I expect to be done with my other fundings and commitments on December 17, so December 18 sounds great. [Laughter]

MR. MARTIN: Alberto Garcia, you have been talking to lenders. Will lenders be prepared to move on the same timeline?

MR. GARCIA: Yes. It is the same situation with the debt. We did not yet have a signed term sheet when things shut down, but things will gear up quickly once the construction permit is in hand. The tax equity and debt need to move on parallel tracks.

MR. MARTIN: Chris Moscardelli, you have been advising other projects besides Vineyard, as have others on this call. How far in advance of the expected financial closing do you think sponsors should be out talking to tax equity investors and banks and by when do they need to have term sheets signed and have moved into documentation?

MR. MOSCARDELLI: It is a balance. You do not want to start too early because the market will have changed by the time you are ready. No one would have expected the COVID impact nine months ago, for example. The uncertain regulatory process has left a huge question mark as to when things will really happen.

It is frustrating that we have gone this long without having a sizeable offshore wind project built in the United States. We are proud of our role in Block Island, but who would have thought that the US would still have built only a single offshore wind project with five turbines for a total of 30 megawatts almost six years after the financial closing on that project?

MR. MARTIN: Let me provide more context to my question about when to start negotiating the financing.

Every project must clear a regulatory process at the Bureau of Ocean Energy Management. The developer must submit a construction and operations plan, or C-O-P for short. This is followed by a lot of back and forth on the COP, and then BOEM prepares an environmental impact statement. Preparation of the environmental impact statement can take up to two years. That leads eventually to a record of decision that is essentially a federal construction permit, after which the project must submit a detailed construction plan. Review of the construction plan takes another four to six months.

Do you start negotiating once the record of decision is issued or must the developer wait until the detailed construction plan goes in or even until it has been cleared?

MR. MOSCARDELLI: No. You start things early. I don't think you have to wait until everything is finalized and then turn to putting documents together. Assume six to nine months to negotiate all the financing documents and fund. Lenders will have a hard time funding without having all the permits and approvals in hand. You bridge that by signing documents with a series of conditions precedent to funding.

MR. MARTIN: Clay Coleman, you heard six to nine months to reach funding. Does that sound right?

MR. COLEMAN: Nine months is probably more realistic than six months, even in cases where everything goes relatively smoothly with BOEM. My view on this could be colored by the fact that circling the tax equity club for our project took a long time. Since ours was the first substantial project, there was an extended education process, which may not be required for later projects. I am measuring the nine months from when you send out the first teasers. Of course, you will have had to have done a lot of preparatory work to get to the teaser stage.

Advance funding commitments

MR. MARTIN: Marty Pasqualini, projects in the Atlantic are expected to take two to three years to complete after the record of decision. There are short construction seasons in the North Atlantic. Tax equity investors do not usually commit that far in advance to fund. How will that problem be addressed?

MR. PASQUALINI: I think there will ultimately be two paths. Tax equity is not as large a component of the final capital stack as for an onshore project. Therefore, one path is for the sponsor group to decide it can wait to put the tax equity in place. This path may take a lot of intestinal fortitude and a balance sheet that can be used to fill any gap in the capital stack, if needed. The other path is to find a way to compensate the tax equity investors for the longer commitment.

MR. MARTIN: Joel Spenadel, how far in advance will JPMorgan commit for a project like this?

MR. SPENADEL: We are prepared to commit up to two years in advance. As Marty suggested, the key is the proper compensation for that extended commitment. Clearly we have not had to make such long commitments for onshore projects, but under these circumstances, we are prepared to do it for offshore.

MR. MARTIN: Is the proper compensation an upfront fee?

MR. SPENADEL: Yes, a commitment fee.

MR. MARTIN: Is it paid in a lump sum up front or over time?

MR. SPENADEL: That can be negotiated. It is part of the commercial discussion.

Debt tenors

MR. MARTIN: Alberto Garcia, you were in the market last year trying to raise external debt for offshore wind projects. Can you share any data about the debt that was on offer then? How many banks and what was the pricing?

MR. GARCIA: There are some confidentiality limits to what I can say. More than 50 institutions expressed interest in negotiating terms. Availability of debt will not be an issue for US offshore wind projects.

