Diapositive 1

1
Project Finance Private Equity in the Wind Energy
Industry Philippe Raybaud Partner, Corporate
Department
35, boulevard des Capucines 75002 Paris Tél
(33-1) 53 45 40 00 Fax [phone]
www.cgrlegal.eu
2
Private Equity in the Wind Energy Industry

• Private equity, in its largest meaning, would be
  any activity where investors entrust their money
  to professionals so that they invest it in
  companies according to certain predefined
  investment criteria.
• This presentation will be focused on the role of
  investment funds in financing wind farm projects
  (asset finance).

3
Private Equity in the Wind Energy Industry

• In 2007,
• US 148.4 billion invested in the clean energy
  sector worldwide
• 57 of which for new renewable energy capacity
  (US 84.5 billion)
• Out of these US 84.5 billion, US39 billion
  for new wind farm projects, adding another 21 GW
  of new capacity worldwide.
• figures taken from UNEPs Publication on
  Global Trends in Sustainable Energy Investment
  2008

4
New Investment by Sector
Asset finance new investment by Sector. 2001-2007 (in million of US) Asset finance new investment by Sector. 2001-2007 (in million of US) Asset finance new investment by Sector. 2001-2007 (in million of US) Asset finance new investment by Sector. 2001-2007 (in million of US) Asset finance new investment by Sector. 2001-2007 (in million of US) Asset finance new investment by Sector. 2001-2007 (in million of US) Asset finance new investment by Sector. 2001-2007 (in million of US) Asset finance new investment by Sector. 2001-2007 (in million of US)
Sector 2001 2002 2003 2004 2005 2006 2007
Wind 2,849.36 3,300.62 6,061.54 9,416.47 17,213.27 23,267.33 39,050.00
Solar 242.03 39.43 461.71 406.37 1,080.44 5,003.00 17,728.29
Biofuels 426.38 722.68 1,054.17 803.78 4,498.69 14,418.50 16,717.79
Biomass Waste 711.31 750.75 1,134.17 911.86 2,859.96 5,936.62 8,631.17
Other Renewables 386.16 299.98 603.15 822.06 1,893.00 1,722.65 2,361.58
Total 4,600 5,100 9,300 12,400 27,500 50,300 84,500
Number of deals
Disclosed no 17 38 44 77 281 330 544
Total no 103 130 197 267 502 547 906
Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals)
UNEPs Publication on Global Trends in
Sustainable Energy Investment 2008 - Dataset
5
Private Equity in the Wind Energy Industry

• Continuous increase of the overall investment in
  new generating capacity mainly fuelled by new
  investment in wind farm projects
• Investment in solar projects is quickly picking
  up

6
New Investment by Region
Asset finance new investment by region. 2001-2007 (in million of US) Asset finance new investment by region. 2001-2007 (in million of US) Asset finance new investment by region. 2001-2007 (in million of US) Asset finance new investment by region. 2001-2007 (in million of US) Asset finance new investment by region. 2001-2007 (in million of US) Asset finance new investment by region. 2001-2007 (in million of US) Asset finance new investment by region. 2001-2007 (in million of US) Asset finance new investment by region. 2001-2007 (in million of US)
Region 2001 2002 2003 2004 2005 2006 2007
United States 1,261.18 1,216.75 3,763.50 2,061.79 6,319.79 16,330.18 16,327.72
EU Europe 2,033.56 2,707.67 3,095.28 6,407.30 13,702.22 19,534.96 38,839.06
Other OECD 608.20 241.99 973.05 2,181.27 2,972.45 3,253.86 6,980.07
China 197.34 322.69 568.08 236.50 1,775.40 4,770.35 10,828.71
India 207.43 274.99 470.48 577.39 628.90 661.83 2,298.40
Brazil 22.50 142.76 148.83 93.32 540.10 3,827.06 5,015.53
Africa 30.83 22.87 201.60 272.78 269.57 1,333.29
Other Non-OECD 285.03 175.84 272.65 601.40 333.73 1,700.30 2,865.98
Total 4,600 5,100 9,300 12,400 27,500 50,300 84,500
Numbers of deals
Disclosed no 17 38 44 77 281 330 544
Total no 103 130 197 267 502 547 906
Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals) Note Grossed-up values based on disclosed deals. The figure represents new investment, i.e. for new-build projects only, and therefore excludes acquisitions and re-financing. Numbers in brackets refer to (disclosed / total deals)
UNEPs Publication on Global Trends in
Sustainable Energy Investment 2008 - Dataset
7
Private Equity in the Wind Energy Industry

