Synthetic Leveraged Lease

Reclaiming the accounting benefits of the classic leveraged lease


Jupiter Renewables has created a synthetic position that provides lessors for renewable energy projects with the favorable GAAP treatment that they have enjoyed with leveraged leases since 1976. The actual leveraged lease accounting benefit will soon officially be dead. In December, 2018 the accounting standards change.  According to Bill Bosco of Leasing 101, “Leveraged lease accounting is considered by many to be one of the best accounting methods in terms of portraying economic effects of a transaction, specifically reflecting the true financial risk and the effects of taxes directly related to the lease investment…Leveraged lease accounting is also unique in its including the effects of income taxes directly related to the leased asset in the revenue recognition methodology.” In short, the accounting reflects the benefit of the various tax benefits in a way that mirrors the economics, net of the non-recourse debt, and applies a constant rate of return. 

The accounting standards change eliminates this treatment. The Guaranteed WindPower® structure reclaims the ability to use this constant interest rate method. This is true for all renewable energy investments. The financial statements for a Guaranteed WindPower®  investment reflect the actual economics of the investment while providing sponsors with superior economics. 

The Jupiter structured credit investment relies on classic third-party risk transfer. The Lessor substitutes strong credits and contracts for project risks with Jupiter’s patented risk-shifting method. The cash flows from the project are securitized into varying tranches in a patent pending process that incorporates the above. Almost all of the lessor’s investments are treated as high investment grade debt. Specifically, they are treated as Equity Linked Notes with lower economic capital usage. The leverage is structured so that it does not consolidate for the lessor. The lessor will be able to use all of the deductions. Many Investors account for Notes Receivable in the following way: Interest income is recognized employing the interest method or on a basis approximating a level rate of return over the term of the loan. In substance, this is the same as the beloved leveraged lease accounting. 

Why wouldn’t everyone use this synthetic leveraged lease. Guaranteed WindPower® allows large independent power producers to fully monetize tax benefits for renewable energy investments. This includes larger development fees and immediate expensing. The proof is in the lower cost of capital, the higher profitability, and the higher equity valuation. It also retains the benefits of classic leveraged leasing for lessors in that the lease finance does not consolidate for the lessee. It also provides sponsors with the ability to finance larger projects or portfolios using undivided interests such as the $1.2 billion Alta wind farms in 2011. This project, and several others, were able to access leveraged leasing while tapping the cash grant that was available as part of the recovery act. Cash flow flexibility is another important benefit. CFO’s have 

the flexibility to deploy capital in other areas. CFO’s can decrease parent company debt improving credit ratings. Or  redeploy capital for other priorities such as investing in battery storage. 

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Jupiter is pleased to provide analyses of any project in order to demonstrate the benefits of this structure for any potential project participant. 

Jupiter is partnering with top investment banks, private equity firms, and sponsors and is always looking for new partners.

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Diagram of Synthetic Leveraged Lease

Patented and Patent Pending


  •  US Patent Number 7,853,461 
  • Application US 14/871,314 
  • Application US 62/684,462