ROOFTOP SOLAR PV AND THE C&I SECTOR

Strictly Confidential

Strategic Advisory

Mergers & Acquisitions

Project FinanceROOFTOP SOLAR PV AND THE C&I SECTOR

IN THE UAE & GCC COUNTRIES

3rd December 2018

Kuwait Solar Workshop

FINERGREEN | NEW ENERGY FINANCIAL ADVISORS 2

SUMMARY

1. INTRODUCTION TO FINERGREEN

2. ROOFTOP SOLAR – TECHNICAL OVERVIEW

3. STRUCTURE TYPES

4. PREVALENT BUSINESS MODELS

5. CASE STUDY – SHAMS DUBAI PROGRAM


FINERGREEN - OUR MISSION

WE ARE A TEAM DEDICATED TO FINANCING THE ENERGY TRANSITION. THANKS TO A UNIQUE POSITIONING IN THE

MARKET, WE OFFER A TRIPLE EXPERTISE TO SUPPORT OUR CLIENTS.

PROJECT FINANCEA renewable energy project is highly capital intensive. Its financing requires the establishment of long term finance agreements with banking institutions. FINERGREEN has deep expertise in such contracts, which enables us to determine the most suitable legal and financial structure for each of

these transactions.

MERGERS & ACQUISITIONSFINERGREEN is a specialist in

the bid management of acquisition processes , both for

buy-side and sell-side transactions. Our project team

(either on greenfield or brownfield assets) also

operates on equity financing operations, which are key steps

in the growth journey of companies operating in this

sector.

STRATEGIC ADVISORYWhether public or private, clients who make the energy transition happen are constantly evolving.

We help these clients adapt to market changes, which often requires changing their business models.Additionaly, we also execute high value-added missions such as independent valuations, financial

audits, etc

Project Finance

Mergers & Acquisitions

Strategic Advisory


PRESENCE ACROSS THREE CONTINENTS THROUGH OFFICES IN

PARIS, ABIDJAN, DUBAI AND SINGAPORE

2013 2016 2017

FINERGREEN32 rue de Paradis

75010 ParisFrance

FINERGREEN AFRICA2 Plateaux, Rue des Jardins

Cocody, Abidjan Ivory Coast

FINERGREEN ASIA541 Orchard Road #09-01 Liat Towers Singapore 238881

1 306PLANTS

PROJECTSFINANCED

520MW

TOTAL CAPACITY

800M€

COMPLETED TRANSACTIONS

2018

FINERGREEN MENAReef Tower - JLTP.O. Box 931 033

Dubai - UAE

OUR PRESENCE


SUMMARY



3. STRUCTURE TYPES




ROOFTOP SOLAR OVERVIEW

ROOFTOP SOLAR TECHNOLOGY forms an important part of Distributed Energy Resources. It allows homeowners, businesses, and communities to take advantage of the abundant solar resource to achieve reliability and self sufficiency in their energy supply.

MAIN DRIVERS

Falling prices of PV technology

Supporting Financing Structures

Hedging against electricity prices

Reducing operating costs

Improving reliability

Focus on Sustainability and energy efficiency

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1 2

3

1 – load, from grid 2 – solar power produced

in the day 3 – excess solar power

available to export

hours

Po

wer

(kW

)

Source Consumption*

Existing Buildings 150-200 kWh/m2/year

Factory (with no AC) 2.5 GWh/year

Factory with heavy machinery

>7 GWh/year

Installing PV could produce up to 1.7 GWh/MWp/ year

* Estimated figures in UAE

Typical Load Profile in a day


ROOFTOP SOLAR – A DEVELOPING MARKETROOFTOP SOLAR IN THE GCC – POTENTIAL MARKET TO DEVELOP IN THE UPCOMING YEARS

Dubai :• Market of 60 – 70 MW in 2018, double digit

growth• Plan to install rooftop PV on every building by

2030Abu Dhabi:• Recently introduced net metering regulation up

to 5MW capacity in one premise

Oman :• Residential PV estimated to be at 1.4 GW - 450 MW can

be produced in Muscat alone• The rooftop solar program, called “Sahim” is already

operational – it aims to deploy 1 GW of rooftop PV power and to install solar PV arrays on 30% of the Sultanate’s residential buildings over the next years.

Saudi Arabia :• Regulation for small scale solar

generation up to 2 MW, but for Net Metering not yet released.

• For residential, rooftop solar is not considered very viable as it is not enough to cover the AC loads

• For C&I, rooftop solar could be a possible solution to hedge against electricity prices

Kuwait :• Small scale (<100 kWp) residential & commercial

projects have already been executed• Net metering regulation absent

Bahrain :• Net metering regulation in place and is

operational in some households and commercial buildings.