The question is how to optimize the debt in conjunction with other elements of the capital stack, like the tax equity in particular. The immaturity of the US sector, combined with the complexity of the structures, will affect the cost of capital here compared to the cost in Europe. The large number of institutions interested in lending here could be a counterbalance of sorts. The debt structures will look more to US onshore wind projects, than to European structures, with the debt back levered behind the tax equity.

MR. MARTIN: Is bank debt likely to have a term of seven years in a mini-perm structure, meaning cash sweeps?

MR. GARCIA: Mini perms, yes. If you asked me last year whether the term will be seven years, I would have said yes. After COVID, we will see. We will try to see whether we can do something in the intermediate range between the onshore projects in the US and the European offshore projects that have way, way longer debt tenors.

MR. MARTIN: How do you expect conditions to have changed early next year, assuming COVID-19 remains a drag on economic activity?

MR. GARCIA: That is hard to predict. Some of the banks that were ready to lend in early 2020 may not be ready.

There will be some tension between pricing and tenor. We will need to take stock of how things are evolving. There will be a lot of focus during diligence on supply chains, construction schedules and contingency plans.

MR. MARTIN: Chris Moscardelli, offshore wind projects have very good PPAs. They are long term and with utilities with good credit. The revenue stream is more predictable. How do you get value for that out-year revenue in a seven-year transaction?

MR. MOSCARDELLI: You get that value by amortizing the principal repayment over a longer term than the initial tenor. The mini-perm structure that Alberto mentioned is very common in the US. One of the main reasons why it is so common is the robustness of the US capital markets for refinancing. We expect most, if not all, of the financings for offshore wind in the US will use a mini-perm structure. You get that value for the long-term contract through a refinancing that pushes out the underlying amortization to match or come close to the end of the PPA term in 20 to 25 years.

Coverage ratios

MR. MARTIN: Let's focus on the other terms on offer. We are talking about the bank market primarily. What debt service coverage ratio do you expect for offshore wind in the US?

MR. MOSCARDELLI: I don't think it will be dramatically different than what we have seen onshore. You have a probability-weighted coverage ratio on a P50 basis and a P99 basis.

MR. MARTIN: Is the P50 debt service coverage ratio 1.35x, 1.4x?

MR. MOSCARDELLI: Historically it has been 1.4x on a P50 basis. We are seeing a little more aggressive behavior from banks moving toward 1.35x and possibly even to 1.30x on a P50 basis. We should be in that range for offshore wind as well. I do not foresee a premium in sizing metrics to lend to offshore wind compared to onshore wind.

MR. MARTIN: Alberto Garcia, same numbers?

MR. GARCIA: Yes.

MR. MARTIN: We have been talking about bank debt. What about project bonds and term loan B debt? Are those markets flush with money for offshore wind?

MR. GARCIA: We will reevaluate again, but I suspect the answer will remain yes, subject to sponsor needs. These other markets are less able to take on construction risk, so they are more likely to be tapped for refinancing after some of the early projects are already in operation.

Banks v. capital markets

MR. MARTIN: Clay Coleman, I think you were ready to go with all bank debt before BOEM stepped in. Will you reassess that and, if yes, what is your thought process?

MR. COLEMAN: We will reassess everything given that it has been more than a year and we have obviously had some pretty severe exogenous shocks since we went pens down. Santander did the market sounding for us in early 2019 of the various sources. The term loan B market was not able to provide all of the debt and, as a co-lender with the banks, it was more expensive. Its big advantage is tenor, but at least in the market sounding we did before, we were seeing mini perms as long as 10 years post-construction and a fully amortizing loan as long as 18 years.

One big change obviously is that interest rates are very low today. It may make sense to take refinancing risk off the table by going with a fully amortizing loan because it is hard to imagine that interest rates that far out will be as low as they are today, even with step ups.

MR. MARTIN: So that suggests project bonds with a fixed rate or institutional debt with floating interest?

MR. COLEMAN: There were a number of banks that were willing to go to 18 years post-construction, which is probably about as long as we could go with either term loan B debt or project bonds. I don't know. There may be some issues with project bonds once we get into the post-PPA period. The whole thing will have to be put into the salad again and re-examined.

