Renewable Energy Projects Financing Issues

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Renewable Energy ProjectsFinancing Issues

• David A. Perlman
• Managing Director
• Fieldstone Private Capital Group, Inc.
• January 19, 2007

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FIELDSTONE IS AN INVESTMENT BANKING
FIRM FOCUSED ON ENERGY AND
INFRASTRUCTURE
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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

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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

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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

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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

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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?

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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

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Are We Communicating with Each Other?