Corporate PPAs The Scandinavian Experience...2018/11/27 · • Corporate PPA with Alcoa for a...
Transcript of Corporate PPAs The Scandinavian Experience...2018/11/27 · • Corporate PPA with Alcoa for a...
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New Power. New Markets. TM
V 01
CorporatePPAs
TheScandinavianExperience
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OverviewGEC
• Reachingbackasfarasthe1990s,GECisoneoftheleadingfinancialadvisorstorenewableenergyassetdevelopers,ownersandinvestors
• GECprovidesafullsetofadvisoryservices:ü Capitalraisingandplacement(equityanddebt)ü ProjectcontractstructuringandopHmisaHon(includingPPAs)ü CapitalstructureopHmisaHonü Financialrestructuring
• Withateamof5professionals,GEChasahands-onapproachtotransacHons:ü Strongprocesscompetence:buy-sideandsell-side;projectassessment;dataroom/processpreparaHon;
modelling;valuaHons;compeHHveaucHons,sourcingofPPAs,appraisalofPPAsü AuniquecombinaHonofindustry,financialandmarketexperHse(windandsolar)ü Well-establishedrelaHonshipswithabroadrangeofcapitalprovidersforrenewableenergyinEurope
• GECprovidesconflict-freeadviceandexecuHonservicesindependentofanycapitalprovider
• GECcreatestangiblevalueforitsclientsthroughitsuniqueunderstandingofboththeassetsandtheinvestoruniverse
• GECisauthorisedandregulatedbytheFinancialConductAuthorityoftheUK(FRN:583634)
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• StrongrelaDonshipswithdevelopers,serviceproviders,investorsandoFakers:
o ClientsbenefitfromGEC’srelaHonshipswithrelevantmarketparHcipantsandserviceproviders
o GEC’sunderstandingofinvestorappeHteandinvestmentcriteriaforrenewableenergyassetsallowsustotargetthecheapestsourceofcapitalforassetownersanddevelopersbasedonanasset’sriskprofile
o UnmatchedknowledgeoftheconHnentalEuropeanandglobalinvestorbase
• TransacDonexperience:
o GECmanagestransacHonsbydeterminingapoolofthemostsuitablepotenHalbuyersallthewaythroughtofinancialclose
o GECwillassistthroughthepreparaHonofinformaHonmemoranda,dealmodels,data-roomsetc.
o ClientsbenefitfromGEC’sabilitytodesignandmanageanefficienttransacHonprocesswithmulHpleparHes:investors,theiradvisors,lawyers,banks,appraisers,o]akers,etc.
• Sectorknowledge:
o GEChasauniquefocusexclusivelyontherenewableenergyspace.WeknowthemajormarketparHcipantsandstakeholdersinthisfield,thetechnologies,thegovernmentsupportschemesandtheissuesinvestorsano]akerswillconcentrateon
HowGreenEvoluDonCapitalcanSupportaTransacDon
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ThefollowingprinciplesareessenHaltoeverythingwedo:
• ClientFirst:GEConlyprovidesindependentandconflict-freeadvicewiththehigheststandardsofintegrity
• Excellence:Themarketsandtheneedsofourclientsareconstantlyevolving,andwetherefore,customisesoluHonsineveryclientengagementandkeepthehigheststandardsofexcellenceineverythingwedo
• LongTerm:GECaimstobuildsecureandlong-lasHngpartnershipswithclientsandinvestorgroupsbybecomingtheirtrustedadvisor
Principles
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CorporatePPAs
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ThePPAMarket
0.1 0.61.5
3.32.5
3.1
00.2
0.5
0.81
1.1
0.20.2
0.2
0.40.6
1.2
0
1
2
3
4
5
6
2012 2013 2014 2015 2016 2017
Asia
Europe
NorthAmerica
Annualvolume(GW)CorporatePPAvolumes,byRegion
Source:Bloomberg,GEC,EurObserv’ER2018
• Forcomparison,thenewinstalledcapacityinwindintheEuropeanUnionwas15GWin2017;andthetotalinstalledcapacityattheendof2017wasapproximately168GW.
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ThePPAMarket
MainCounterparDes:
• Datacentre/ITcompaniesthatprocurelargeamountsofenergyallovertheworld
Ø Google,Apple,Facebook,Microsof,etc.
• Aluminiumsmelters/metalscompaniesforwhoenergyconsHtutesalargeporHonofthebogomline
Ø Alcoa,NorskHydro,etc.
• ConsumerproductscompaniestowhompublicrelaHonsrelatedaspectsareespeciallyimportant
Ø Nestlé,Procter&Gamble,AnheuserBusch,KimberleyClarketc.
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RecentMajorTransacDonsintheEuropeanPPAMarket
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ThePerspecDveoftheCorporate
• Corporateshaveanumberofwaysofachievinggreenelectricityprocurements.CorporatePPAsarejustoneofthem.
