“Shaking the Money Tree”Session B: Finance and Affordability Maryland Clean Energy Summit October 16, 2013
What Do You Need to Know to Successfully Finance a Distributed Generation Project? • Developer’s Perspective • Elements of a Financeable Project, Portfolio • Financing Sources and Solutions • Steps to Financing • Scalability Challenges
Developer’sPerspectiveonExecutingDistributedGenerationProjectsDeveloper’sPerspectiveonExecutingDistributedGenerationProjects • Site and host opportunity assessment • Technology options assessment • Revenue stream and path assessment • Financial structuring options assessment • RE resource or fuel supply assessments • Value proposition case development • EPC and O&M strategy, options • Operations or contract sell-down strategy Development Strategy Project ID and Planning Project Development Project Financing Project / Asset Management • Site selection and permitting • Technology selection and commitments • PPA and REC path confirmation • Financing assumptions • Detailed resource assessment • Host provisions and commitment terms • Develop EPC and O&M contracts • Develop extension and termination rights • Finalize site development • Equipment warranties, performance guarantees • Vendor • Off-take commitments • Regulatory process and approvals • Financing pro-forma • Finalize EPC • Finalize O&M contract • Finalize equity and debt commitments • Pro-forma management • Contract management • Address due diligence issues • Finalize regulatory commitments • Legal / contractual review • Conditions precedent met • Financial close • Start construction draw and management • O&M management • Fiduciary / contract management • Risk management • Credit and collateral management • Environmental asset management • Financial reporting and management
Elements of a Financeable Project, Portfolio • Strong O&M and availability guarantees • Reliable, monetized revenue streams Financing • Strong un-levered returns on equity • Credible sponsorand technology
Steps to Financing • Development & Partnering • Develop Bankable Project Portfolio with Strong Site, Host and Revenue Features • Financing • Optimize Capital Components to Generate Requisite Returns • Structuring and Securitization • Provide Performance • Guarantees and Supplemental Security Create stakeholder interests among equity, off-take, lenders and vendors
What is a Partnership and Lease? • These structures unlock the value of tax incentives (ITC/PTC, MACRS)… • A (leveraged) tax partnership creates a pass thru LLC • Allocates income and loss to separate LLC members • Allocable items are tax credits, cash, depreciation, and interest deductions • Tax equity investors (TEI) are preferred, ownership flips once yield is achieved (JP Morgan) • A (leveraged / single investor) lease is essentially debt • Project is sold by lessee (the developer) to lessor (the bank) • Bank monetizes the tax equity capacity of the asset • Lessee operates the project and pays rent to lessor • An agreement is a lease if it meets both GAAP and Tax (IRS) requirements
What are the Differences? There are pros and cons to each financing structure, for developers and their financial partners.
Thank You • For more information,please contact: • Bo Poats • 702.227.2164 • bo.poats@Siemens.com