Windenergie projectenWindenergie projectenJuridische planning,Juridische planning,documentatie en financieringdocumentatie...
Enter: project financingEnter: project financing• New projectNew project• Ringfenced through SPVRingfenced through SPV• Hi...
Project financing: why ?Project financing: why ?• Leverage: higher ROELeverage: higher ROE• Tax benefitsTax benefits• Off-...
Project financingProject financingconsequencesconsequences• Lenders have no ‘Lenders have no ‘upsideupside’’• Have to prot...
8 main project risks8 main project risks• Commercial viability (market, competition)Commercial viability (market, competit...
8 main project risks8 main project risks• Revenue risk (volume, price)Revenue risk (volume, price)• Force Majeure risk (de...
Project main project risksProject main project risks• Contract mismatch (take-over, COD, pre-Contract mismatch (take-over,...
Project main project risksProject main project risks• Due diligence & IdentificationDue diligence & Identification• Alloca...
Project financing wind: mainProject financing wind: maindocumentsdocuments• SPV constitutive documents sponsors & equity p...
SPVSPVCorporate entity Establishment General featuresV.o.f.Partnership• no formal requirements• partnership agreement is a...
SPV issuesSPV issues• Feasibility studies (site surveys, wind studies)Feasibility studies (site surveys, wind studies)• Le...
Risk allocationRisk allocation• Commercial viability risk (market, competition)Commercial viability risk (market, competit...
Siteownership & leaseSiteownership & leaseTitle to land Title topanels orturbinesAgreements IssuesOwnership SPV • Land pur...
Site issuesSite issues• Legal formLegal form• Long-term availability, use and accessLong-term availability, use and access...
Risk allocationRisk allocation• Some Completion risk (site, permits, costSome Completion risk (site, permits, costoverruns...
Forms of ConstructionForms of ConstructionContractsContracts19
General applicationGeneral application• Yellow Book: design/build contractYellow Book: design/build contractelectrical/mec...
General risk profile: Shift ofGeneral risk profile: Shift ofrisksrisks• Employer’s Engineer is Employer’s RepresentativeEm...
Shift of risks, cont’dShift of risks, cont’d• No extension of Time for Completion for:No extension of Time for Completion ...
Shiftofrisks,Shiftofrisks,cont’dcont’d• Employer’s RiskEmployer’s Riskexcludes:excludes:• Use of works by Employer,Use of ...
Price & qualityPrice & qualityprotection:protection:• Fixed price lump sum payments against schedule ofFixed price lump su...
Risk AllocationRisk Allocation• Main Completion Risk in EPC contract (contractor,Main Completion Risk in EPC contract (con...
Operation & MaintenanceOperation & MaintenanceContractContractCreditworthy, experienced Operator: turbineCreditworthy, ex...
Operation & MaintenanceOperation & MaintenanceContractContractIncreased OPEX through latent defects/ newIncreased OPEX th...
Operation & MaintenanceOperation & MaintenanceContractContract What is the maintenance standard ?What is the maintenance ...
Risk AllocationRisk Allocation• Main Operating risk (technology,Main Operating risk (technology,operation management and c...
Power Purchase AgreementPower Purchase Agreement CP’s & milestonesCP’s & milestones Delay in COD, testing, early product...
Risk AllocationRisk Allocation• Main Revenue risk (volume, price)Main Revenue risk (volume, price)• Some Operating risk (o...
32FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY
Nat windenergiecongres 16 mei 2013
Nat windenergiecongres 16 mei 2013
Nat windenergiecongres 16 mei 2013
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Nat windenergiecongres 16 mei 2013

Published on: Mar 3, 2016
Published in: Economy & Finance      Business      
Source: www.slideshare.net


Transcripts - Nat windenergiecongres 16 mei 2013

  • 1. Windenergie projectenWindenergie projectenJuridische planning,Juridische planning,documentatie en financieringdocumentatie en financieringWeero KosterWeero Koster16 mei 201316 mei 2013
  • 2. Enter: project financingEnter: project financing• New projectNew project• Ringfenced through SPVRingfenced through SPV• High leveraging/gearingHigh leveraging/gearing• Non-recourse or limited recourseNon-recourse or limited recourse• Future cash-flows service interest and debtFuture cash-flows service interest and debtrepayment (rather than value assets)repayment (rather than value assets)• Main security is SPV’s contracts, licenses,Main security is SPV’s contracts, licenses,permits, concessions, reports, studiespermits, concessions, reports, studies
  • 3. Project financing: why ?Project financing: why ?• Leverage: higher ROELeverage: higher ROE• Tax benefitsTax benefits• Off-balance-sheet finacingOff-balance-sheet finacing• Increased borrowing capacityIncreased borrowing capacity• Risk limitationRisk limitation• Risk sharing/ JV’sRisk sharing/ JV’s• Long-term financeLong-term finance• Enhanced creditEnhanced credit
  • 4. Project financingProject financingconsequencesconsequences• Lenders have no ‘Lenders have no ‘upsideupside’’• Have to protect against ‘Have to protect against ‘downsidedownside’’ riskrisk• High level attention to mitigating and allocatingHigh level attention to mitigating and allocatingproject risksproject risks• Not mitigating and allocating risks properlyNot mitigating and allocating risks properlyleads to renegotiation of contracts, higher costs,leads to renegotiation of contracts, higher costs,higher provisions & reserves, lower cash-flowhigher provisions & reserves, lower cash-flowand lower IRRand lower IRR• Legal planning & documentation should takeLegal planning & documentation should takeproject finance requirement lenders into accountproject finance requirement lenders into accountfrom the start of the projectfrom the start of the project
  • 5. 8 main project risks8 main project risks• Commercial viability (market, competition)Commercial viability (market, competition)• Completion risk (site, permits, contractor, costCompletion risk (site, permits, contractor, costoverruns, revenue during construction, delay inoverruns, revenue during construction, delay incompletion, inadequate performance oncompletion, inadequate performance oncompletion, third-parties and interface)completion, third-parties and interface)• Environmental risk (pollution, permits andEnvironmental risk (pollution, permits andchanges)changes)• Operating risk (technology, operationOperating risk (technology, operationmanagement and costs, availability, maintenance,management and costs, availability, maintenance,performance degradation)performance degradation)
  • 6. 8 main project risks8 main project risks• Revenue risk (volume, price)Revenue risk (volume, price)• Force Majeure risk (delay, physical damage,Force Majeure risk (delay, physical damage,political, uninsurable events)political, uninsurable events)• Financial risk (inflation, interest rates,Financial risk (inflation, interest rates,exchange rates,)exchange rates,)• Political risk (currency, expropriation,Political risk (currency, expropriation,disturbance, change-in-law/ subsidies)disturbance, change-in-law/ subsidies)
  • 7. Project main project risksProject main project risks• Contract mismatch (take-over, COD, pre-Contract mismatch (take-over, COD, pre-completion costs and revenues, delays, costcompletion costs and revenues, delays, costoverruns, force majeure, change in law, receiptoverruns, force majeure, change in law, receiptand payment of monies),and payment of monies),leading to:leading to:• Sponsor support (contingent equity, costSponsor support (contingent equity, costoverrrun guarantee, completion guarantee,overrrun guarantee, completion guarantee,payment subordination, clawbackpayment subordination, clawbackguarantee,cash deficiency guarantee)guarantee,cash deficiency guarantee)
  • 8. Project main project risksProject main project risks• Due diligence & IdentificationDue diligence & Identification• Allocation to project parties under ProjectAllocation to project parties under ProjectContractsContracts• Quantification & Mitigation of remaining riskQuantification & Mitigation of remaining risk
  • 9. Project financing wind: mainProject financing wind: maindocumentsdocuments• SPV constitutive documents sponsors & equity providersSPV constitutive documents sponsors & equity providers• Permits & licensesPermits & licenses• SiteleasesSiteleases• Construction ContractsConstruction Contracts• Grid Realisation and Connection & Transport AgreementGrid Realisation and Connection & Transport Agreement• Power Purchase AgreementPower Purchase Agreement• Operation & Maintenance AgreementOperation & Maintenance Agreement• Insurance packageInsurance package• Financing: Facility, Direct and Intercreditor AgreementsFinancing: Facility, Direct and Intercreditor Agreements
  • 10. SPVSPVCorporate entity Establishment General featuresV.o.f.Partnership• no formal requirements• partnership agreement is advisable• all partners can in principle representthe partnership• joint and several liability• separate capitalCVLimited Partnership• no formal requirements• Partnership agreement is advisable• special form of V.o.f.• joint and several liability• but limited partners: only limitedliabilityBVPrivate limited company• Notarial deed• Declaration of no objections (to beabolished)• Minimum capital requirements: EUR18.000• Registration trade register• separate legal entity and own capital• tradable shares• board members can in principlerepresent the company individually• limited liability• possibility or obligation to set upSupervisory boardNVPublic limited company• Notarial deed• Declaration of no objections (to beabolished)• Minimum capital requirements: EUR45.000• Registration trade register• separate legal entity and own capital• tradable shares• board members can in principlerepresent the company individually• limited liability• possibility or obligation to set upSupervisory board
