BAES’ specific experience on Hydro / Wind Farms, etc€¦ · BAES’ specific experience on Hydro...

BAES’ specific experience on Hydro / Wind Farms, etc

May, 2013

Eduardo Bernardotti

Due Diligence assessment on renewable energy projects

Contents

Introduction

Assessment services

DD reports development

Technical and economic Due Diligence

Financial and WEM Due Diligence

Works monitoring services and project commissioning

Qualifications

Introduction

Introduction

Banks as well as other financial entities, such as development corporations and private equity funds, often must evaluate the financing of energy projects; from power plants of different sizes and technologies, to transmission lines at high voltage. In this sense, these entities need of technical consulting services to carry out a due diligence (DD) process, on both technical-economic and financial aspects, providing an independent engineering review within project finance schemes.

For the development of these studies, BAES has a group of international experts of recognized experience and knowledge, as they have worked together on multiple projects in different countries of Latin America. This team combines knowledge of Latin American energy markets and systems of hydro-thermal dispatch, with the development of strategic work and a great experience in hydroelectric and renewable energy.

Professionals covering the study areas usually applied in these projects are specialists, on areas such as; hydrology, geology, electrical, mechanical, environmental and power systems.

This team also provides technical support to financial entities during subsequent stages of disbursement, covering Construction Monitoring, over the course of the works and evaluation of Project Completion, when it is able to into operation (Commissioning).

Contents

Introduction

Assessment services





Qualifications

Phase 1: Due Diligence

Technical-Economic DD Financial and Market DD

Assessment services

Assessment services

Hydrology Geology

Engineer-ing

•Civil y Electro-mechanical Eng.

•Civil Works

•Power gen. & Transmission

•Contrats Review Environmental and social impact

Market

Regulatory framework

Energy

Power

•Project Appraisal

•Energy (PPA)

•Power payment

•Business Model

Phase 2: Monitoring

Works Monitoring Services and Project Commissioning

Contents

Introduction

Assessment services





Qualifications

Analysis and critical review of existing studies (developer’s Data Room)

Visit to the project site and requests for additional information.

Identification of the need to expand existing reports and / or additional studies.

Studies by specialty; review data from developer, providing comments and recommendations.

– Geology

– Hydrology

– Electrical interconnection

– Environmental and social impact

Reports development Technical-economic Due Diligence

Reports development.

Technical-economic Due Diligence Report

Specialty studies

Site visit

Existing information review

Review of regulatory framework and local electricity market rules applicable to the project.

Based on the conclusions of the Technical DD, incorporates the revised values to the evaluation

of the project:

– Evaluation of power generation and associated revenues, based on hydrological study of Technical DD.

– Investment plan and schedule review.

– Review of project Financial Model (projection of future market revenues)

Reports development Financial and Market Due Diligence

Reports development.

Financial and Market Due Diligence Report

Financial Model review

Market remunera

tion

Electricity market:

framework

Contents

Introduction

Assessment services





Qualifications



As an additional service to the technical, economic, financial and market Due Diligence assessments BAES offers to financial entities, support on subsequent construction works aimed to monitor its progress.

The following aspects are followed by BAES’ experts team:

Possible modifications to the original project

Detailed engineering and equipment manufacturing

Progress of civil works

Verification of compliance with the schedule of works and disbursements

Contract subscription

Quality of works under the contract

Finally each monitoring report shows conclusively its findings and recommendations concerning how the works progress.

At the end of the works BAES issues a certification of completion in accordance with the quality specifications of the contract.

Contents

Introduction

Assessment services





Qualifications

Qualifications – Wind Power (1)

Qualifications…

Customer Experience

CAF, Development Bank of Latin America (Corporación Andina de Fomento) and Confidential client 2013, Uruguay Independent engineer role on a 50MW wind farm projet in Flores department, Uruguay

BAES was appointed by CAF and the client, to take the “Independent Engineer” role on the project. This is a part of the activities undergone in the development of a technical Due Diligence (DD), on the wind farm “greenfield” project consisting of aproximately 50MW of new capacity. DD is aimed to validate project’s budget and works schedule for the lender. SECOND PHASE BAES is also appointed on monitoring tasks (during 24 months) as the independent engineer on construction works, certifying its advance, to authorize disbursements throughout the completion of proposed schedule


Qualifications…

Customer Experience

R del Sur, Grupo ALARDE 2012-2013, Uruguay Works Monitoring on a 50MW wind farm project in Sierra de Caracoles, Maldonado department, Uruguay

BAES was appointed by “R del Sur”, to join them during the construction phase of a 50MW wind farm project, to support the verification and certification process on the execution of 25 foundations for wind turbines later installation (25 wind generators of 2 MW each ). Consulting services also included an audit of the construction of the wind turbines on site, to be presented to financial institutions such as the Banco República Oriental del Uruguay (BROU) and other European banks involved, on: • The materials used and testing results provided • The procedure employed • Compliance with applicable regulations and quality

procedures.