Gearing

MR. MARTIN: Chris Moscardelli, what debt-equity ratio do you expect for offshore versus onshore?

MR. MOSCARDELLI: There will be slightly lower leverage for offshore. One reason is offshore projects do not have a traditional lump-sum, turnkey, fixed-price construction contract. Each project will have a group of contractors bringing specialized expertise to specific tasks. That leads to heightened sensitivity to construction risk for offshore wind as compared to onshore. That said, I still think you can get gearing up pretty high. I think you can probably still get to 80% and maybe even 85% leverage on these projects.

MR. MARTIN: That is term debt. What about advance rates for construction debt?

MR. MOSCARDELLI: Higher. It depends on the structure of the tax equity. It was interesting to hear Joel Spenadel say that JPMorgan can commit two years in advance. That will help get to a higher advance rate. The construction loan advance rate turns partly on whether the lenders are bridging to tax equity or are making a construction loan that will convert to back leverage at the end of construction.

MR. MARTIN: Alberto Garcia, same story?

MR. GARCIA: Pretty much. Offshore wind has to be a little more contained on the leverage. We have been thinking 80% is most likely, but 85% is possible. We expect to see advance rates for construction debt of 95% to 97%.

Tax equity terms

MR. MARTIN: Marty Pasqualini, you were in the market last year trying to raise tax equity for offshore wind. What data can you share about the tax equity then on offer?

MR. PASQUALINI: Obviously much has changed since then, but we had more than two times coverage for the tax equity ticket, which was the better part of a billion dollars.

The most prominent tax equity investors, like JPMorgan, were very interested in playing a prominent role in the space and were highly motivated to dig into what is a new product at least here in the United States.

Even smaller players who lack the same ability as JPMorgan to predict taxable income in the out years were telling us that they were very interested not only in the space, but also in the particular project. Some potential investors had geographic ties that made the particular project of great interest. However, investors in this category are not able to make two-year forward commitments.

MR. MARTIN: How do you expect things to look next year?

MR. PASQUALINI: The post-COVID market for tax equity is considerably more constrained, especially for deals on which investment tax credits will be claimed. If you analogize to the solar market, you have smaller banks that have shut down at least for a period of time as they assess to what degree their loss reserves will turn into actual credit losses.

Those conversations could be more difficult next year if COVID persists. That is a potential overhang for a period of time. I do not expect COVID to affect players with very large balance sheets who are dedicated to the space generally. It may put them in a better position, from a competitive standpoint, to support the projects.

MR. MARTIN: Clay Coleman, how are pricing and other terms for offshore wind tax equity different than for onshore?

MR. COLEMAN: The flip return requirements are necessarily different. Because the weighted average life for a project on which an investment tax credit is claimed is so short, the tax equity investors are getting a good deal of their investments back through the tax credit pretty much in the first few months of the transaction, and they end up with a higher all-in return 25 years out than they would for an onshore wind project with production tax credits.

Obviously one of the dynamics is that you have a huge capital base with offshore that quickly absorbs the money the investors are putting in. You have to ensure the investors will have large enough capital accounts and outside bases to take all of losses and avoid tax credit recapture. There are a few tools in the toolbox to deal with these issues, including perhaps switching to 12-year straight-line depreciation. In terms of the flip return and other deal terms, I do not see a huge difference between offshore and onshore.

MR. MARTIN: Joel Spenadel, your colleague Yale Henderson said on this panel last year that the differences between offshore and onshore are dramatic. Do you have examples?

MR. SPENADEL: The simplest example is the amount of capital required, as Clay said. For a project with $3 billion in eligible equipment and an 18% investment tax credit, which is what you would get if you start construction this year, that suggests tax credits of at least $540 million. With depreciation and cash, we get easily to a funding of over $600 million. That is roughly twice the tax equity required for large onshore wind projects. Until we get to a point where someone will underwrite and maybe sell down pieces, as was happening in the solar market before COVID hit, the large investments required will be a challenge for the offshore market.

MR. MARTIN: One of the surprising things to me is how little cash the tax equity investor requires in an offshore project compared to a project on land. Am I correct?

