Project development for large-scale PV power plants
Project development for large-scale PV power plants Phoenix Solar Capital Market Day Munich, 07 June 2011
Norbert Burkhart Head of Sales GMS SonnenSt...
Project development for large-scale PV power plants Phoenix Solar Capital Market Day Munich, 07 June 2011
Norbert Burkhart Head of Sales GMS SonnenStrom Electricidad Solar
Elettricità Solare
Solar Electricity Électricité Solaire
Table of Contents
1.
Contractual Aspects
2.
Financial Aspects
3.
Market View
Project Business at Phoenix Solar
Capital
Project implementation is a combination of ...
Construction
Site
Business Areas for Contract and Financing
Project development -
Assessment of land (shadowing, contamination, statics of roof installations) Optimisation of planning (depending on the solar exposition, irradiation and feed-in tariff) Lease contract Feed-in contract with the local utility Authorisations
Economical analysis and optimisation -
Cost calculation and earnings projection Legal and tax structuring Contract negotiations Set-up of special purpose vehicles
Investors / Banks -
Acquisition of investors Structuring according to the needs of the investors (e.g. investment funds, local authorities)
Contractual Structure
Before starting discussions and negotiations about contract and deal details a) Pure EPC contract
Important question:
b) Asset deal structure c) Share deal structure
Consequence: = Contractual structure and risk evaluation differs according to structure
Example: SPV Contractual Structure
Land owner
Purchaser take-over of lease contract and take-over of the plant for EUR [1] after every [20] completed years of operation
lease contract
grant
General contractor
EPC contract credit
EPC contract fixed package price, fixed date
Company A
Company B
operational and maintenance contract
Bank Special Purpose Vehicle (SPV)
interest and clearance
interest & clearan interest in a limited partnership
maintenance contract (for the inverters)
Equity investor payout
Utility
feed-in contract
business management contract
Authorities
authorizations & urbanistic contract
Self-marketing, equity management etc.
KfW
Important Contracts (Focus Project Financing)
Significant amount of contracts and agreements per project (just a few examples) - Project development contract - Land lease contract - EPC contract - Financing contract (debt financing) - O&M contract
Important Issues (Focus Project Financing)
Project Development Contract 1. Risk structure - risk sharing during the development process - completely developed project (ready to pick up) - own project development 2. SPV structure - by developer due dilligence - by Phoenix fixing all contractual obligations between SPV and developer
Important Issues (Focus Project Financing)
Land Lease Contract a) Cadastral register situation – concerning financing b) Easements c) Duration of contract and terms in line with national legal frames d) Deconstruction commitments e) Transferability of the contract f) Denunciation arrangements g) Compensation measures
Important Contracts (Focus Project Financing)
EPC Contract a) Warranty (construction, inverter, modules) b) Guarantees (modules) c) Bank guarantees d) Acceptance issues e) Securities (allignment of security contracts – assignment of claims etc.) f) Payment terms and conditions g) Penalties
1
Important Contracts (Focus Project Financing)
Loan + Debt Financing Agreement (Debt Financing) Payment conditions! a) Equity b) Insurances c) O&M contract d) Land lease terms e) Easements f) Performance guarantees g) etc. Some conditions contradict obligations and duties in the EPC contract. problem shifting!!!
1
Table of Contents
1.
Contractual Aspects
2.
Financial Aspects
3.
Market View
1
Project Financing: Cash-Flow oriented
1.
Decrease of earnings irradiation degradation performance ratio technical availability
2.
Increase of expenses repair costs insurance bonus leasing expenses change of interest
Development process Construction phase
Implementation Ca
sh
flo w
Expiration of warranty
Operational phase
1
Investment Goals Reliability a) legal reliability b) fiscal reliability
Projects are digital. Each small detail can influence the success and terminate a deal and several months of hard work. Projects are a roller coaster – you have to take care about each individual detail. Never think that it‘s done! Many players, many parties. New rules can change the whole deal „in flight“. Projects always have new aspects.
1
Table of Contents
1.
Contractual Aspects
2.
Financial Aspects
3.
Market View
1
Market View
Reaching grid parity is the big challenge now facing the entire solar industry. Because of the actual political decisions in all countries the markets are moving faster and faster in the direction of grid parity. Consequences: 1. Risk:
Due to reduced tariffs
2. Chance:
Due to more sites which can be used for plants
1
Germany Contrast High degree of legal security and reliability for investors vs. lower project rentability EEG evolution With publication in the federal law sheet v. 4/15/2011 the latest amendment of the EEG came into force. Deduction of Tariffs now dependent on new installed base. Deduction by end of June/August Most likely scenario of (-) 6% … means … Cost Base Recognizable prize movements in the areas of Modules and inverters can compensate if necessary for negative factors of influence. But: almost no cost effects on labour and raw materials. Demand for German projects
2
Italy Year of change and decrease Rapid reductions in 2011 / 2nd half of year. Consequence: (-) 40%. Grid parity Italian market still interesting and most likely the first one in Europe to reach grid parity. Cost Base Recognizable prize movements in the areas of Modules and inverters can compensate if necessary for negative factors of influence. But: almost no cost effects on labour and raw materials. Strong Demand for projects with higher rentability compared to Germany
2
France Change Significant changes in rules (market cap). Influences on ground-mounted systems and rooftop projects. Rooftop projects will win Ground mounted systems with only 5%-10% share. Political intent to support rooftop projects. Migration phase Period until mid 2012 to finish “old” projects according “old” system. But: Significant hurdles in inflexible technical setups which have to be built according to permits. Acquisition of “old” project rights as attractive opportunity if technical components are available. New system not clear and specified in detail Investors and banks support “old” projects. News processes unclear.
2
Greece Project finance Setup of project finance as key issue. Country risk significant. Projects available Significant amount of developed projects available. But … Equity Almost no equity available with willingness to invest in Greek projects according to country risk. Access to debt financing Hard access to debt finance for investors with equity. HERMES approval takes up to 9 months.
2
Bulgaria Tariff unkown Feed-in tariff not yet published Market relevance Little interest of investors and banks in the market in general Planning security Feed-in tariff will be guaranteed for 20 years. Tariff valid for one year without fix mechanism of deduction. Preparation for take-off Uncertainty can be fixed by legal frame. Take-off of market very likely in case of established rules. Demand for projects very likely.
