Threshold Power Trust extends the cross-border income fund model to wind projects

Threshold Power Trust will indirectly acquire the interests of US tax shelter investors in US LLCs generating electricity from wind through a structure similar to that used by Argent Energy Trust to invest in a U.S. oil and gas business:  it will hold the underlying project LLCs (and Delaware LLPs) through a subsidiary Ontario trust on top of a Canadian holding company on top of a US C-Corp. holding company, with interest paid at 7.5% on a note owing directly by the C-Corp. to it.

Although no view is expressed on whether the foreign accrual property income rules will apply (which is relevant for surplus purposes even if the underlying project LLCs are not considered to be controlled foreign affiliates), presumably the position will be taken that producing and selling electricity does not generate income from property.

The U.S. inversion rules are not expected to apply to the Trust since none of the vendors of the project LLC interests will receive Trust units in consideration for the sale nor will their continuing interests in the project LLCs have dividend, redemption or liquidation rights that are substantially similar to the rights of a holder of Trust units.

Neal Armstrong and Abe Leitner.  Summary of Preliminary prospectus for IPO of Threshold Power Trust under Foreign Asset Income Funds and LPs.