usa energy market ppt june 30, 2010
TRANSCRIPT
USA Energy Market Opportunities
Presented by:Eliot Norman, International Practice
Partner Williams Mullen,
Fairfax County, Virginia, [email protected] Piret, Managing Director
Newbury Piret & Co. Inc. Middle Market Investment Bankers,
Boston, MA, USA. [email protected]
Our Workshop TodayOur Workshop Today• What are the Opportunities What are the Opportunities in U.S. Energy Markets? in U.S. Energy Markets? • What are Sources of What are Sources of Financing for Entering U.S. Financing for Entering U.S. Energy Market? Energy Market? • What are the Advantages of What are the Advantages of Locating in Fairfax County, Locating in Fairfax County, VirginiaVirginia• What Services will you need What Services will you need to “Start-up” Operations to “Start-up” Operations • What are your Market Entry What are your Market Entry Strategies? Strategies?
3 Success Stories 3 Success Stories
SORRY, This is Big Mistake!
SUCCESS STORY #1: Solyndra Solar: 704kW installation
3,800 Solyndra solar panels, producing over 825,000 kWh of electricity and eliminating more than 1,100,000 pounds of CO2 emissions annually for this factory in New Jersey near New York City
$535 million loan guarantee from U.S. Dept of Energy
• Solyndra panels are designed to optimize solar electricity production on commercial rooftops. The unique panels employ cylindrical modules which capture sunlight across a 360-degree photovoltaic surface capable of converting direct, diffuse and reflected sunlight from the rooftop into electricity. The Solyndra system is lightweight, non-penetrating and achieves over a 130 mph wind rating as the panels allow wind to blow through them. These factors enable the installation of solar PV on a broader range of rooftops without traditional anchoring or ballast required with flat-plated panels
"The Future is Here": President Obama Tours Solyndra
• Solyndra proudly hosted a visit by United States President, Barack Obama on May 26, 2010 and demonstrated the company's innovative cylindrical photovoltaic (PV) systems for commercial rooftops and the advanced manufacturing process used to produce them. The President toured Solyndra's Fab 1 with Chief Executive Officer Chris Gronet and Executive Vice President Ben Bierman before making a televised speech on energy policy at Solyndra's Fab 2 construction site.
• President Obama spoke of the "heartbreaking" oil spill in the Gulf of Mexico and the need for alternative energy. He talked of solar as an economic reality. Among his remarks, the President delivered the following words of encouragement to the employees and the solar industry.
• "As you fill orders for solar panels to ship around the world, you're demonstrating that the promise of clean energy isn't just an article of faith -- not anymore. It's not some abstract possibility for science fiction movies or a distant future -- 10 years down the road or 20 years down the road. It's happening right now. The future is here."
U.S. Government Helps Solyndra establish Commercial ties to Germany
• Umwelt-Sonne-Energie GmbH, near Stuttgart (Holzgerlingen)
• EBITSCHHenergietechnik, Zapfender DE
• Alwitra GmbH & Co. • projects in Germany, Belgium 1.9 MWp
10 rooftop sites, • Euro HQ: Holzkirchen near Munich
SUCCESS STORY #2: SAFT
SAFT: U.S. Funding for European Technologies in USA
• lithium-ion batteries for vehicles • Joint Venture with Johnson Controls• Stand alone factory • State and Federal Grants:
– $8.2 million DOE development funding in 2008
– $95 million in Recovery Act funding 2009 – $128 million State funding 2009
Success Story # 3: German Turbo-Generators for Waste-to-Energy Power Plants
What are the Opportunities in What are the Opportunities in U.S. Energy Markets? U.S. Energy Markets?
TOP 11 List TOP 11 List
USA ENERGY MARKET OPPORTUNITIES
1. Smart Grid 2. Clean Coal Technologies3. Natural Gas 4. Nuclear 5. Renewable energy: solar, wind, other technologies 6. Energy efficiency technologies, including sales to U.S.
