Sun shines on tax breaks in leasing deal

Colorado-based Key Equipment Finance has teamed up with Entropy Solar Integrators to complete a $602,000 solar installation for Allied Old English, a premier bottler of branded and private label food products based in New Jersey.

Key Equipment Finance provided a solar non-tax lease for Allied Old English, which offers the company the opportunity to use the tax benefits of the investment tax credit and depreciation themselves.

“With this solar installation at its New Jersey headquarters, Allied Old English is conserving both energy and dollars,” said Doug Beebe, vice president, energy finance for Key Equipment Finance. “The company is a forward-thinking manufacturer that is realizing the tax benefits of the investment tax credit (ITC) and depreciation to reduce its lease payments.”

Entropy Solar Integrators, based in North Carolina, designed, engineered and built the rooftop solar array totaling 345 kilowatts.

“We work hard to give our customers and project developers the financial and technical guidance and execution they need for a solar project that is on time and on budget,” said Anthony Conklin, investment acquisition specialist for Entropy Solar Integrators.

Allied Old English is consuming the solar power and receives income from the sale of New Jersey Solar Renewable Energy Certificates. The company is projected to generate 423,887 kilowatt hours annually, which equates to about 644,393 pounds of carbon dioxide removed from the atmosphere. Allied Old English estimates the installation will generate approximately $2,502,000 of gross income over its 25-year life span.

“As a third-generation family owned and operated corporation, Allied Old English is always seeking ways to improve the world for future generations, and reducing our carbon footprint is one way to do this,” said Frank Gatti, CFO of Allied Old English. “Our partnership with Key Equipment Finance and Entropy Solar Integrators has enabled us to go green at our headquarters while also reducing our energy costs.”

Future trends

Key Equipment reckons that lower energy prices will spur more capital equipment spending in sectors like speciality vehicles. On the flip side, general manufacturing equipment financing activity is expected to slow because of ties to energy sector, says Key Equipment vice president Peter Bullen.

Bullen’s insights regarding overall expectations about the equipment leasing and finance industry for 2016 suggest that increasing consumer disposable income from lower energy prices will help propel the economy, but this will be counterbalanced by slowing capital expenditures for companies with ties to oil.

Industries benefiting from low energy prices or increased consumer disposable income will be actively replacing equipment. These include transportation, retail, restaurants, and chemicals. From the point of view of leasing companies, while pricing is important, relationships will continue to matter most to those financing capital expenditures. However, an imbalance between supply of capital and demand for capital continues to cause yields to drop.