Wirtschaft Immobilien Kommunen Zuschüsse
„Integration of wind energy project financing in a bank's business model“
Dipl.-Ing. H. Eimannsberger
X:\541\Berichtswesen und Öffentlichkeitsarbeit\Vorträge\Hans Eimannsberger\
PEP Capacity Development Workshop, 29.10.2012
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Agenda
Investitionsbank Schleswig-Holstein and energy agency
Links to other fields of financing
How can a bank build up structures and capacities into wind energy project financing
Which role do external consultants play for the technical assessment of projects
Summary
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Schleswig-Holstein within Europe and Germany
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Investitionsbank Schleswig-Holstein (IB)
The main development bank of the land Schleswig-Holstein plays a key role in providing financial support to foster regional development and growth
Balance sheet total 18,1 Mrd. €
New business volume 2,1 Mrd. €
494 employees
Energy Agency
Participation in financing of:
480 wind turbines (102 wind farms) with a total installed capacity of approx. 585 mw; Investment volume: 692 million €
76 PV-Systems with a total installed capacity of approx. 95 mw; Investment volume: 248 million €
107 Biogas-Systems with a total installed capacity of 66 mw; Investment volume: 250 million €
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Organization chart of RE financing
Vorstand (Board of Directors)
Erk Westermann-Lammers(CEO)
Dr. Michael Adamska
corporate development(Unternehmens-
entwicklung)
real estate financing
(Immobilienkunden)
corporate financing
(Firmenkunden)
public sector financing
(Kommunalkunden)
european territorial
cooperation(Europäische Territoriale
Zusammenarbeit)
…
Firmenkunden Beratung /
Finanzierung
Firmenkunden Finanzierung
Firmenkunden Eigenkapital-
produkte
Förderlotsen
IB.Europa
Bundesförderung / Kreditinstitute
corporate financing Consulting / Financing
corporate financingfinancing
corporate financing/ equity products
promotion pilots
IB europe
Federal Funding / credit institutions
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The Energy Agency: History
1991 Founding of the Energy Agency as part of the Investitionsbank Schleswig-Holstein
Aims
Implementation of the energy concept of the Federal State
Improvement of Climate Protection
Rational and economical use of energy
Increasing the usage of renewable energy sources
Employees
15 Engineers with diverse specialisation, Agronoms, Geographers etc.
NotationIn Germany there are 28 energy agencies. Their main tasks are promotions of the use of RE, energy saving or energy efficiency projects. They are funded by the state, by projects or by banks.
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The Energy Agency: Scope of consulting
Neutral Advice and Project management in the following areas:
Energy management / Energy controlling
Refurbishment of buildings (concept, selection of planner,realisation)
Contracting / Financing
Economic Energy production (Object-combined heat and power)
Usage of renewable Energy (Wind, Biomass, Geothermia, Solar)
Tendering for energy supply
Energy efficiency for industry and SME
Preparation of expertises for lenders, Project Financers and real estate owners
Links to other fields of financing
Financial structures of renewable energies (1)
Business finance
Financing base credit quality of the borrower
full recourse to borrowers
terms of financing mid to long-term runtime*)
credit worthiness dependent margin
standardised credit agreements
usual credit assessment
Project finance
Financing Base cash flow of the project
No / limited recourse to sponsors
terms of financing long-term runtime
project risk dependent margin
comprehensive documentations (loan and collateral agreements)
independent consultants (technology, law, insurances)
*) long-term runtime: 15 till 20 years
Financial structures of renewable energies (2)
bank
wind turbines manufacturers
general contractors
equity providers
wind, technical, legal, insurance consultants,
offtaker
regular / local approvals
operator
project company
dividends
loansinterest and repayment
Equity
various contracts O&M contract
licences
Offtake Agmt.
Who are the investors ?
Utility Companies as investors in RE not always “Early Birds”
mainly corporate financed, increasing demands for project financing
drift unit: rising indebtedness and pressure from rating agencies
easy access to outside capital
ROE expectations 12 - 15% p.a. +
Independent developer / institutional investors/ partially manufacturers pacemakers in the market of RE
“Copy and Pace” strategy for countries which begins with promotion of RE,
project finance is mainly necessary
ROE expectations for investors about 10%+/- if there is a stable project flow
Where do banks and financiers need to pay attention?
stable and secure conditions essential for investors, industry and financiers
feed-in tariff law, promotion based on certificates, tax incentives, tenders
national/ regional licensing procedure
calculable / non-calculable;
quick and transparent or bureaucratic
local “technical” assumptions amongst others: wind speed, sunshine duration, sustainable access to biomass etc.
technology practically proven or new technology,
service- and maintenance costs p MWh
credit worthiness / political stability of a country criterion also again in Europe
Main examination fields for banks and financiers
analysis and interpretations of wind studies, verification through own data base
examination of the federal immisson control act (BImSchG), especially economic evaluations of operation restrictions (aspects of noise and shadows, animal welfare)
assessment of legal risks of contradiction and complaint procedures
assessment of technical risks of wind turbine types ( issue of SDL-prototypes)
assessment of long-term performance of project partners (e.g. full maintenance contracts).
completeness of licence agreements; suitable lease agreements
grid connection concept; esp. feed in in a transformer station of third parties
revenue distribution and revenue accounting;
manpower requirement in start up phase: ca. 10 persons
Impact of changes
Essential examination fields to cover the capital service are:
effect
locational energy revenue prognosis +++
feed in tariffs (e.g. SDL* ) +++
exceeding of investment costs ++
dynamic change of capital market rates +
dynamic in technical operating costs of power plants +
shadow / sound / fauna +
Capital project risks are minimised from the perspective equity providers, but there are always the risk of planning mistakes.
Schematic representation of project financing processes
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Identification and feasibility
risk analysis
provisional capital budgeting
project structuring
determining financing options
financing structures
get in contact with financing partners
Financing structures
optimization of financing and project structures
contract structuring
Due Diligence
Financial Model / Model Audit
sensitivity and scenario analysis
tax planning
information memorandum
Financing arrangements
Determination of standards in arrangement and underwriting
optimization of financing conditions because of competitive environment
valuation of financing commitment
Term Sheet negotiation
Financial close
Coordination of Due Diligence
final negotiations of conditions and loan agreements
accompanying of project until the achievement of pay out conditions
refinancing
Which role do external consultants play for the technical assessment of projects?
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Numerous external specialists are involved in structuring and arranging project financing. In the area of the renewable energy this complexity acquires new challenges which can be co-ordinated by the activation of a financial advisers who arranges, coordinates and supervises the process.
Legal Adviser
Tax Adviser
Technical Adviser
Insurance Adviser
Legal Adviser
Model Auditor
Independent Engineer
Insurance Adviser
arranging banks
consortium banks
Project Developers
Financial Adviser
Worldwide investments in renewable energies
Bill. $
worldwide investments RE (Billion USD)Source: UNEP/SEFI/New Energy Finance 2007
Summary
The entrance in financing wind energy projects for banks is related with risks.
Banks have to build up their own know-how as quickly as possible to be independent from external consultants and to be able to read and understand necessary certificates.
Independent consultants are always necessary because banks cannot provide in particular technical know how.
Nevertheless there is a strong increasing of wind energy projects and this offers additional income for banks
In Schleswig-Holstein there aren't any distressed engagements.
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Thank you very much for your attention!
Hans EimannsbergerHead of energy agencyTel. (04 31) 99 05 - 36 [email protected]
Investitionsbank Schleswig-Holstein, Fleethörn 29 - 31, 24103 KielFax: (04 31) 9905 - 36 52, www.ib-sh.de
