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1. Presentation of the Green for Growth Fund
2. Introduction to Renewable Energy
Agenda
for
CONFIDENTIAL
2. Introduction to Renewable Energy
3. Introduction to the specifics of Hydro Power Plants
4. Case study of a hydro project
5. Financing of Renewable Energy Projects
6. Regulatory Conditions for Bankability
1
Preparatory Summary (from previous presentations)
Project Participants
• Developer / Sponsor
• Landowners / Concession
• Authorities / Regulatory
Bankable documents
• Feasibility study
• Business plan
• Site, design, project participants
for
CONFIDENTIAL 2
• Authorities / Regulatory
• EPC / Turnkey construction
• O&M contractor
• Raw material provider
• Offtaker
• Debt provider
• Capital expenditures (CAPEX)
• Energy Revenues
• Operating expenditures (OPEX)
• Cash flow calculations with tax
assumptions
• Financing strategy
• Legal documentation
Preparatory Summary
Corporate Finance
Bank(s)
Disbursement of funds
Provision of investor data
for corporate due diligence
InvestorInvestment (with bank funds
and own equity)
Investor develops the project and/or
evaluates the project risk
Biomass Project SPV
for
CONFIDENTIAL 3
Disbursement of funds
Project Finance
Disbursement of senior and/or
mezzanine funds directly to the SPV
Provision of project data
for project due diligence InvestmentBiomass Project SPV
Bank(s)
InvestorGGF
Equity
Debt
Investor develops the project and/or
evaluates the project risk
Preparatory Summary
Corporate Finance
Bank(s)
Disbursement of funds
Provision of investor data
for corporate due diligence
InvestorInvestment (with bank funds
and own equity)
Investor develops the project and/or
evaluates the project risk
Biomass Project SPV
for
CONFIDENTIAL 4
Disbursement of funds
Project Finance
Disbursement of senior and/or
mezzanine funds directly to the SPV
Provision of project data
for project due diligence InvestmentBiomass Project SPV
Bank(s)
InvestorGGF
Equity
Debt
Investor develops the project and/or
evaluates the project risk
Project Finance
Project data
Bank(s)
GGF
What means Project Finance?
• Project company (SPV)
• Capital structure (Debt Capacity � Equity)
• Debt Structure (Syndication, Sub debt…)
for
CONFIDENTIAL 5
Project SPV
Energana d.o.o.
Investor
Equity
Debt
• Cash flow waterfall
• Due diligence
• Technical
• Legal & Tax
• Economic
• Project collateral
• Non-recourse vs. limited recourse
• Insolvency Proceedings
Eligibility of Financing (Bank‘s perspective)
Renewable Energy Technology must be eligible by the Bank, here GGF:
• Solar (thermal and photovoltaic)
• Small hydro (<30 MW)
• Biomass (including Biogas)
for
CONFIDENTIAL 6
• Geothermal
• Small wind farms (<30 MW)
Limitations for Bank’s:
• Bank’s long term funding is condition for long term funding to the project
• Long term fixed interest rate hedging (interest swaps provided by Bank)
• Credit margin according to project & country risk
• Exposure limitations (regarding technology or client )
Typical Capital Structuring
for
Total invest = 10mn
Senior Debt
Total invest = 20mn
Senior Debt divided
among different
Lenders
Total invest = 20mn
Senior Lender
con
stru
ctio
nC
ash
flow
wa
terfa
ll
CONFIDENTIAL 7
Equity
3mn
Senior Debt
provided by one
Lender
7mn Bank
8mn
Equity
4mn
Lenders
GGF
8mn
Equity
4mn
Senior Lender
12mn
Ca
sh in
ject
ion
du
rin
gco
nst
ruct
ion
wa
terfa
lld
urin
go
pe
ratio
n
Mezzanine Lender
4mn
Setting up a Cash flow Model
for
Create (semi-) annual model
CONFIDENTIAL 9
Extend this model with the
periods of project lifetime
• DSCR measures how many times the cash flow
after debt service (CFADS) can repay the
scheduled Debt Service – here 1.20 and 1.22
• Minimum DSCR are usually defined in the bank‘s
risk policy with consideration of the financing
Debt Service Cover Ratio (DSCR)
for
CONFIDENTIAL
risk policy with consideration of the financing
structure, resource & technology risk
• The higher the risks, the higher the DSCR should
be to have more cushion in downside years
• The DSCR can be used as loan covenant and
prevent dividend payments (distribution lock-up)
• With the min. DSCR the debt capacity can be
calculated � in any year the minimum DSCR may
not fall below the DSCR threshold
11
Cashflow Available for Debt Service
Debt Service (Repayment+Interest)
Debt Capacity
for
How much debt can be burdened to the project?
CONFIDENTIAL 12
Adapt the loan amount until the min. DSCR has been reached
Content of more detailed Cashflow Models
Consideration of Reserve Accounts
• Debt Service Reserve
• Maintenance & Repair Cost Reserves
• Decommissioning Reserves
for
CONFIDENTIAL 13
• Interest / FX Risk Reserves
Debt Structuring
• Grace periods
• Linear Repayment / Annuity Debt Service / Debt Sculpting
• Cash Sweep
• Other lenders (pari passu, subordinated)
Content of more detailed Cashflow Models
Scenario Analysis (Impact on Cashflow)
• Construction Delays
• Changes in Interest Rate
• Changes in Foreign Exchanges
for
CONFIDENTIAL 14
• Unexpected Increase of OPEX
• Cut-down of Feed-in-Tariff
Other
• Tax modelling (loss carryforward, depreciation methods…)
• Income statement & Balance Sheets (regarding overindebtedness)
Thank you for your attention!
CONFIDENTIALContact: Dominic Hereth, Phone: +49 (0) 69 977 876 50-88, Fax: +49 (0) 69 977 876 50-10, E-Mail: [email protected]