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RISK ASSESSMENT AND MANAGEMENT - WHAT CAN A DEVELOPER DO FOR A FINANCIER!

RISK ASSESSMENT AND MANAGEMENT - WHAT CAN A DEVELOPER DO FOR A FINANCIER!. Presenter Name: Bernard Kiernan / Tilman Schwencke Date of Presentation: 21 st April 2010. Agenda. Introduction to Mainstream The Financiers Wind farm project lifecycle Areas of Risk LAND PLANNING & PERMITTING

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RISK ASSESSMENT AND MANAGEMENT - WHAT CAN A DEVELOPER DO FOR A FINANCIER!

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  1. RISK ASSESSMENT AND MANAGEMENT - WHAT CAN A DEVELOPER DO FOR A FINANCIER! Presenter Name: Bernard Kiernan / Tilman Schwencke Date of Presentation: 21st April 2010

  2. Agenda • Introduction to Mainstream • The Financiers • Wind farm project lifecycle • Areas of Risk • LAND • PLANNING & PERMITTING • REVENUE • WIND • GRID • DESIGN & CONSTRUCTION • OPERATIONS & MAINTENANCE • HEALTH & SAFEY 2

  3. Current Target Markets Canada (Onshore) • Secured pipeline to date: 625 MW • First asset target Financial Close: 2011 United States (Onshore) • Secured pipeline to date: 787 MW • First asset target Financial Close: 2011 Chile (Onshore) • Greenfield development Germany (Offshore) • Secured pipeline to date: 1,000 MW Scotland (Offshore) • Secured pipeline to date: 420 MW South Africa (Onshore) • Secured pipeline to date: 3,000+ MW • First asset target COD: 2011 UK (Offshore) • Contract awarded on 4,000 + MW zone 3

  4. FINANCIERS • Who are the financiers • Equity investors • Debt lenders • Long-term asset owners • When will they get involved • Equity investors • Debt lenders • Long-term asset owners • Know the risks the financier will consider • Risk identification & allocation • Sufficient returns & debt service coverage 4

  5. Wind Farm Project Lifecycle 5

  6. LAND • Of Utmost importance – ‘..... they’re not making it anymore’ • Know local planning procedures, regulations and timelines • Secure full land control • Appoint law firm with local knowledge & expertise • Sample Legal documents • Legal Review of Title Deeds • Must be watertight • Communicate with Landowner 6

  7. PLANNING & PERMITTING • Procedures vary Country by Country, Region by Region • Country Level Permits • Energy Regulator Consents • Health & Safety Authority • Environmental Authority • Aviation Authority ..... • Regional Level Permits • Met Mast consent • Substation Compound • Public Roads works ..... • Local Level Permits • Local Transport Permits • Commencement Development Permit • Waste Permit ....... 7

  8. REVENUE • Source of Revenue • Appetite for Merchant Risk • Power Purchase Agreement • Feed-in Tariff • Power Purchase Agreements • Long-term Creditworthy counterparty • Key terms – Price, Terms, Benefits, Point of Delivery, Volume • Feed-in Tariff • How attractive is the tariff? • How stable is the regulatory regime? - If there is a floor price on offer be clear as to who pays this and under what circumstances? 8

  9. WIND • The ‘bankable’ report; • Summary of wind resource • Assessment Methodology • Reports during operations • Producing a Bankable Report, ironing out uncertainties • Adequate Data Measurement • Met Masts • Long-term reference data • Turbine selection • Optimum layout 9

  10. GRID • Largely outside control of the developer • Know the process • Review Regulatory Grid Process • Contact Transmission Operator Owner • Feasibility study • Submit Grid Application • Negotiate Grid Connection • Sign Interconnection • Who Controls Transmission Planning? • Who controls economic transactions for the Transmission Market? • Who maintains Grid and builds new transmission lines? • Who manages the rights and responsibilities of transmission companies to develop new capacity? • Not everyone likes overhead lines! 10

  11. DESIGN & CONSTRUCTION • What will the Independent Engineer review? • Site Appreciation • Turbine Technology • Balance of Plant • Turbine Foundation • Electrical Systems • SCADA System • Contracts & Specifications • Project Schedule & Cost Estimate • Completion & Handover 11

  12. OPERATIONS & MAINTENANCE • Potential long-term risk to all Financiers caused by • Availability issues • Inadequate validation of availability & performance • Mitigate O&M risk • Warranty/Maintenance Service Agreement with OEM • Performance defined by Availability & Output levels • O&M Services Agreement • Experienced & reputable O&M contractor • Adequate systems • Site Management Systems • Data Management Systems • Management control processes • Allow for realistic costs • Independent Engineer will review costs, timing etc 12

  13. HEALTH & SAFETY • H&S risks apply throughout the project lifecycle • Adequate procedures and policies must be in place to avoid incidents • Serious incidents negatively impact upon projects • Death or serious injury • Turbine collapse • Pollution 13

  14. CONTACT DETAILS • Bernard Kiernan • Senior Corporate Finance Executive • Mainstream Renewable Power Ltd. • 1st Floor, Cedarhurst Building, • Arkle Road, Sandyford, • Dublin 18, Ireland • Tel: +353(0)1 290 2009 • Mob: +353 (0) 87 9670267 • Fax: +353(0)1 294 2390 • Bernard.Kiernan@mainstreamrp.com • www.mainstreamrp.com 14

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