MR. SPENADEL: That may be driven by particular sponsors who want to keep cash to borrow against at lower rates in the debt market.

There is a minimum we have to get. We have to have economic substance. We are used to funding a very high percentage of the capital stack in the onshore market where people are claiming production tax credits.

For offshore wind projects that rely on the investment tax credit, we see funding levels trending down. For a deal with an 18% investment tax credit, funding is moving toward 20% of the capital stack. We don't have the leverage at such a small share of the capital stack to dictate as many terms as we might in an onshore project where the tax equity percentage is higher.

There are issues around cash priorities and even uses of cash to support indemnities and the like that come up in offshore that are pretty well settled in onshore.

On the plus side, the good news for offshore is we generally see well-rated, regulated utilities at the other end of bus-bar PPAs. We rarely see such contracts today in the onshore market. Offshore does not yet have the same sort of grid congestion issues that we see in the onshore market in parts of Texas and the Midwest.

On the minus side is we are not as confident about predicting reliability and operating costs are we are with onshore.

MR. MARTIN: Marty Pasqualini, I'm surprised to hear people talk about ITCs. My impression was that most of these projects would end up with production tax credits. Do you disagree?

MR. PASQUALINI: It depends on the projected output and capital costs of each project.

Where a project will be built and financed in phases, some capital costs that benefit all of the phases are bunched into the first phase, making the ITC better for that phase. PTCs make more sense for the second phase. However, the projects would have to be treated as separate projects for tax purposes in order to mix tax credits in this manner.

We are seeing increases in turbine capacity from one year to the next. Sponsors are leery of committing to a particular turbine because they do not want to be locked into last year's technology.

If you had a tie, you would choose PTCs because there is more depth in the PTC market today. PTCs offer a friendlier profile for the tax equity investment community. But it does not appear to be a close call on some of the early projects facing high capital costs.

MR. MARTIN: Joel Spenadel, are you willing to accept physical work as the method to start construction of offshore wind projects? If yes, do you require the sponsor to represent facts that the investor can use to draw its own conclusion that construction started in time and must it represent the legal conclusion that construction started in time?

MR. SPENADEL: Yes, we will rely on a physical-work strategy, but with the right set of facts and with the proper sponsor supports.

In terms of the type of rep, ultimately we want the sponsor to take the risk that the project will qualify for tax credits. If diligence suggests we need a rep that has embedded in it a legal conclusion and not just facts, then that is what we will seek.

If the sponsors are concerned about representing the legal conclusion, then there are specialty tax insurance products to cover the risk. Just asking insurers for quotes is a way to price the risk.

MR. MARTIN: We are talking about $3 to $6 billion projects with a huge amount of tax benefits. We have heard from brokers that the premiums for a project that size could be a little under 2%.

Capital stack

MR. MARTIN: We heard from Joel Spenadel that tax equity is trending down and will account for maybe 20% of the capital stack. Does that mean that debt will be 60% and sponsor equity 20%? How does the rest of the capital stack shake out?

MR. COLEMAN: For offshore, the EBITDA profile is much stronger than it is for onshore currently. Thus, there is the potential to support more leverage. Our current numbers suggest that we are at about a 60% overall leverage ratio for the debt. The tax equity is a little north of 20%. Sponsor equity is the rest.

MR. MARTIN: That assumes what percentage tax credit?

MR. COLEMAN: Eighteen percent.

MR. MARTIN: That is with an ITC. Does it scale so that if Congress increases the ITC for offshore wind to 30%, you get commensurately that much more tax equity?

MR. COLEMAN: Pretty much. Some things do not ramp up with the ITC. The tax equity investors are getting not only the ITC, but also cash and depreciation that pretty much equals the amount that they invest. These last two items are largely unaffected by any increase in ITC. If we move to a 30% ITC again, we would see a healthy increase in the amount of tax equity we could raise. That would let us reduce the amount of sponsor equity.

MR. PASQUALINI: A 30% ITC would probably take the tax equity to about 30% to 32% of the capital stack.