Government 7. Grid Modernization 8. Zero emission vehicles9. Hydroelectric10. Biomass, CHP/Waste Heat, Biofuels, Waste to Energy11. Market Pressures: State Renewable Energy Standards
Country Comparisons • Total Electricity Generated: USA,
Germany, Switzerland, France, Japan, China
• Total Nuclear• Total Hydroelectric• Total Non-Hydroelectric Renewable• Total Thermal Conventional Generated***Conclusion: U.S. Renewable Energy Market is
Undeveloped Compared to Europe***
Renewable Portfolio Standards
State renewable portfolio standardState renewable portfolio goal
www.dsireusa.org / June 2010
Solar water heating eligible *† Extra credit for solar or customer-sited renewablesIncludes non-renewable alternative resources
WA: 15% x 2020*
CA: 33% x 2020
NV: 25% x 2025*
AZ: 15% x 2025
NM: 20% x 2020 (IOUs) 10% x 2020 (co-ops)
HI: 40% x 2030
Minimum solar or customer-sited requirement
TX: 5,880 MW x 2015
UT: 20% by 2025*
CO: 30% by 2020 (IOUs)10% by 2020 (co-ops & large
munis)*
MT: 15% x 2015 ND: 10% x
2015
SD: 10% x 2015
IA: 105 MW
MN: 25% x 2025
(Xcel: 30% x 2020)
MO: 15% x 2021
WI: Varies by utility;
10% x 2015 statewide
MI: 10% + 1,100 MW x 2015*
OH: 25% x 2025†
ME: 30% x 2000New RE: 10% x 2017
NH: 23.8% x 2025MA: 22.1% x 2020 New RE: 15% x 2020
(+1% annually thereafter)
RI: 16% x 2020CT: 23% x 2020
NY: 29% x 2015
NJ: 22.5% x 2021
PA: ~18% x 2021†
MD: 20% x 2022DE: 20% x 2020*DC: 20% x 2020
VA: 15% x 2025*
NC: 12.5% x 2021 (IOUs)10% x 2018 (co-ops & munis)
VT: (1) RE meets any increase in retail sales x
2012; (2) 20% RE & CHP x 2017
KS: 20% x 2020
OR: 25% x 2025 (large utilities)*
5% - 10% x 2025 (smaller utilities)
IL: 25% x 2025
WV: 25% x 2025*†
29 states + DC have an
RPS(7 states have goals)
DCOK: 15% x 2015
Smart Grid
Wind• At the end of 2009, the installed capacity of wind
power in the United States was just over 35,000 megawatts (35 GW),[2][3] making it the world leader ahead of Germany. Wind power accounts for about 2% of the electricity generated in the United States.[4]
• Over 9,900 MW of new wind power capacity was brought online in 2009, up from 8,800 in 2008. In 2009 added new capacity was enough to power the equivalent of 2.4 million homes or generate as much electricity as three large nuclear power plants.[5]
• Texas. 9410 MW of wind, Iowa 3053 MW of wind
Step One for Financing• Feasibility Study (Internal)• Market Study (External)
USA Energy Market Opportunities: Sources of Financing
• Venture Capital and Funds• M&A and Joint Ventures • American Recovery and Reinvestment Act (ARRA)• U.S. Tax Credits• Guaranteed Loans• R&D Grants • Department of Energy (DOE) Programs • State Renewable Portfolio Standards and Financing
•
Clean Energy
American Recovery and Reinvestment Act of 2009 (ARRA)
• Signed into law by President Obama on February 17, 2009
• Provides a total of $787 billion in funds• Unprecedented level of
funding designed to help create and save jobs, jumpstart the economy, and build the foundation for long-term economic growth
Follow the Money: U.S. Stimulus Act Allocations?
• “Shovel-ready jobs?”• Roads and Bridges?
ARRA: Spending Provisions
• Funds designated to the following sectors:– Energy and Environment: $98 billion– Transportation: Rail, roads and bridges: $49
Billion . Only 50% of Energy/EnvironmentOnly 50% of Energy/Environment.– Defense and Security: $16.448 billion– Agriculture and Rural Development: $15.986
billion– Biomedical research $10 billion
The New (Green) Deal:Clean Energy and the
Stimulus Bill
• “The country that harnesses the power of clean, renewable energy will lead the 21st century.”