• Everyrenewableenergyasset,everycorporatesituaHonandeveryjurisdicHonwillbedifferentandrequireadifferentsoluHon.
GreenEnergyProcurement
Strategy
PPAwithWindFarmorSolarPVOperator
OnsiteGeneraDonofEnergyfromRenewables
CerDficateProcurement
DirectinvestmentinRenewableEnergyAssets
Three-PartyPPAwithUDlitybackedbyRenewableEnergyAssets
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CaseStudy:NorskHydro
Source:NorskHydro,ThirdQuarterinvestorPresentaHon
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CommercialAspectsofaPPA
Key Comments
AddiHonality • Corporateo]akersgenerallyprefertoenterintoPPAsinrelaHontoarenewableenergyassetthatcanbepresentedashavingbeenbuiltthankstothePPA
• TheimplicaHonisthatPPAscanonlybeenteredintowithrespecttoconstrucHon-readywindorsolarPVfarms
• HoweverthisisnotaprecisedefiniHonanddifferentapproachesdoexist
PurchasedProduct • Allorpartoftheenergyproducedbyawindfarmwithorwithoutenvironmentalagributes,likeGuaranteesofOrigin,Elcerts,etc.
MainRisksthatneedtobeallocatedandtransferred
• PriceRisk• VolumeRisk(incl.balancingrisk):
-over-producHonaswellasunder-producHonvsP50-profilerisk
• CorrelaHonbetweenPriceRiskandVolumeRisk(“CannibalizaHon”)• NegaHvepricingrisk
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PricingofPPAs
• PricestendtoreflectØ Thelackoflong-termPPAcapacity,andØ Theriskofoversupplyofwindinthelongrun,
nevermindthepricecurvesofmarketforecastersthatgenerallypointtoincreasingprices(oil/coalcycles)
• “Baseload”PPAsareusuallypricedafewEuroshighercomparedto“Pay-as-produced”PPAs
• Seasonalprofilewillaffectboththeprice(+)aswellastheriskprofile(-)ofaPPA
• Priceswillvaryaccordingtothepriceregion
Ø TheywillforexamplebehigherinFinlandcomparedtoSweden
• Pricinggenerallyseenclosetoorbelowforwardwholesaleprices
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ThePerspecDveoftheInvestor–MainStructuralConsideraDonsinDesigningaPPA
KeyStructuringAspect TypicalValue Comments
TenorofaPPA 8–15years • Drivesloantenor• Longertenorpreferredbyinvestor/lenders;shortertenor
preferredbyo]aker
Profileofvolumesold Baseloador“Pay-as-Produced”
• Pay-as-producedpreferableforinvestor/banks• Baseloadpreferabletoo]aker
Hedgingstructure FixedpriceorCaps&Floors
• FixedpriceisthenorminScandinavia• StructureswithfloaHngpricesaboveafloorhavebeen
observedinSpain
Quantumofpowerhedged
60–80% • UpperlimitdrivenbythefactthataprojectwillrequireanopenposiHonto(parHally)absorbvolumevariaHons
• OpenposiHonprovidesupsideincaseofpowerpriceincreases
• Lowerlimitdrivenbyprojectfinancerequirements
BalancingresponsibilitytowardsTSOandaddiHonalservices
ProducerorO]aker
• Willgenerallybeallocatedtoo]akerwhowillreflectthecostintheo]akeprice
• Willthengenerallybeoutsourcedbyo]akertoaspecializedthirdparty(e.g.uHlityorenergytrader)
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KeyDifferencesBetweenUDlityPPAsandCorporatePPAs
UDlityPPAs
• Volumesweetspotofbetween30-70MW,withtenorsofupto10years• Processdrivenbywindfarmowner/investorwhonegoHateswithuHlityon
abilateralbasis• UHlitygenerallybundlesPPAo]akewithaddiHonalenergymarket-related
servicessuchasassumingthebalanceresponsibilitytowardsTSO,GoOhandling,ElCertmarkeHng,reporHng,regulatoryfilings
CorporatePPAs
• Volumestendtobelarger(100MW+),withtenorsthatmayexceed15years
• Corporatestendtohavehigherleverageagainstwindfarmowner/investorduetoshortageofsupplyofcorporatePPAs,especiallyforlongmaturiHes
• AddiHonalservices,suchasthoseprovidedbyuHliHesneedtobeboughtseparately.Thismaycomplicatethelegalstructure
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KeytrendsinPPAsourcing
• PPAaucHons
Ø Google’sEuropeanPPAsourcedviaaucHonwithseveralstages,overseveralmonths,inseveralEuropeancountriesandusingadetailedquesHonnaire(on-goingprocess)
Ø MostUSPPAsareawardedaferaucHon
• GreenEnergypurchasingconsorHum