Customer Experience

Confidential

2012, México Post PPA revenue study of two wind power projects (160MW each) in Oaxaca (Mexico)

The objective of the study is to forecast the future revenues of such power projects under a potential Power Purchase Agreement for the period (2026–2043).

The client was interested in furthering their understanding of the future operation of the target power plants. As part of this process the client engaged the services of BAES as a market consultant to advice about revenue forecast for the two wind projects.

BAES carried out the study according to the following tasks:

1) Analysis of the two wind projects information regarding wind series and information validation with wind series from the “Atlas de Recursos eólicos del Estado de Oaxaca, AREEO”; 2) Two wind projects detail model addition to DOSE model; 3) Electric market dispatch operation simulation using DOSE database (this means demand, fuel, hydrothermal units and transmission data for last three years); 4) Run of DOSE for 2026-2043; 5) Post processing task in order to get wind projects revenues for energy and capacity; 6) Preparation of the written Report.

Qualifications…


Qualifications…

Customer Experience

Confidential (1/2 continues)

2011, México Mexican Power Market 70 MW wind asset post PPA sales prices, industrial demand forecast and CFE interconnection agreement review.

Our client was considering a new investment opportunity based on “autoabastecimiento” scheme (PPA with industrial players for 15 years). Due to its nature, the industrial player cannot commit long term off-take like in case of CFE, but client would like to know and consider the potential revenue after the termination of current PPA (Post-PPA). Clients idea is to invest in existing project, which already has the interconnection agreement with CFE for 25 years, which is consistent with the considered project life. 1)Phase 1 (Main long term assumptions for Mexican power market and Industrial demand forecast) This first deliverable covered all the proposed long term main drivers evolution that are needed for the post PPA price forecast, plus the results of the industrial demand forecast approach. BAES included our recommendations of main drivers for the post PPA modeling assumptions for the long term period. Wind power plant potential post PPA prices forecast. Interconnection Agreement review, included comments on the existing Interconnection Agreement and the analysis related with the energy banking mechanism in Mexico.


Qualifications…

Customer Experience

Confidential (2/2 cont.)

2011, México Mexican Power Market 70 MW wind asset post PPA sales prices, industrial demand forecast and CFE interconnection agreement review.

2) Phase 2 (post PPA sales price forecast): In the second part of the analysis, BAES conducted the quantitative element of the Scope of Work. Forecast of the potential wholesale energy and capacity prices of the wind farm from year 2025 up to 2040. The model data base update for the long term is a very time demanding task that included different activities as follows: a. forecasting long term fuel prices (based on international sources) in each relevant region and charge it to each individual power plant; b. forecasting long term demand in each relevant region; c. updating long term transmission topology after POISE study, and forecast long term future transmission improvement up to 2040; d. updating long term new/retirements scheduled power plants in Mexico, following the future Mexican wholesale market with the economic signals (spot energy prices plus capacity prices).


Qualifications…

Customer Experience

GE Energy Financial Services (1/3 continues)

2008, Honduras Honduran Power Market and Cerro de Hula wind farm project

The objective of the study was to conduct an analysis of the Honduran Power Market. The project also included the forecast of capacity and energy revenues of Cerro de Hula Project (CdH) that will supply energy to Empresa Nacional de Energia Electrica (ENEE, the Honduran public power vertical integrated utility) under a 20-year PPA. The tasks performed were as follows: Subject #1: Power market and regulatory framework 1) Current and expected regulatory power framework conditions, and market conditions; 2) Power market overview and regulatory explanation; 3) Planned reforms and review on political conditions; 4) Expected evolution in generation (private participation through single buyer approach, renewable policies, international fuel cost dependence, etc.), transmission (expected improvements) and distribution (expected improvements, and loss reduction plans); 5) ENEE current and expected commercial conditions (impact of losses reduction, fuel price, final users tariff adjustments, etc.);


Qualifications…

Customer Experience

GE Energy Financial Services (2/3 cont.)


6) Discussion on PPA abrogation, including some regional experiences (potential economic drivers, stranded cost, regulatory reforms, Cerro de Hula alternative commercial operations – exports -, etc.); 7) MER (Regional Electric Market –interconnection) regulatory framework and risk / opportunities to Honduran generators, especially Cerro de Hula. Subject #2: PPA critical review 1)Overall review and comparison with typical regional PPAs (duration, guaranties, dispatch, invoicing, construction period, etc.); 2) Commercial highlights (capacity payment, energy payment, adjustments and escalation, fines, etc.); 3) Discussion on cash flow stability and risks. Subject #3: Cerro de Hula competitive position 1) Honduras supply curves (both for variable production costs and PPA prices – if no public information, existing PPAs commercial conditions must be informed by ENEE or national regulator);


Qualifications…

Customer Experience

GE Energy Financial Services (3/3 cont.)


