MuniMae makes a move into renewable energy market

May 17, 2006|By LAURA SMITHERMAN | LAURA SMITHERMAN,SUN REPORTER

Municipal Mortgage & Equity (MuniMae) announced yesterday the acquisition of a small California company that arranges financing for and operates solar and other renewable power plants, a marked departure for the Baltimore real estate financier.

By purchasing Renewable Ventures LLC of San Francisco, MuniMae hopes to capitalize on growing demand for alternative energy sources and tax credits extended under last year's broad federal energy legislation.

Company officials declined to say how much MuniMae paid for the Renewable Ventures in a deal that closed Monday night, but the consideration includes an upfront amount as well as future payments that depend on the performance of the business.

Michael L. Falcone, MuniMae's chief executive, said the company is seeking to position itself as a "powerhouse" in the business of financing clean-energy projects in the United States.

"We believe there is more political will than there has ever been with oil at $70 a barrel and the cost in human terms of the Iraq war," he said.

As in previous decades, the renewable energy industry has gotten a boost from geopolitical forces such as skyrocketing oil prices and a desire to reduce the nation's dependence on foreign oil.

What makes this a prime time to get into the business, according to Falcone, are technologies that make alternative energy more cost-effective and tax credits that have been extended on the state and federal level.

The energy bill enacted by Congress last summer increases from 10 percent to 30 percent the federal tax credit for solar energy. The bill also includes credits for wind and biomass energy and the first-ever credit for residential solar power systems.

"We have been interested in expanding our market beyond affordable housing to be able to sell tax credits and other financing associated with clean energy, but we clearly didn't have the knowledge or industry contacts in the business to make that work," Falcone said. "So we went looking for a partner."

MuniMae officials became familiar with Renewable Ventures at an affordable housing conference, according to Falcone. After months of talks, the companies signed a contract and closed the deal in one day.

Renewable Ventures, which will be renamed MMA Renewable and remain in San Francisco, has a pipeline of more than $500 million in projects that are in the works with developers and contractors.

With MuniMae's assistance, the companies hope to finance about $50 million in projects this year.

The facilities would provide power to commercial and government users, and in some cases the energy could be sold and delivered on a power grid.

Renewable has worked on deals to build five solar power plants. Their locations range from Connecticut, where a facility powers a museum, to California where one provides power to a city.

Matt Cheney, Renewable's CEO, said MuniMae's expertise in financing affordable housing could easily translate to clean energy, both of which depend on tax credits and private investment. MuniMae brings with it a client base of institutional investors.

Through the acquisition, MuniMae bought out management contracts for four employees at Renewable Ventures and took over a $3 million solar energy plant being built at a vineyard in the wine-producing Napa Valley.

laura.smitherman@baltsun.com

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