- U.S. President Barack Obama, February 24, 2009
ARRA Clean Energy Strategy
• Spur innovative technology• Reduce greenhouse gases• Re-establish U.S. manufacturing capability that
is focused on energy• Reconstitute aging power and water
infrastructure • International companies should be able to lead
the way because of technological advances in Germany, Europe and other countries
3rd Generation Photovoltaic Cells
The old energy project
The new energy projects
USA Energy Market &U.S. Recovery Act
1. Follow the money: Where is it being spent?
2. What are the new opportunities?
3. How much has been spent so far?
4. How much remains to be allocated?
Types of Funding from DOE
• Contracts• Cooperative Agreements• Loan Guarantees• State/Local Government allotments• Grants and R&D fellowships• Indirect (TAX CREDITS)
ARRA Clean Energy: Level of Funding
• Direct appropriations for energy-related projects and technologies equal to approximately ($72 billion)
• Tax credits and other financial incentives for projects and energy equipment ($22 billion +)
• The U.S. Treasury direct grant program equal to potentially 30% of total qualifying energy property investment
• Expansion and “rapid deployment” of DOE loan guarantee program ($6 billion appropriation; $60 billion in loans)
• Expansion and establishment of new bond mechanisms ($4 billion for energy projects)
• Massive funding for state and local energy programs
Examples of Clean Energy Financial Incentives
• Direct Investment• Investment Tax Credit (“ITC”)• Production Tax Credit (“PTC”)• Federal Block Grants• Advanced Energy Project Credits• Clean Renewable Energy Bonds• Qualified Energy Conservation Bonds• Potential Carbon “Cap and Trade”, Carbon Management
benefits
Funding State and Local ProgramsNot all the money is at the federal level
• Weatherization Financial Assistance Program ($5 billion)
• Green Building ($4.5 billion) • Energy Efficiency and Conservation Block Grant
Program ($3.2 billion)• State Energy Funding Program (discretionary
funding for “shovel ready” energy and water projects)
Advanced Energy Project Credits• ARRA expands 30% Investment Tax Credit for any
Qualifying Advanced Energy Project that re-establishes, expands or constructs a manufacturing facility to produce the following equipment:
• Renewable energy systems (including solar, wind and geothermal)
• Fuel Cells• Microturbines• Electric/Hybrid Cars, Batteries & Equipment• Renewable Grids/Smart Grids• Carbon Capture & Sequestration• Renewable Fuels Refining or Blending• Energy Conservation Technologies
Recovery Act Case Study – Wind Energy
Iberdrola Renovables (Spain) • World’s largest wind energy firm• 2nd largest wind energy producer in U.S.• Headquartered in Valencia, Spain• Has formed U.S. subsidiary to import components
and exploit its technology• Received $400 to $500 million in ARRA (Stimulus
Act) grants for U.S. projects in 2009• Has remained profitable despite downturn and
falling fossil fuel prices
2008 Owners of U.S.Wind Energy Farms
Stimulus Act has Accelerated Trend to Foreign Ownership
• NextEra Energy Resources 6290.1
• Iberdrola Renewables 2063.4 (Spain)
• MidAmerican Energy 1939.5• Horizon-EDP Renewables
1872.7 (Portugal)• Invenergy 1276.5• Babcock & Brown 1118.8• Edison Mission Group 959.9• AES 956.7• E.On Climate and
Renewables 726.9 (Germany)
• John Deere Wind 527.3• enXco 527.0 (affiliate of EDF
Energies Nouvelles, a French Company)
• Shell Wind Energy 449.0• Puget Sound Energy 385.2• Terra-Gen Power 368.5• Duke Energy 321.5• AEP 310.5• Eurus 296.6 (Japan)• Noble Environmental Power 282.0• Orion Energy Group 280.5• Enel North America 249.3 (Italy)• Others 4167.1
Qualifying for $4 Billion DOE Loan Guarantee Program
• Definitions: “New or Significantly Improved Technologies”• Technology Categories (illustrative only)
– #2: Biomass– #3 Efficient Electricity Transmission, Distribution and
Storage: ex. “solid-state devices for grid applications, such as advanced converters”
– #5 Geothermal: ex. “electricity production from hot wastewater from oil and gas wells”
– #8 Solar– #9 Wind and Hydropower: ex. “turbine or component
manufacturing”
–
Qualifying for $4 Billion DOE Loan Guarantee Program
• Manufacturing Projects: Examples– Ocean Wave, Tidal and River Current (e.g.