  • 11. SPV issuesSPV issues• Feasibility studies (site surveys, wind studies)Feasibility studies (site surveys, wind studies)• Legal form and personalityLegal form and personality• Limited liabilityLimited liability• Tax treatmentTax treatment• JV and development issuesJV and development issues• Project management and controlProject management and control• Revenue allocation and distributionRevenue allocation and distribution
  • 12. Risk allocationRisk allocation• Commercial viability risk (market, competition)Commercial viability risk (market, competition)• Permitting & subsidy riskPermitting & subsidy risk• Some Operating risk (operation management and costs)Some Operating risk (operation management and costs)• Some Force Majeure risk (uninsurable events)Some Force Majeure risk (uninsurable events)• Political risk (currency, expropriation, disturbance,Political risk (currency, expropriation, disturbance,change-in-law)change-in-law)• Contract mismatch risk (take-over, COD, pre-completionContract mismatch risk (take-over, COD, pre-completioncosts and revenues, delays, cost overruns, force majeure,costs and revenues, delays, cost overruns, force majeure,change in law, receipt and payment of monies),change in law, receipt and payment of monies),
  • 13. Siteownership & leaseSiteownership & leaseTitle to land Title topanels orturbinesAgreements IssuesOwnership SPV • Land purchase agreement• Notarial deedStrongest title to land andinstallations.Superficies(Opstal)SPV • Agreement of superficies• Notarial deed• Agreements other usersOwnership of the land is nottransferred. SPV is only granted titleto the constructions build on the landLand lease(Erfpacht)Land owner • Agreement of Land Lease• Notarial deed• Agreements other usersTitle to both the land and the turbinesshall belong to the owner of the land.SPV is only granted an exclusive rightto use the propertyServitude(erfdienstbaarheid)• Agreement servitude• Notarial deed• Agreements other usersServitudes can be vested to thebenefit of another plot of land. Forexample right of access (overpad).
  • 14. Site issuesSite issues• Legal formLegal form• Long-term availability, use and accessLong-term availability, use and access• Fixed-costsFixed-costs• Restrictions on useRestrictions on use• Environmental issuesEnvironmental issues• Possibility to grant security and transferPossibility to grant security and transfer
  • 15. Risk allocationRisk allocation• Some Completion risk (site, permits, costSome Completion risk (site, permits, costoverruns, third-parties and interface)overruns, third-parties and interface)• Some Environmental risk (pollution, permitsSome Environmental risk (pollution, permitsand changes)and changes)• Some Operating risk (operation costs,Some Operating risk (operation costs,availability, maintenance)availability, maintenance)
  • 16. Forms of ConstructionForms of ConstructionContractsContracts19
  • 17. General applicationGeneral application• Yellow Book: design/build contractYellow Book: design/build contractelectrical/mechanical works, including plant supplyelectrical/mechanical works, including plant supplyand construction works; allocation of risk on basis ofand construction works; allocation of risk on basis ofinsurability, project management principles andinsurability, project management principles andability to foresee and mitigateability to foresee and mitigate• Silver Book: fixed-price, date-certain, lump-sum turn-Silver Book: fixed-price, date-certain, lump-sum turn-key contract:key contract:• Shift of risks to Contractor: design and executionShift of risks to Contractor: design and execution• Little risk of price increase (but higher price) or delay forLittle risk of price increase (but higher price) or delay forEmployerEmployer
  • 18. General risk profile: Shift ofGeneral risk profile: Shift ofrisksrisks• Employer’s Engineer is Employer’s RepresentativeEmployer’s Engineer is Employer’s Representative• Employer’s ‘Employer’s ‘determinationsdeterminations’’• Setting Out responsibility ContractorSetting Out responsibility Contractor• (No) Unforeseeable difficulties & verification/(No) Unforeseeable difficulties & verification/interpretation of Employer data (incl. sub-surface,interpretation of Employer data (incl. sub-surface,hydrological and Employer Requirements)hydrological and Employer Requirements)• General design obligations, design error: ContractorGeneral design obligations, design error: Contractorfully responsible for design and design coordinationfully responsible for design and design coordination(including Employer design)(including Employer design)
  • 19. Shift of risks, cont’dShift of risks, cont’d• No extension of Time for Completion for:No extension of Time for Completion for:• exceptionally adverse climatic conditionsexceptionally adverse climatic conditions(except FM)(except FM)• unforeseeable shortages in personnel orunforeseeable shortages in personnel orgoods by epidemic or government actionsgoods by epidemic or government actions• Errors in Employer’s RequirementsErrors in Employer’s Requirements• Setting OutSetting Out• Unforeseeable physical conditionsUnforeseeable physical conditions
  • 20. Shiftofrisks,Shiftofrisks,cont’dcont’d• Employer’s RiskEmployer’s Riskexcludes:excludes:• Use of works by Employer,Use of works by Employer,• Design of works byDesign of works byEmployer’s personnel,Employer’s personnel,• Unforeseeable operationUnforeseeable operationof forces of natureof forces of nature
  • 21. Price & qualityPrice & qualityprotection:protection:• Fixed price lump sum payments against schedule ofFixed price lump sum payments against schedule ofpayments & Performance Certificatepayments & Performance Certificate• Robust security package: advance payment bond,Robust security package: advance payment bond,performance bond, retention of moneyLiquidatedperformance bond, retention of moneyLiquidated• Liquidated Damages for delay (10 – 20 %, > ?)Liquidated Damages for delay (10 – 20 %, > ?)• Defects liability period (>2 yrs)Defects liability period (>2 yrs)• Warranty bond after Taking Over (> 2yrs)Warranty bond after Taking Over (> 2yrs)• Liquidated Damages for performance (10 – 20 %, > ?)Liquidated Damages for performance (10 – 20 %, > ?)