2) Long term supply curves evolution based on local and MER markets. To this end PA proposes to apply the Long Term Market Price Approach for each local market, without WEM modelling. Sensitivity of power supply curves to WTI fuel price will be included (and other drivers if needed); 3) Worst conditions for Cerro de Hula power supply considering existing hydro facilities (ENEE could decided not to buy CdH energy due to power system instability or potential spill of hydro energy). Subject #4: Transmission constrains to power supply 1) Critical review of Cerro de Hula power interconnection approach; 2) Congestion review and eventual congestion costs (who and when should be paid, etc.).

Qualifications – Hydropower (1)

Qualifications…

Customer Experience

Interbank (IBK - Banco Internacional del Perú S.A.) and CAF, Development Bank of Latin America (Corporación Andina de Fomento) 2012, Perú Technical, Financial and Electric Market Due Diligence for EGE Junín hydroelectric power plant

BAES was appointed by CAF-Interbank finance corporations to develop, firstly a Technical Due Diligence and, secondly, an economic and Electricity Market Due Diligence on the “greenfield” project for two new hydroelectric power plants, Runatullo II and Runatullo III on Runatullo river basin, almost reaching 40MW of new capacity. The first part of the project included the visits for our specialists to site location, as a starting point for BAES technical revision on aspects related to the of geological and geotechnical factors of the site, revision of hydrological information and contribution of water resources analysis in extreme conditions with associated potential energy production, the review of the civil (layout) and electromechanical works drafts , connection to the national transmission system. EPC contract was also reviewed and discussed on several issues such as works schedules, budgets approval, disbursement schedule as well as other contractual and environmental aspects.


Qualifications…

Customer Experience

Interbank (IBK - Banco Internacional del Perú S.A.) and CAF, Development Bank of Latin America (Corporación Andina de Fomento) (cont.) 2012, Perú Technical, Financial and Electric Market Due Diligence for EGE Junín hydroelectric power plant

After the technical DD was done, the economic and electricity market DD included: • Electric Market review: local electricity market legal

framework, associated risks, Spot market price forecast and extreme scenarios impact on the project’s economics

• Developer’s Financial Model review: taking into account the study’s conclusions and recommendations on the financial and physical parameters assumed by the developer.

• Special Renewable Energy Resources (RER) legal framework was also studied as this project had a PPA (power purchase agreement) under this particular policy. This was included on the financial model income forecast review, together with regular PPA and spot market forecast.

SECOND PHASE BAES is currently appointed on monitoring tasks as the independent engineer on construction works, certifying its advance throughout the completion of proposed schedule


Qualifications…

Customer Experience

CAF, Development Bank of Latin America (Corporación Andina de Fomento)

2012, Perú Technical, Financial and Electric Market Due Diligence for Langui hydroelectric power plant

This small hydropower plant classifies as ERNC (non conventional renewable energy) with a total power under 20MW

BAES was appointed by CAF finance corporation to develop, firstly a Technical Due Diligence and, secondly, an economic and Electricity Market Due Diligence on the expansion project for an additional 3MW capacity on Langui I Hydro Power existing facility. The first part of the project included a technical revision on aspects related to the geology of the site, the contribution of water resources in extreme conditions and possible energy production, the review of the civil and electromechanical works drafts , connection to the national transmission system and, finally, included the visits for our specialists to site location. After the technical DD was done, the economic and electricity market DD included: • Electric Market review: local electricity market legal

framework, associated risks, Spot market price forecast and extreme scenarios impact on the project’s economics

• Developer’s Financial Model review: taking into account the study’s conclusions and recommendations on the financial and physical parameters assumed by the developer.


Qualifications…

Customer Experience

CAF, Development Bank of Latin America (Corporación Andina de Fomento) and CIFI (Corporación Interamericana para el Financiamiento de Infraestructura) 2012, Perú Technical, Financial and Electric Market Due Diligence for Pizarras hydroelectric power plant

BAES was appointed by CAF-CIFI finance corporations to develop a technical and economic Due Diligence on the “greenfield” project for a new 18MW capacity Hydro Power facility. Main tasks and deliverables consisted of; Electric Market review, consisting of local electricity market legal framework, associated risks, Spot market price forecast and extreme scenarios impact on the project’s economics; Technical review, based on site visits on the following areas, Geology and water resource review (water intake and basin analysis), Civil Works project, Electromechanical project, Interconnection project (transmission and transformation); Developer’s Financial Model review, taking into account the study’s conclusions and recommendations on the financial and physical parameters assumed by the developer. SECOND PHASE BAES is currently performing monitoring tasks as the independent engineer on construction works, certifying its advance through the schedule.