MR. MARTIN: The November elections are obviously a huge potential inflection point. If Biden is elected and the Senate shifts to Democratic control, offshore wind could be given more time to start construction at a larger tax credit. How is this affecting financing or construction-start strategies?

MR. COLEMAN: The complexity and opacity of the construction-start rules have been so profound that they have forced us to spend an inordinate amount of time on this subject. If a change of administration would lead to more clarifications, that would not be a bad thing.

MR. MOSCARDELLI: Even if Biden were to win and the Senate flips, there is no assurance that Congress will do anything for offshore wind. The market does not put its money behind speculative positions.

Hot-button issues

MR. MARTIN: Alberto Garcia, as lenders look at these projects, what do you think are their hot-button issues?

MR. GARCIA: I think they will be most worried about construction arrangements and the interface risk among the different contracts. These constructions are much more complex than for onshore wind, and they will be more complex than they are in Europe. Contractors here are less willing to take the same risk they might in Europe because it is a new market and the regulation is more complicated. We have the Jones Act and other arrangements that complicate the logistics. There are the permitting complications that we discussed earlier. Americans are more litigious. Lenders will look carefully at the insurance coverage given the increasing number of hurricanes in the Atlantic.

MR. MARTIN: Premiums for casualty insurance have skyrocketed.

MR. GARCIA: Yes. We looked at that closely last year and were happy with what was on offer at the time. Hopefully, it has not changed.

MR. MARTIN: Chris Moscardelli, what do you think are the hot-button issues for lenders?

MR. MOSCARDELLI: I agree with Alberto. Construction is front and center. Lenders have heightened sensitivity to how the construction package will be designed. He also mentioned the Jones Act. Vessel compliance is a big deal. The only other areas I would add are potential supply-chain issues and transmission and interconnection issues. We anticipate that transmission and interconnection will be a lot different here than it is in Europe where the transmission lines are largely owned by the utility. It remains to be seen what path the interconnection and transmission concerns will take, but they are on lender radar screens.

MR. MARTIN: No one construction contractor will wrap everything. What are your options?

MR. MOSCARDELLI: The lenders will want to make sure the construction contracts fit together to mitigate the finger-pointing risk if something goes wrong.

MR. MARTIN: Marty Pasqualini, what do you think are the hot-button issues for tax equity investors?

MR. PASQUALINI: Sponsor quality is number one.

MR. MARTIN: These are all big sponsors. They are mostly large oil companies and utilities.

MR. PASQUALINI: For the most part. There are investment funds involved in some of the projects and lesser-known developer names.

It is one thing to enter into one of these projects at the dollar amounts we are talking about for someone with whom you are otherwise regularly doing business. It may be a different story to do it with a financial sponsor.

The tax equity market will also worry about the construction arrangements. It is used to looking at a single balance-of-plant construction contract. It will focus on what can go wrong where you have multiple contractors and no one contractor taking responsibility for the entire job. Someone will have to talk the tax equity investors and lenders through the arrangements and how everything holds together.

MR. MARTIN: Joel Spenadel, what are the hot-button issues from where you sit?

MR. SPENADEL: I came up with the acronym "QUOTE" which covers qualification for tax credits . . .

MR. MARTIN: Uh oh, five items. [Laughter]

MR. SPENADEL: There are only four because Q and U have to stick together. The O is offshore experience of the sponsor. Marty touched on the importance of how the sponsor manages large construction projects and large financings. T is timing considerations. E would be environmental and regulatory issues.

MR. MARTIN: Clay Coleman, can you come up with one that begins with U? [Laughter]

What are your hot-button issues as a sponsor?

MR. COLEMAN: Obviously having confidence in your schedule is pretty important because delays are expensive. On funding, we are pretty confident that the debt markets will be there for us despite any impact from COVID because everyone is awash with liquidity. The tax equity markets are more worrisome because we are asking for a very big check, and only a handful of folks can write a check that size.

European comparisons

MR. MARTIN: Chris Moscardelli, how does the cost of capital for offshore wind compare in the US to Europe, and what is the gap?

MR. MOSCARDELLI: It should be better in the US, notwithstanding that US offshore wind is not yet a mature market. Europe uses longer-tenor financing. Borrowing long term costs more.

