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CohnReznick's new hire sees more debt, equity in power deals as tax credits wane

CohnReznick Capital Markets Securities LLC's newest hire, Richard O'Day, is helping the boutique investment bank navigate changes in the power generation sector driven by the step-down of renewable tax credits and the emergence of new technology.

O'Day joined CohnReznick as a senior managing director June 3 after a decade at Credit Suisse (USA) Inc., where he was a managing director and head of the structured solutions group.

"Clearly, I'm going to focus on capital raising in the renewables sector," O'Day told S&P Global Market Intelligence in an interview, saying his focus will span equity, tax equity, debt and M&A and capital advisory. "It's a great entrepreneurial platform with a great pipeline and, really, there's no sort of limit on what you can do in terms of looking at other asset categories or getting into different industries. It's very exciting."

O'Day initially plans to focus on originating new business with the aim of expanding the firm's reach.

"I would like to expand areas of practice to include infrastructure, which would probably be power-based initially, grid and power infrastructure, but potentially expand into other areas, including real estate down the road," he said. "From a diversification standpoint, this is a fantastic platform with a lot of capital-raising and M&A mandates and I think that diversifying into other areas is important as the market changes."

One area of opportunity O'Day cites within the energy sector is the advent of asset managers and long-term holders of energy assets as major players in the power space.

"I would like to look at asset accumulation and asset management as a way to expand the business and that's, broadly speaking, yet to be defined," he said.

As someone who helped launch Credit Suisse's tax equity business, O'Day now sees an opportunity for capital providers as the federal investment tax credit and production tax credit begin to step down.

"From a tax equity perspective, I think there will still be interest in deals with a 10% ITC," said O'Day, citing the attractiveness of depreciation benefits. However, he notes that the stepdown of the two tax credits will create a gap in the capital stack and that "the slack needs to be picked up by more debt and more equity in the transactions."

Despite changes in the renewable sector, O'Day predicts continued demand.

"The technology for wind, solar and storage is still expanding, so there will be a need for a lot of financing and I think that is being driven a lot by increasing [renewable portfolio] standards, corporate adoption, big companies saying they want to decrease their carbon footprint or eliminate it," he said.