  • 22. Risk AllocationRisk Allocation• Main Completion Risk in EPC contract (contractor,Main Completion Risk in EPC contract (contractor,cost overruns, revenue during construction, delay incost overruns, revenue during construction, delay incompletion, inadequate performance on completion),completion, inadequate performance on completion),Some Force Majeure riskSome Force Majeure risk• Limited scope for Contractor claims for time/money;Limited scope for Contractor claims for time/money;Contractor will:Contractor will:• Price these risks, so increase initial Contract SumPrice these risks, so increase initial Contract Sum• Do extensive due diligence to mitigate, leading to delay inDo extensive due diligence to mitigate, leading to delay inexecutionexecution
  • 23. Operation & MaintenanceOperation & MaintenanceContractContractCreditworthy, experienced Operator: turbineCreditworthy, experienced Operator: turbinesupplier ?supplier ?Can the Operator be replaced ?Can the Operator be replaced ?What is ‘What is ‘OperationOperation”” ? Scope of work? Scope of workAgreed upon performance criteria at fixed/Agreed upon performance criteria at fixed/predictable OPEXpredictable OPEX
  • 24. Operation & MaintenanceOperation & MaintenanceContractContractIncreased OPEX through latent defects/ newIncreased OPEX through latent defects/ newtechnology: typically defects warranty ends aftertechnology: typically defects warranty ends after2-5 years2-5 yearsPerformance guarantees with LD’s:Performance guarantees with LD’s: Availability, power curve, soundAvailability, power curve, sound cover variety of costs, but also PPA damages ?cover variety of costs, but also PPA damages ? but usually low caps.What if operator cannot bebut usually low caps.What if operator cannot bereplaced ?replaced ?
  • 25. Operation & MaintenanceOperation & MaintenanceContractContract What is the maintenance standard ?What is the maintenance standard ? Does maintenance include replacement ofDoes maintenance include replacement of‘‘ComponentsComponents””: blades, nacelle, tower, gearbox ?: blades, nacelle, tower, gearbox ? Is maintenance work warranted for design, materials,Is maintenance work warranted for design, materials,workmanship ? Serial defects ?workmanship ? Serial defects ? Is there access to the site for components ?Is there access to the site for components ? Is there an on-site stock and what’s in it ?Is there an on-site stock and what’s in it ? How long will spares remain available ?How long will spares remain available ? Condition of the Works at the end of the maintenanceCondition of the Works at the end of the maintenanceterm ? Testing ?term ? Testing ?
  • 26. Risk AllocationRisk Allocation• Main Operating risk (technology,Main Operating risk (technology,operation management and costs,operation management and costs,availability, maintenance, performanceavailability, maintenance, performancedegradation)degradation)• Some Political risk (change-in-law)Some Political risk (change-in-law)
  • 27. Power Purchase AgreementPower Purchase Agreement CP’s & milestonesCP’s & milestones Delay in COD, testing, early production (at opex + price ?)Delay in COD, testing, early production (at opex + price ?) Failure to construct or achieve nameplate capacityFailure to construct or achieve nameplate capacity Approval by purchaser of project doc’s, e.g. pass-throughApproval by purchaser of project doc’s, e.g. pass-throughOPEX or CAPEX overrunsOPEX or CAPEX overruns Price linkeage to subsidiesPrice linkeage to subsidies Operation of plant/ curtailmentOperation of plant/ curtailment Take-or-pay is not an absoluteTake-or-pay is not an absolute Delivery point, connection & transportDelivery point, connection & transport Long-term income securityLong-term income security
  • 28. Risk AllocationRisk Allocation• Main Revenue risk (volume, price)Main Revenue risk (volume, price)• Some Operating risk (operationSome Operating risk (operationmanagement and costs, availability,management and costs, availability,maintenance,)maintenance,)• Some Political risk (change-in-law)Some Political risk (change-in-law)
  • 29. 32FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE AND COMMODITIES TRANSPORT TECHNOLOGY

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