SUMMARY



3. STRUCTURE TYPES

a) NET METERING (ON GRID)

b) MINI GRID (OFF GRID)




1 – PV modules on the rooftop produce electricity 2 – The PV Inverter converts the PV Direct Current into

Alternating Current 3 – The power used for self consumption is connected to

loads inside the house/facility 4 – The excess electricity is exported to the grid operator 5 – Deficit power is imported from the grid A bidirectional energy meter bills the net energy units

consumed each month, and the Client only pays the netconsumption bill

If there is excess export, then it is adjusted in the form ofa credit in the next billing cycle.

NET METERING

Rooftop System

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KEY POINTS

Excess energy sent to grid can be compensated either as credit or cash

Maximum size of Rooftop PV must not exceed self consumption limit.

Net Metering is a metering and billing arrangement designed to compensate distributed energy generation system owners for any generation that is exported to the utility grid. It allows utility customers with on-site distributed generation to offset the electricity they draw from the grid throughout the billing cycle (e.g., one month). The utility customer pays for the net energy consumed from the utility grid.


MICRO GRIDSA microgrid is a group of interconnected loads and distributed energy resources that acts as a single controllable entity with respect to the grid. It can connect and disconnect from the grid to operate in grid-connected or island mode. Microgrids can improve customer reliability and resilience to grid disturbances.

1 – PV and wind together can be used to design amicrogrid. Often in community microgrids, rooftop PVplants are installed to save ground space

2 – A diesel generator is normally used as a backup or torun at night

3 – The loads are powered through a hybrid operation ofrenewables + diesel genset

4 – Excess energy produced is stored in a battery system,to provide load shifting

5 – the microgrid may or may not be connected to thegrid, as determined by the operation philosophy

Microgrid System

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3

KEY POINTS

A microgrid can be composed of 100% renewables with proper sizing and storage

Microgrid controller is the brain of the system and dictates the smooth operationof the setup

Such microgrids are vital for offgrid areas or small island nations


SUMMARY



3. STRUCTURE TYPES


a) LEASE-TO-OWN MODEL

b) PURCHASE MODEL



How it works: 1 – Leasing company installs, operates and maintains the

rooftop PV plant 2 – Power produced by PV plant is used by client, excess

injected to the grid 3 – Client pays a leasing fee to the leasing company

LEASE TO OWN MODELINNOVATIVE FINANCING HELPS RAMP UP THE ADOPTION OF SOLAR ROOFTOP PROJECTS

Solar Leasing is a system whereby the Leasing Company isresponsible for the complete engineering, procurement, installation,permitting, operation & maintenance and financing of the solarrooftop plant and the Client just has to pay amonthly/quarterly/annual fee to the company.

The leasing service agreement is signed for a specific period untilwhich the plant is guaranteed to produce pre-determined units ofenergy, and the fee is paid according to this production.

Client Benefits: Lock in dependable predictable energy rates Long term savings Self sufficiency No expertise in solar needed

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For the Client: No upfront Investment No operational obligations Pay a fee proportional to the power produced, no

excess payments Can purchase the system after a lock-in period Owns the PV system at the end of the lease


FULLY OWN THE PV SYSTEM – FULL OPERATIONAL CONTROL

For the Client: Full upfront Investment Complete operational responsibility Common when client wants to develop inhouse

capabilities to operate a PV Plant, and replicate inother scenarios

How it works: 1 – EPC company constructs and commissions the PV plant 2 – Power produced by PV plant is used by client, excess is

injected to grid 3 – Client takes care of the O&M of the plant, EPC

contractor only liable for warranty issues

PURCHASE MODEL

In the Purchase Model, the client offers to procure a rooftop PVsystem from a Solar EPC company.

Client takes over control once the plant is commissioned The Client has full operational control, and can obtain the most cost

effective solution Typical payback period of 5-7 years (in UAE)

Client Benefits: Electricity produced is essentially free after payback

period Long term savings Self sufficiency

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1

3


1.SUBSIDIZED BANK LOANS

OTHER OPTIONSGCC CAN TAKE INSPIRATION FROM OTHER MODELS FOLLOWED IN DIFFERENT COUNTRIES

2. PROJECT FINANCE

3. PROJECT PLATFORM

In Jordan, The Jordan Renewable Energy and Energy EfficiencyFund (JREEEF) was established to help invest in various sources ofrenewable energy . As a part of this USD 25 mn fund, several localbanks have formed an alliance to disburse loans to individuals,commerces and SME’s to reduce their electricity bill by installingsolar PV panels and using solar heaters.

In UAE, to benefit from the net metering program, many industrialgiants are looking to develop rooftop plants of sizes 5MW+ usingtraditional debt financing. Local banks are well poised to supportthese projects as rooftop technology is now mature and DEWA hasexcellent creditworthiness.

In India, to meet the ambitious target of the government to have40GW of rooftop solar by 2022, equity investors are being broughtin to create a “platform” which can fund a portfolio of rooftopassets, rather than just one single project. The portfolio is thenfinanced using debt financing. The sizeable portfolio thus allows toachieve good financial conditions.