Ø Example:AkzoNobelSpecialtyChemicals,DSM,GoogleandPhilipssignedPPAswiththeKrammer(102MW)andBouwdokkenwindfarms(29.4MW)intheNetherlandsinOctober2016andJanuary2017
• NewentrantsasPPAo]akers.Examplesinclude:
Ø KutxaBank(Spain)withIberdrolaSolarPVProjectfor391MW
Ø NovoNordiskwithKriegersFlakOffshoreProjectfor600MW
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CaseStudy:ProjectNordlicht(KviZjell/Raud\ell)
• 281.4MWwindfarmlocatednearTromsø,Norwaywith67SiemensGamesaSWT4.2MWturbines• Grossenergyyield:971MWh(39.4%loadfactor)
• TransacHonsponsoredandmanagedbyPrimeCapitalAGwithaconsorHumoftwoinvestorswhocameinatconstrucHon-readystatus:Germanpensionfund(66%),turbinemanufacturer(33%)andGECasfinancialadvisorstothedeal
• FinancialCloseinSeptember2017
• CorporatePPAwithAlcoaforaperiodof15yearsfromCODwhichis2yearsaferFinancialClose(i.e.approx.17yearsintotal)• Pay-as-Producedstructure
• 100%ofproducHonsoldtoAlcoa,with70%soldforafixedpriceand30%forafloaHngpriceasperNordPool
• ECA–guaranteefromGIEK(aNorwegianGovernmentenHty)toachieveabankableraHng
• AllofthedebtprovidedbyDekaBankofGermany,combiningKfW-andcommercialtranches(sculpted)toopHmisedebtsizingandcostofdebt
• 17.75yearoveralltenor,slighlyabovethePPAtenor
• DebtsizingusingdifferentDSCRraHosforhedged/unhedgedpowerandelcertvolumeandcombiningdifferentpricescenarios
• Debtresizingmechanismbasedonactualachievedpricelevelthroughelcerthedging
• FlexibledebtstructureaccommodaHngvariousearn-outanddeferredpayments
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Conclusions
• CorporatePPAswillbecomemorewidespread,bothinexisHngPPAmarketsandinnewmarkets
Ø DependingonrenewableenergyaucHons,thiswillalsoincludematuremarketssuchasGermanyinthemedium/long-term,andotherindustrysectors
• TheoverallcorporatePPAmarketvolumeislimitedduetothelimitedscopeofindustrysectorsthathavetherightrequirements
Ø UHliHesarethenaturalcompeHtortocorporatePPAs,andtheyareadapHngtheirproductofferingtorespondtothecorporatePPAchallenge
• Corporate(anduHlity)PPAswillbeasignificantindustrydriverforrenewableenergygoingforward
• ThemainlessonfromProjectKviwjell/RaudxellinNorwayisthattransacHonsofthisnaturerequirebiggerandmorespecializedteams.Thoseteamsandworkstreamsneedtoworkseamlesslytogether.Investorswillrequirelongerexclusivityperiods
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Conclusions
FormoreinformaHon:
YvesSchausPartnerTel:[email protected]
KimChrisHanKöhlerPartnerTel:[email protected]
LondonOffice:116PallMallLondonSW1Y5EAUnitedKingdom
www.greenevoluHoncapital.com
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Disclaimer
ThispresentaHonandtheinformaHoncontainedinit(the“PresentaDon”)relatetoayettobeestablishedinvestmentvehicle(the“HoldCo”).ItisbeingissuedintheUnitedKingdombyGreenEvoluHonCapitalLLP(“GEC”).GECisauthorisedandregulatedbytheFinancialConductAuthorityoftheUnitedKingdom(“FCA”)underFRN583634.ThedistribuHonofthisPresentaHoninotherjurisdicHonsmayberestrictedbylawandpersonswhorequestoragreetoreceivethisPresentaHonarerequiredtoinformthemselvesof,andtocomplywith,anysuchrestricHons.ThePresentaHonisnottobemadeavailabletoanypersoninanyjurisdicHonwheredoingsowouldcontraveneanyapplicablelawsorregulaHons.ByrequesHngoragreeingtoreceivethisPresentaHon,therecipientconfirmsthatitisawareofthelawsinitsownjurisdicHonrelaHngtothereceiptofinformaHonrelaHngtoinvestments,andtherecipientwarrantsandrepresentsthatitwillnotpassonoruHlisetheinformaHoncontainedinthispresentaHoninamannerthatcouldconsHtuteabreachofsuchlawsbyGECoranyotherperson.RecipientsofthisPresentaHonwhointendtoapplyforaninvestmentininterestsinHoldCoareremindedthatanysuchapplicaHonmaybemadesolelyonthebasisoftheinformaHonandopinionscontainedintheHoldCoofferingandsubscripHondocumentaHon,whichmaybedifferentfromtheinformaHonandopinionscontainedinthisPresentaHon.ProspecHveinvestorsshouldseekappropriateadviceinrelaHontoanyapplicablelegalrequirementsandtaxregulaHonsinthecountryoftheirdomicileorresidencethatmightberelevanttothesubscripHon,purchase,holding,exchange,redempHon,disposalortaxaHonofanyinvestments.ThisPresentaHontogetherwiththeinformaHonandopinionscontainedhereinareforbackgroundpurposesonly,donotpurporttobefullorcompleteandarenotintendedtoconsHtute,andshouldnotbeconstruedas,investmentadvice,arrangingdealsininvestmentsormakingarrangementswithaviewtotransacHonsininvestments.PotenHalinvestorsinHoldCoshouldseektheirownindependentfinancialandtaxadvice.TherecipientisnotGEC’sclient,GECneitherprovidesinvestmentadviceto,norreceivesandtransmitsordersfrominvestorsinHoldCodescribedorreferredtointhisPresentaHonnordoesitcarryonanyotheracHviHeswithorforsuchinvestorsthatconsHtute“MiFID“orequivalentthirdcountrybusiness”forthepurposesoftheFCARules.ThisPresentaHondoesnotconsHtuteorformpartofanyoffertoissueorsell,oranysolicitaHonofanyoffertosubscribeorpurchase,anyinvestment,norshallitorthefactofitsdistribuHonorcommunicaHonformthebasisof,orbereliedoninconnecHonwith,anycontracttherefor.ApplicaHonsforaninvestmentinHoldCocanonlybemadeattherelevantHmeonthebasisoftheofferingdocumentaHonavailable.AnypersonsubscribingforaninvestmentinHoldComustbeabletobeartherisksinvolvedandmustmeetthesuitabilityrequirementsrelaHngtosuchaninvestment.SomeorallalternaHveinvestmentprogrammesmaynotbesuitableforcertaininvestors.InformaHonincludedinthisPresentaHonisprovidedfordiscussionpurposesonlyandmaybesubjecttoamendment.CertaininformaHonincludedinthisPresentaHonisbasedoninformaHonobtainedfromsourcesconsideredbyGECtobereliable.However,anyprojecHonsoranalysesprovidedtoassisttherecipientofthisPresentaHoninevaluaHngthemagersdescribedhereinmaybebasedonsubjecHveassessmentsandassumpHonsandmayuseoneamongalternaHvemethodologiesthatproducedifferentresults.Accordingly,anyprojecHonsoranalysesshouldnotbeviewedasfactualandshouldnotberelieduponasanaccuratepredicHonoffutureresults.NorepresentaHonisbeingmadethatanyinvestmentwillorislikelytoachieveprofitsorlossessimilartothoseshown.NoreliancemaybeplacedforanypurposeontheinformaHonandopinionscontainedinthisPresentaHonortheiraccuracyorcompleteness.NorepresentaHon,warrantyorundertaking,expressorimplied,isgivenastotheaccuracyorcompletenessoftheinformaHonoropinionscontainedinthisPresentaHonbyGEC,itsmembers,officersoremployees,ortheFund,andnoliabilityisacceptedbysuchpersonsfortheaccuracyorcompletenessofanysuchinformaHonoropinions.GECdoesnotdisclaimorexcludeorrestrictanydutyorliabilitythatithasundertheregulatorysystemintheUnitedKingdom.NorepresentaHonisbeingmadebytheinclusionofanyinvestmentexamplesandstrategiespresentedhereinthatHoldCowillachieveperformancesimilartosuchinvestmentexamplesandstrategiesoravoidlosses.TherecanbenoassurancethatanyinvestmentexamplesandspecificstrategiesdescribedhereinwillmeettheirobjecHvesgenerally,oravoidlosses.Pastperformanceisnotnecessarilyareliableindicatoroffutureresults.AninvestmentinHoldCoinvolvesasignificantdegreeofrisk.PotenHalinvestorsmustfamiliarisethemselveswithHoldCo’sofferingdocumentaHonandmustmeetcertaineligibilityrequirementsinordertomakesuchinvestmentandmustbeabletofullyabsorbtherisksassociatedwithsuchinvestment.ThematerialcontainedinthisPresentaHonisbaseduponproprietaryinformaHonandisprovidedpurelyforreferenceandassuchisconfidenHalandintendedforprivateuseonly.ThetextandstaHsHcaldataoranyporHonthereofcontainedinthisPresentaHonmaynotbestoredpublished,rewrigenforbroadcastorpublicaHonorredistributedinanyformexceptwiththeexpresswrigenpermissionofGEC.GECwillnotbeliableforanyinaccuracies,errorsoromissionsinthePresentaHonorinthetransmissionordeliveryofalloranypartthereoforforanydamagearisingfromanyrelianceonthePresentaHonbytherecipientoranythird-party.