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Renewable Energy Projects Financing Issues

Renewable Energy Projects Financing Issues. David A. Perlman Managing Director Fieldstone Private Capital Group, Inc. January 19, 2007. F IELDSTONE IS AN INVESTMENT BANKING FIRM FOCUSED ON ENERGY AND INFRASTRUCTURE. Fieldstone Summary. Founded in 1990 Independent, employee owned company

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Renewable Energy Projects Financing Issues

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  1. Renewable Energy ProjectsFinancing Issues David A. Perlman Managing Director Fieldstone Private Capital Group, Inc. January 19, 2007

  2. FIELDSTONEIS ANINVESTMENT BANKING FIRMFOCUSED ONENERGY AND INFRASTRUCTURE

  3. Fieldstone Summary • Founded in 1990 • Independent, employee owned company • Headquartered in New York with four international offices: • London • Johannesburg • Berlin • Hyderabad (India) • Provides financial advisory and capital raising services • Arranges financing to optimize capital structure • Unique combination of project and corporate advisory experience • Free of product conflicts • Senior bankers actively involved in every assignment

  4. Renewable Energy Project Summary • Project Financed • Multiple off take parties • Multiple financing parties looking at stand-alone credit • Government incentives • Risks allocated to suitable parties • Highly structured • Generally more expensive cost of capital than recourse financing • Renewable technology can be • Established • Scale-up • New

  5. Stand-Alone Project Financial Projects • Each party must have an incentive to participate • Developer • Financiers / Investors • Construction contractor • Operator • Suppliers • Off taker (utility) • A fixed amount of capital is available for financial incentives • Revenues • Subsidies

  6. Maximizing the Impact of Subsidies • Tax subsidy issues • Limited investor pool • energy focus • tax base • Structural complexities • Inefficient economically • Complex documentation • Cash subsidy is preferable but not perfect • Available to all parties • Preferable to financiers • Does not introduce structural complexities

  7. Incentives to Maximize Revenue • Renewable Portfolio Standards • Off taker needs portfolio of renewable projects • Off taker pays what is required to meet RPS • Renewable PPAs • Profit incentive for off taker • Old rate base system • Allowing more than a pass trough on PPAs • Who ultimately pays increased cost of power • Ratepayers? • Taxpayers? • How significant is the difference?

  8. Incentives to Limit Costs and Expenses • Construction • EPC vs. open book • Who covers cost risks in open book? • Financial parties • Off taker • Operations • Feedstock costs, if any • Equipment warranties • Finance and ownership • Project finance structure with tax investor • Traditional project finance structure • Off taker ownership and finance

  9. Are We Communicating with Each Other?

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