hydrokinetic) Manufacturing Facilities– Energy Efficient industrial Manufacturing Facilities – Utility-Scale Energy Storage Device Manufacturing
• Stand-Alone Projects: Examples– Large Scale Concentrated Solar Power Project– Offshore Wind Project – Wave or Tidal Energy Projects – Large-Scale Concentrated Solar Power Project– Advanced Hydropower Project
ARRA Energy-Related Focus
• Energy efficiency• Green buildings• Renewable energy projects• “Smart Grid” technology & infrastructure, including $11
billion for electrical grid projects • Clean coal deployment $3.4 billion for Fossil Energy R&D• Advanced biofuels and green vehicles• Cleantech
The Virginia Advantage
U.S. POPULATION DISTRIBUTION
• Central location along the Atlantic Coast
• Nearly 50 percent of the nation’s population and 50 percent of the manufacturing activity are within 1000 kilometers of Richmond
• Well-developed transportation system provides access to major markets: The 3rd largest state-maintained transportation network
• The 3rd largest container port on the U.S. East Coast & inland port provides an interface between truck and rail services for transfer of ocean-going containers
• Washington Dulles International Airport has nonstop service to almost 130 destinations
Virginia’s Strategic Location
Business Begins in Virginia!
Forbes.com: Best State for Business2006, 2007, 2008, 2009
Cable Channel CNBC:Top State for Business 2007 & 2009
Entrepreneur.com:Best State for Starting New Business2006 - #2
Pollina Corporate Real Estate Inc.:Top 10 Pro-Business States2004 - 2009
• Streamlined environmental permitting process
• Efficient Court System
• Training programs to help new businesses become operational faster
• Right-to-work law allows individuals the right to work regardless of membership in a labor union or organization
• AAA bond rating
• Ranked among the best in the U.S. Chamber of Commerce’s 2010 study for having the “Best Legal System”
Legal Advantages for International Businesses
Concierge Services: How to Keep it Simple
to Enter the U.S. Market
Support Services for Starting a Business in Fairfax County Virginia
• Virginia’s Concierge Legal Services Program
• How the program works• What are the services offered? • Result: another Virginia Advantage for
your international business
Top 12 Concierge Services for “Start-up” of Your U.S. Company
1. Form U.S. company: corporation or limited liability company
2. Conduct trademark search and file trademark application
3. Reserve and apply for Internet domain name4. Apply to Internal Revenue Service for
Employer Identification Number for tax purposes
5. File local business license6. Review lease for office
Concierge Services (cont.)
7. Assist with opening U.S. bank account, obtaining U.S. Social Security numbers
8. File for New Office L-1 or other visas for manager and family
9. Strategic Advice for Obtaining U.S. Government Grants, Contracts or Subcontracts
10. Advise on employment law11. Advice on export of products to U.S.12. Review distribution/agency agreements for
selling products in U.S.
First Choice for Visas: New Office L-1
• The L-1A Manager• The L-1B Specialized Knowledge• Both allow transfer from German
company to U.S. company • The L-1 is a very useful temporary,
nonimmigrant visa for starting a new office in the United States
L-1 Visas: Intra-Corporate Transfers
Energy RenewablesTechnologies
USA, Inc. FAIRFAX, VIRGINIA
Energy Renewables GmbH
Munich, Germany Managers, Executives
Engineers
Energy, LtdManchester, UK
IP Experts
Energy Technology, SA
Grenoble,FranceHydro Technical
Support Staff
Energy Systems, Ltd.
New Delhi, IndiaSoftwareProgrammers
L-1 Transfers
EnergyHolding
GmbHBerlin, Germany
67%
100%
Other Support Services• Compliance and risk management
– Products Liability—reducing risks – Energy Regulatory Compliance
• Advice on important contracts under U.S. law – license agreements– sales agreements– non-compete and confidentiality agreements– financing agreements
• Financial incentives under U.S. Recovery Act • Strategic Advice :M&A and joint ventures • Doing business with U.S. government• Tax Planning
The “Level Playing Field” For U.S. Market
Entry
Can Foreign Companies Participate in ARRA Projects?