• Europe attracted the largest investment, but
  China, Brazil and India are becoming significant
  players
• With the Obama administration, wind turbine
  manufacturers expect a significant increase of
  new wind farm projects in the US

8
Private Equity in the Wind Energy Industry

• Infrastructure Investment Funds are very active
  in the acquisition and/or financing of wind farm
  projects
• Private equity financing for clean energy
  projects was estimated at approximately US 10
  billion worldwide in 2007

9
Main Features of Infrastructure Funds
investments

• low risk, low return
• long term investments
• priority on risk diversification (countries,
  turbines, etc.)
• investments are typically made with a high
  leverage of debt, but some funds make 100 equity
  investments

10
Minimizing risk as much as possible is crucial

• Extensive technical, legal, tax and financial due
  diligence on the project
• No development risk to be taken by the fund risk
  allocation under the Share Purchase Agreement and
  Development Service Agreement
• No construction risk to be taken by the fund
  turnkey-type construction agreements with
  maintenance agreement
• In the current market, funds even refuse to take
  financing risks.

11
Examples of infrastructure investment funds
Infrastructure Funds DIF Renewable Energy and DIF Infrastructure II Allianz Renewable Energy Funds Akuo Investment SICAR
Size of fund DIF RE 140 millions DIF I I 150 millions DIF I II 500 to 750 millions ( 200 millions committed at first closing) Fund I 450 millions Fund II 500 millions (expected) 150 225 millions (Fund not closed yet. Last closing expected in March 2010)
Strategy PPP projects and renewable energy projects. Captive Allianz fund investing in renewable energy projects Investment in renewable energies, with a large part of the deal flow expected to be provided by Akuo Energy
Countries of Investment Europe (mainly France, Germany, Netherlands, Spain) Eurozone Mainly Turkey, Poland, Italy, France
Individual Investments 5 to 80 millions (equity) 20 to 100 millions 1 to 15 millions (equity)
Duration of Investments Fund Duration 10/12 years Valuation of projects on full life of project Life of project 5 to 7 years
Target IRR Not disclosed Not disclosed 8 to 16
Leverage of Debt Financing Between 20/80 30/70 No debt financing 100 equity 15/85
12
Private Equity in the Wind Energy Industry

• The current credit crunch has not significantly
  reduced the deal flow of infrastructure
  investment funds
• the valuation of wind farm projects has gone
  down
• more projects are on the market, as developers
  tend to encounter more difficulties to finance
  them
• infrastructure investment funds are experts in
  project finance

13
Private Equity in the Wind Energy Industry

• The current credit crunch has not significantly
  reduced the deal flow of infrastructure
  investment funds
• some infrastructure investment funds finance the
  whole project with equity (Allianz funds)
• the increase of margins applied by banks on
  interest rates (spread) tend to be at least
  partly set off by the decrease of base rates
• banks continue to show interest in financing
  energy generating facilities.

14
Consequences of the current credit situation on
infrastructure funds

• The bank financing process is much more difficult
  and tends to take much longer
• Credit Facility Agreements contain more stringent
  provisions and in particular market flex clauses
• Infrastructure investment funds will only take
  very limited risks on wind farm projects
• Some fear that asset financing of wind energy
  projects may become even more difficult in the
  future.

15
Project Finance Private Equity in the Wind Energy
Industry Philippe Raybaud Partner, Corporate
Department
35, boulevard des Capucines 75002 Paris Tél
(33-1) 53 45 40 00 Fax [phone]
www.cgrlegal.eu