SUMMARY



3. STRUCTURE TYPES




DUBAI LEADS THE WAY AS A FRONTRUNNER IN DECARBONIZATION OF THE ENERGY SYSTEM IN THE UAE

2020 - 7% electricity from solar

2030 -25% electricity from solar

2050 -75% electricity from solar

SHAMS DUBAI - BACKGROUND

IRENA,2015

Dubai’s ambitious clean energy targets

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2006 2008 2010 2012 2014 2016 2018 2020

Slab tariff introduction

Slab tariff increase

Fuel surcharge introduction

Commercial

Industrial

>9% annual tariff increase over the last 10+ years

As of today, only 2% of Dubai’s power, or 210 MW is generated fromsolar, while the rest is from diesel (30%) and gas (70%)

Demand in Dubai has increased by 5% from 2016 to 2017, and isexpected to increase year on year

Tariff evolution over the last 10+ years has been steep, and can beexpected to be volatile in the upcoming years

Dubai has ambitious targets to incorporate renewables in the energy mix,including plans to have solar power on every rooftop in the emirate by2030, an addressable market of almost 1.5GW

The rooftop market in Dubai is expected to be around 60−70 MW in 2018 Under the Shams Dubai program, clients can achieve up to a 30%

reduction of electricity tariffs by installing PV systems in their premises. As of 2015, using rooftop solar PV was already cheaper than the highest

DEWA tariff, usually the case for high consuming C&I sector.

AED

/kW

h

Solar PV tariff

DEWA Tariff Evolution

Category Tariff, 2018 (excl fuel surcharge)

Residential 23 to 38 fils/kWh

Commercial 23 to 38 fils/kWh

Industrial23 fils/kWh for < 10,000 kWh/month

38 fils/kWh for > 10,000 kWh/month or above

DEWA Slab Tariff 2018


DEWA PIONEERS THE UPTAKE OF SOLAR ROOFTOP

SHAMS DUBAI – RESULTS SO FAR

The initiative encourages household and building owners toinstall PV panels to generate electricity and connect them toDEWA’s grid. The electricity is used on site and the surplus isexported to DEWA’s network

Ultimate aim is to have solar power on every rooftop by 2030 Installed capacity till date is roughly 50 MW, with double digit

growth expected in upcoming years 1,126 buildings have been connected so far, out of which 5MW

are residential villas and the remaining are government,commercial and industrial buildings

Additionally, rooftop solar creates new business opportunities,including:

o Job and technology creationo Localization of component manufacturing like structures,

cables and panelso Local capacity building and knowledge transfer for

established electrical and mechanical contractors.o 446 solar photovoltaic experts, with 96 companies - 85

contractors and 11 consultants - are currently enrolled withDEWA


SHAMS DUBAI – A TYPICAL PROJECTINDICATIVE FIGURES OF A PROJECT

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100,0

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200,0

250,0

2018 2019 2020 2021 2022 2023 2024

AED

/kW

h

Solar lease tariff

DEWA tariff

Price difference %

is always steady

Parameter Value

Size 1 MWp, on approx. 10,000 m2 of roof area

PV Yield 1,650 kWh/kWp/year

Demand 2.4 GWh/year

Solar energy 1.65 GWh/year (70% of demand)

DEWA Tariff 44.5 fils/kWh

Lease tariff 30 - 40% lower than DEWA tariff

Approx. Savings AED 27,000/month*

At any time of day, if demand is lower than production or onweekends/holidays, the surplus can be fed to grid

Savings are evident from 1st month of operations Cumulative savings are enough to reinvest into operations, rather

than spend on electricity Valuation of property/ warehouse is increased Can meet sustainability guidelines/accreditations

Solar lease or EPC?

In Dubai, experts say Solar Lease is better than full EPC for rooftopprojects because :• No hassle for client to manage project stakeholders (DEWA,

consultants, contractors etc)• Invest time and money in operating businesses rather than

electricity supply• Avoid treatment of transaction on balance sheet• No need of inhouse expertise to own and operate a PV plant

ADVANTAGES?


CONCLUSION & CONTACTS

Finergreen MENA DMCCPO Box 931 033

Dubai – United Arab EmiratesCO

NTA

CTS

Antoine POUSSARDManaging Partner MENA

Mobile: +971 50 774 8042

[email protected]

Raka SARKARAnalyst

Mobile: +971 55 614 7680

[email protected]

#1

Unique momentum with Commercial & Industrial clients looking to be sustainable while saving money

FINERGREEN is your partner of choice to make your deals happen.

Simple technology but with potential to incorporate complex microgrid schemes, storage options and achieve 100% renewables run off-grid systems – upcoming concepts for sustainability

THANK YOU!

www.finergreen.com

ROOFTOP SOLAR PV AND THE C&I SECTOR

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