• Common Perception: Given the purpose of ARRA, and its Buy American Provisions, Stimulus Projects must be reserved for U.S. companies and U.S. manufactured products
• ARRA states: Any ”project for …public building or public work” can use Stimulus funds only if all the iron, steel and manufactured goods are produced in the United States.” Buy American?
• But ARRA also says that : “This section shall be applied in a manner consistent with U.S. obligations under international agreements:” WTO obligations apply.
• Reality: Significant exceptions to Buy American Provisions exist and can benefit foreign companies:
• Buy American Act Provisions not a major issue• Proof: Look no further than Iberdrola Renovables or SAFT/Johnson
Controls
“Buy American” provisions affecting Stimulus Act public construction projects do not prevent foreign company from being contractor or supplier when:
• Application of “Buy American” provisions would contradict U.S. obligations under international agreements.
• The United States and the company’s foreign country are signatories to the WTO-GPA.
• The WTO-GPA prohibits application of the BUY AMERICAN ACT to Stimulus Act procurements by federal agencies and 37 state or other government authorities.
Who Has Signed the WTO-GPA?• Parties and Date of entry into Force/Accession: • Canada 1 January 1996 • European Communities
with regard to its 27 member States: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom1 January 1996Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia 1 May 2004 Bulgaria and Romania 1 January 2007
• Hong Kong , China 19 June 1997 Iceland 28 April 2001 Israel 1 January 1996 Japan 1 January 1996 Korea 1 January 1997 Liechtenstein18 September 1997 the Netherlands with respect to Aruba25 October 1996
• Norway 1 January 1996 Singapore20 October 1997 Switzerland1 January 1996 Chinese Taipei 15 July 2009
• United States 1 January 1996
Example 1: U.S. Department of Transportation (but not Federal Aviation Administration) solicits bids for Stimulus Act project.
• Result: A Foreign WTO-GPA company is eligible to bid, because Annex 1 to GPA lists U.S. Department of Transportation (but not Federal Aviation Administration) among covered central government entities.
Example 2: Pennsylvania Department of Transportation (but not South Carolina Department of Transportation) solicits bids for project.
• Result: A foreign WTO-GPA company is eligible to bid, because Annex 2 to GPA lists Pennsylvania Department of Transportation (but not South Carolina Department of Transportation) among covered sub-central government entities.
Example 3: Port of Baltimore (but not City of Charleston) solicits bids for project.
• Result: A foreign WTO-GPA company is eligible to bid, because Annex 3 to GPA lists Port of Baltimore (but not City of Charleston) among other covered entities.
Additional Loopholes• Buy American” provisions affecting
stimulus-package public construction projects do not prevent a foreign company from being contractor when:– Company can obtain WAIVERS of Buy
American Provisions in Stimulus Act – U.S. companies do not produce goods
“in sufficient and reasonably available quantities” and of “satisfactory quality”; or
– Application would contradict “the public interest.”; or
– Application would increase project’s overall cost by more than 25%.
Remember: “International agreements” do not provide only exception to “Buy American” requirements
• Between 7 April 2008 and 17 September 2009, 18 Federal Register notices from U.S. government entities including Environmental Protection Agency, Department of Commerce and Department of Agriculture have granted: – 13 “unavailability” waivers; and – 5 “public interest” waivers.
Stimulus Act: Lets Assume That “Buy American” Provisions Apply
A foreign company can still participate in the procurement under the Stimulus Act if:
• There has been a “substantial transformation” of its products in the United States into a new or different “manufactured good distinct from the materials from it was transformed.”
• NOTE: “There is no requirement with regard to the origin of components or subcomponents in manufactured goods or products, as long as the manufacture of the goods occurs in the United States.”