Qualifications…

Customer Experience

Industrial Bank (Guatemala) and General Bank (Panama)

2011, Guatemala Economic and Wholesale Market Due Diligence study for Hydro power plant Renace II

Banco Industrial Guatemala as financing corporation, asked for an Economic and Wholesale energy market Due Diligence to BAES, to receive assessment on Renace II Hydro power expansion project (114MW) in Guatemala The project included technical review of aspects related to the hydrology, the review of the contribution of water resources in extreme conditions and the possible power production assessment defining the plant’s firm capacity. The financial and electricity market study included •Financial Model review: taking into account the study’s conclusions and recommendations on the financial and physical parameters assumed by the developer. •Guatemalan electric power framework and rules review •MER (Regional electric market) simulation considering SIEPAC interconnection plans, existing power projects in the region and long term expansion assumptions •Technical review of developers assumptions related to future revenues. •Renace I existing Hydro power plant energy incomes forecast and Renace II expansion project energy income forecast.


Qualifications…

Customer Experience

Manufacturas Industriales Mendoza

2010, Peru “Shima” hydropower plant technical feasibility review

BAES was contracted to assess the client on a technical evaluation previous to the investment decision evaluating both technical and economic risks of the 5MW hydropower project named Shima. As part of the general process of technical evaluation, special detail was considered for risks involving hydric resource real availability studies and geological site conditions studies.


Qualifications…

Customer Experience

Hydro Quebéc – Coastal Energy

2006, Panamá Due Diligence for Fortuna hydroelectric power plant

BAES was hired by an international consortium to evaluate the assets of hydroelectric power plant “Fortuna”, in Panama, within the frame of a possible acquisition process. The due diligence covered technical, hydrological and economic aspects, as well as the evaluation of the possible evolution of the electrical system and the impact on the future operation of the plant and its firm capacity. Wholesale energy market simulation and income forecasts were done, together with regulatory framework description and risks analysis.


Qualifications…

Customer Experience

Comisión Ejecutiva del Río Lempa (CEL)

1998, El Salvador Feasibility study on “El Cimarrón” hydropower project

BAES made a feasibility study of “El Cimarron” hydroelectric plant at the request of CEL, to be presented to the board of directors. The studies were based on the existing hydroelectric resource project undertaken by the firm Harza, and available hydrological studies. Starting from the project’s information and the rest of the electricity market BAES simulated with DOSE model, future market operation obtaining; energy production, energy dispatch and expected income of Cimarron hydropower plant. Afterwards, BAES developed income cash flow and expenditure forecasts for the project, and included various financing alternatives, with information provided by CEL. The undertaken feasibility study plus investment costs of the plant allowed to determine the potential profitability of it in the context of competition that characterizes the Salvadoran wholesale energy market.


Qualifications…

Customer Experience

Hidroinvest Consortium (ENDESA Chile, CMS Energy and others)

1992, Argentina Due Diligence on “El Chocon” hydropower facility

BAES was hired to conduct “El Chocon” hydropower facility Due Diligence (DD) for its dealership process and provided a comprehensive assessment on issues related to the electricity sector. Consulting services extended throughout all privatization process, since the client was the winner of the dealership, take over tasks were also included. Among the tasks performed Argentine electricity sector analysis, and the financial, legal and accounting Due Diligence processes are distinguished. Furthermore, analysis of the selling structure, assets valuation, plus obtaining financing for the acquisition, tender preparation and presentations to potential buying companies, among other tasks performed.


Qualifications…

Customer Experience

Duke Energy

1992, Argentina Due Diligence on “Cerros Colorados” hydropower facility

BAES was hired to conduct “Cerros Colorados” hydropower facility Due Diligence (DD) for its dealership process and provided a comprehensive assessment on issues related to the electricity sector. Among the tasks performed Argentine electricity sector analysis, and the financial, legal and accounting Due Diligence processes are distinguished. From this information an economic evaluation of the plant was determined by identifying its commercial value for different rates of return. Risks associated with the buying process were also analyzed.

Qualifications – Biomass

Qualifications…

Customer Experience

FIDUC Group

2009, Argentina Biomass project evaluation for Renewable Energy Tender

FIDUC group is a local agricultural private company and was interested in participating of a local bidding process aimed to achieve Argentinean 2016 objective of including an 8% non conventional renewable energy sources. BAES provided technical and economic assessment regarding both, local legal framework and long term electricity costs studies. Among the principal tasks were: technical characteristics review; operating conditions definition; renewable fuel logistic scheme; generation assets valuation; generation plant lay-out; electrical connection to national grid planning and costs estimation; future income forecast, optimal bidding price calculation and regulatory price cap estimation.

BAES’ specific experience on Hydro / Wind Farms, etc€¦ · BAES’ specific experience on Hydro...

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