MR. MARTIN: This is surprising given how much less experience the US has with this asset class. Alberto Garcia, do you agree with Chris Moscardelli's assessment?

MR. GARCIA: It depends what you call cheaper. I think the combination of the pricing plus the tenor that the projects are getting in Europe makes the financing really, really cheap. Spreads are around 170 basis points for debt that has a term as long as 18 years.

In the US, we are going to see something really different. If projects finance in the bond market, they will be done using structures that look like a mini perm. There is tension between the price and tenor, particularly with the early projects. It would not surprise me if the first US projects are more expensive to finance than similar projects in Europe.

MR. MARTIN: Our London office reported earlier this year that construction debt in Europe covers about 60% to 70% of the project cost, and the equity does not fund until the debt has been fully drawn. The expectation is that a refinancing will follow at the end of construction and increase the gearing to 80% to 85%. This is the opposite of how debt works in the US. Why do things happen differently here?

MR. GARCIA: Europe had a very different experience after the last financial crisis. Europeans are less used to shorter debt tenors. Financing risk is different there. The US market never closed. The US market is more comfortable taking that risk and that helps to facilitate getting tighter pricing. In the US, debt will be drawn down after the equity has funded.

MR. MOSCARDELLI: My colleagues in Europe tell me they are seeing a shift to a bit more pro rata funding of debt and equity and some cases where leverage is 80% to 85% out of the box instead of waiting to refinance at the end of construction at the higher gearing. That said, US lenders are more accustomed to taking construction risk and are more willing to lever up out of the gate versus waiting until project completion.

Off to the races?

MR. MARTIN: Clay Coleman, once BOEM issues the construction permit for Vineyard, will it feel like US offshore wind is truly rolling or will it be one project here and one there for quite a while?

MR. COLEMAN: It will remain a bit of an open question, I suppose. A lot of states are coming out with requirements for utilities to buy renewables, particularly in the northeast. Offshore wind procurements are spreading to the west coast, where we will be using floating turbines as opposed to fixed turbines given the depth of the seabed. The southeast is a bit of a question because of what President Trump has ordered. Several more RFPs are expected in the northeast.

MR. MARTIN: President Trump ordered a halt to leasing of offshore sites after mid-2022 off the Atlantic coasts of the four southernmost states, possibly spreading up to a fifth state, Virginia.

Marty Pasqualini, does it feel like offshore wind is really about to take off with release of the first construction permit, or will it be one project and then another sometime later?

MR. PASQUALINI: There is an enormous amount of capital poised to invest on top of an enormous amount of investment that project developers have already made. I could tick off 10 developers, equipment manufacturers and other service providers that have set up shop in Boston alone to be positioned for what they see as a multi- billion-dollar build out over the course of the next 10 to 15 years. I think we will be off to the races once the logjam is broken on construction permits, but it will be a question of how fast the race is. The answer depends in part of the outcome of the national elections.

MR. MARTIN: There are two federal issues that are hang ups. One is the delays at BOEM issuing the first construction permit. The other is the four-year period the IRS allows to finish construction to qualify for federal tax credits. The Treasury will have to do something to ease up on that.

Joel Spenadel, I am going to end with you. I suspect you sit at the intersection of almost every project since JPMorgan is such a large share of the tax equity market. What is your sense of how these projects will unfold? Vineyard is obviously at the front of the queue. Do you see a lot of others stacked up behind it in quick succession?

MR. SPENADEL: Our team has been having discussions with a number of developers, some of whom have multiple projects they would like to get going. The extension of the four-year window to finish construction is important. I suspect that without an extension, there may not be many projects able to raise tax equity.

MR. MARTIN: Assuming Vineyard gets its construction permit in the near term, do you think Vineyard will be the only project able to close on financing next year or do you expect another project -– maybe even two other projects — next year?

MR. SPENADEL: Based on what developers are telling us, we hope to see one and perhaps two projects in 2023 and one or two in 2024.

MR. MARTIN: That is closing on the tax equity or funding at the end of construction?

MR. SPENADEL: Funding at the end of construction. So back up two years from that for negotiation and document signing. That is one to two projects in 2021 and one to two in 2022 negotiating and signing tax equity documents.