• There are also “De minimis” exceptions: 5% of value for incidental products (EPA) = Blanket Waivers
• Summary: Each case has to be evaluated individually in terms of the products involved, the identity of the procuring agency, whether the Buy American Act provisions apply, and whether exceptions or waivers to the Buy American Act provisions exist
German Turbo-Generators for Waste-to-Energy Power Plants
German Turbo-Generators for Waste-to-Energy Power Plants
• We “Americanize” the supplier
• We qualify under Buy American
• We block Chinese competition
M&A: How to Accelerate U.S. Market
Entry
June 2010
M&A Considerations 1. Why Buy? Why Now? 2. Defining Your Acquisition Strategy3. Valuation Issues4. Due Diligence, Negotiations and Closing the Deal5. Financing the M&A Deal 6. Cross-Cultural Issues 7. Post-Acquisition Operations/Risk Management 8. The Joint Venture Alternative9. Special Issues: IP, Antitrust, Buying Government Contractors10. Reducing Taxes 11. U.S. Immigration: recruiting/retaining global talent post-acquisition.
Make initial contacts with identified targets to explore potential strategies for partnership
Monitor websites that list businesses for sale, and reach out to investment banks and business brokers to learn about their existing sell-side clients
– Be prepared to execute the seller’s form of Confidentiality Agreement prior to receiving any detailed information
Review available information on the target, and request additional data, as needed
Prepare financial models reflecting the effects of the acquisition and quantify any available synergies. Sellers may request preliminary valuation feedback before proceeding to in-person meetings
If interest exists to move forward, visit the target’s headquarters to meet the management team and tour the facility. More detailed information is typically made available at this stage
Based on information obtained to-date and with support of shareholders and financing sources, prepare a formal, non-binding letter of intent to make the acquisition
Identifying TargetsAnd Initial Due Diligence
Internal Preparation
Define high-level acquisition strategy, including rationale(s) for acquisition, characteristics and deal size of ideal target, etc.
As possible, develop a list of potential targets, such as high-quality competitors, joint venture partners, other members of industry trade groups, etc.
Coordinate the assembly of a professional deal team, including experienced transaction attorneys, investment bankers/buy-side brokers, an accounting diligence firm, and other advisors
Begin assessing long-term capital needs, including meeting with bankers and expanding financial flexibility as needed
Closing the Transaction(8-10 weeks)
If agreement on transaction price and structure is reached, proceed to closing through multiple and simultaneous “work streams” (1):
1. Conduct confirmatory due diligence
– Financial/Accounting and Tax
– Operations
– Sales & Marketing
– Human Resources
– Legal and Risk Management
– Environmental
2. Negotiate Purchase & Sale agreement and disclosure schedules
3. Secure transaction funding (as needed)
Execute P&S agreement and close
Post-closing true-ups
Buy-Side M&A Process
(1) See next slide for a diagram of a coordinated buy-side due diligence and closing process.
Target Company
Operations /
Manufacturing
Sales & Marketing
Environmental
Legal & Intellectual
Property
Acquiring Company
Real Estate
Risk Manageme
nt
Accounting
Finance & Treasury
Human Resources & Benefits
Buy-Side Financial Advisor
HR and Benefits consultants, if appropriate
3rd party insurance
providers, if appropriate
Appraisal firms, if
necessary
Transaction services team,
if desired
Banks & Financial institution discussions
Outside Counsel
Consultant for market study, if appropriate
Environmental consultants, if appropriate
Tax work and review with
Auditor
Coordinated Buy-Side Due Diligence and Closing Process
Joint Ventures & Teaming
Arrangements:Alternate U.S. Market Entry
Strategies
Joint Ventures
• Often an excellent alternative to the M&A deal • Factors for success• When and why does it not work? • How to structure: tax, legal issues • Use in Government Contracting?• Use in private sector projects• Case examples
Government Contracting• Standard Competitive Bidding model may not always apply to
government contracts or subcontracts • Alternatives: Teaming arrangements with Energy Company
holding the General Contract – How does it work?– Benefits
Inflatable Boat from GSA Schedule
• 27' Extreme Patrol/SAR Aluminum-Hull Rigid Inflatable Boat (A-RIB) with a 42oz polyurethane collar or Foam Hybrid Collar. Set-up for inboard(s) or outboard(s) machinery package. Select center console or full cabin configuration. See option ...Manufacturer: NORTHWIND MARINE INC.Contractor: NORTHWIND MARINE, INC. [GS-07F-0416N] (s) $113,622.00 EA 120 days delivered ARO
International Tax Planning Before You Cross the Atlantic
Other Inbound Investment Considerations:
Tax and Treaty Eligibility
Corporate vs. LLC form: Corporations do not have "flow through" tax treatment and hence are required to file tax returns. Limited liability companies, on the other hand, have "flow-through" tax treatment and are not required to file income tax returns; rather their parent companies must file income tax returns in the United States. Since most foreign companies do not want to file tax returns in the United States, the preferred form of entity for U.S. operations of foreign companies most often is the corporation.
Taxes• Worldwide Income Taxation (subject to foreign tax credit regime)
– Income Tax. The revenue generated by the U.S. subsidiary or U.S. operations of a foreign business will be subject to taxation in the U.S. This tax is assessed at the federal and state levels.
– Federal Tax. Federal income tax rates are set depending upon many factors. Federal corporate tax rates range between 15% and 39%; the average tax rate is typically 35%.
– State Tax. State income tax rates are set forth on a state by state basis. The current rate for corporate income tax in North Carolina is 6.9%. This is lower than many other states, including California (8.84%) and New York (7.5%-9%).
• Accounting considerations (FIN 48; permanent establishment, etc.)
International Tax PlanningPermanent establishment: initial assessment of taxable presence;
• Transfer pricing:– Where to direct profit:
• Profit Drivers:– Capital;– Function;– Know how (and other intangibles);– Risk
International Tax Planning
• Financing: debt-to-equity considerations (including section 163(j) restrictions);
• Treasury Management – repatriation planning– Where a treaty is absent
• LOB provisions and treaty “shopping”• Holding company planning techniques
Conclusion and Some Practical
Recommendations
Summary
• Keep it Simple: Concierge Services for “Start-up” of Your Company
• There is a “Level Playing Field”: You just need to know the Rules of the Game
• Broad range of opportunities under U.S. Recovery Act• Special incentives for Renewable Energy and GreenTech
Projects (large and small, R&D and manufacturing)• Money not yet spent or allocated.• Not too late , particularly if you find the right Teaming Partner• Mergers & Acquisitions: Accelerate your Entry and Americanize
your Company• The Joint Venture/Teaming Arrangement Alternative, particularly
in Government Contracts Field• Be flexible, get advice early in the process
Steps for Success: U.S. Recovery Act Public Sector Projects
1. Feasibility Audit to best position your company2. Identification of best opportunities under ARRA3. Teaming Arrangements, JV or Strategic Acquisitions to maximize
your access to Stimulus Act Projects4. Legal guidance concerning application of WTO-GPA
• Supply chain planning to avoid Buy American Act issues; or• Representation of foreign companies in obtaining waivers of
Buy American Act Provisions5. Obtain advice after contract awards on compliance with
government contract laws and regulations6. Select advisory team to help your company finance, prepare for
and close the deal if you are doing M&A, JV. 7. Consider support services for future business operations: financial,
tax and accounting, legal, strategic.
Steps for Success: U.S. Recovery Act Private Sector Projects
1. Feasibility Audit to assess your company’s technologies and match opportunities under Stimulus Act
2. Advice on available tax credits, guaranteed loans, grants and other financial incentives. If project is in the clean energy sector, consider potential impact of Carbon management, financing and “cap and trade”
3. Decide on use of Teaming Arrangements, JV or Strategic Acquisitions
4. Obtain advice on application of any Buy American Provisions tied to Stimulus Act incentives
5. Formulate business growth strategy 6. Select advisory team to help your company finance, prepare for
and close the deal if you are doing M&A, JV.7. Consider support services for future business operations:
financial; tax and accounting; legal; strategic.
Thank You & QuestionsThank You & Questions
Eliotg Norman , Esq.International Partner
Wiliams Mullen 200 South 10th St.
Richmond, VA 23219 [email protected]
www.williamsmullen.comwww.williamsmullen.com/immigration