Solar PV as an Investment Grade Asset PV Plant Conference 2014 – Istanbul, 9th April 2014 Increase...

Solar PV as an Investment Grade Asset

PV Plant Conference 2014 – Istanbul, 9th April 2014

Increase IRR and reduce risk in large scale PV plants

Thomas Götz

SMA Solar Technology AG

IMPORTANT LEGAL NOTICE

This presentation does not constitute or form part of, and should not be construed as, an offer or invitation to subscribe for, underwrite or otherwise acquire, any securities of SMA Solar Technology AG (the "Company") or any present or future subsidiary of the Company (together with the Company, the "SMA Group") nor should it or any part of it form the basis of, or be relied upon in connection with, any contract to purchase or subscribe for any securities in the Company or any member of the SMA Group or commitment whatsoever.

All information contained herein has been carefully prepared. Nevertheless, we do not guarantee its accuracy or completeness and nothing herein shall be construed to be a representation of such guarantee.

The information contained in this presentation is subject to amendment, revision and updating. Certain statements contained in this presentation may be statements of future expectations and other forward-looking statements that are based on the management's current views and assumptions and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those in such statements as a result of, among others, factors, changing business or other market conditions and the prospects for growth anticipated by the management of the Company. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements which speak only as of the date of this presentation.

This presentation is for information purposes only and may not be further distributed or passed on to any party which is not the addressee of this presentation. No part of this presentation must be copied, reproduced or cited by the addressees hereof other than for the purpose for which it has been provided to the addressee.

This document is not an offer of securities for sale in the United States of America. Securities may not be offered or sold in the United States of America absent registration or an exemption from registration under the U.S. Securities Act of 1933 as amended.

Disclaimer

2


Agenda

3

1 Overview SMA

2 What makes an „Investment Grade“ PV project

3 Main factors determining the financial success of a large PV Asset

SMA Solar Technology AG 4

SMA is the global market and technology leader for solar inverters

Facts & Figures

Founded: 1981

Sales 2012: EUR 1.5 billion

Installed global capacity : > 35

GW

Employees: + 5.500

worldwide

R&D Professionals: >1.000

Invest R&D 2012: > € 100

Mio.

Comprehensive Product Range

On-grid

Residential2 – 30 kW

Industrial> 1 MW

Backup

Off-grid

Residential< 2 kW

Commercial30 – 500 kW

All PV

application

s

All performance

ranges

Global Presence

Canada

ChileUSA

GermanyBelgiumCzech RepublicFranceGreeceItalyPolandPortugalSpainUnited Kingdom

AustraliaChinaIndiaJapan

South KoreaThailand

United Arab Emirates

South Africa21Subsidiarie

sWorldwide

SMA Facts & Figures


Agenda

5

1 Overview SMA




Example of an Investment Grade PV ProjectMany are bankable,… SMA is INVESTMENT GRADE!

6

Equity $ 850 Mio. (BBB-)

First Investment Grade PV-Plant in history


What makes a Solar Project „Investment Grade“?Example Fitch

7

Completion Risk:

Probability to achieve commercial operation

date

Experienced ContractorOperation Risk:

Stability and adequacy of plant performance

Qualified operator

comprehensive maintenance

reliable technology

Solar Resource:

Scope, Quality and reliability of project‘s

energy

production forecastRevenue Risk:

Strength, duration and flexibilty of power

purchase

agreement. Stability of regulatory framework.

Debt Structure:

Terms and conditions of debt payment

Debt Service:

Free Cashflow to pay debt

Operation Risk:

Stability and adequacy of plant performance

Qualified operator

comprehensive maintenance

reliable technology

Debt Service:

Free Cashflow to pay debt

Completion Risk:

Probability to achieve commercial

operation date

Experienced Contractor


Agenda

8

1 Overview SMA




The „brain“ of a PV PlantDifference between great and a distressed asset

RELEVANT CATEGORIES

Experience

Quality

Service

Technology

Grid

Mgmt.

PERFORMAN

CE

&

RELIABILITY

Inverter = only

10%

of Project Value

…

… BUT MOST

VITAL !

IN

CR

EA

SE TH

E

CA

SH

FLO

W

LO

WER

IN

VES

TM

EN

T

RIS

K

9


Experience: how much? / how big? /where? Real life Experience is a vital selection criteria

10

Germany [38 MW]

Italy [85 MW]

United Arab Emirates [10 MW]

USA [16 MW]


Routine Tests

11

Endurance Tests

> Optical inspection / Wiring test

> Protective conductor inspection

> High-voltage test / Function test

> 1000-h endurance test at max.

temperature and full power

> Powercycle: 1000 cycles “start-

operation-stop”

Quality- increased availability + long life -> higher cashflow + reduced risk

Advanced Tests

Seismic

Humidity

Electromagnetic

Climate

DustLightning


Dangerous Condensation

12

Fall-Down-Test

Quality- Small details make a huge difference

Detailed Measurements (> 120 sensors) Fuses need to last 20Years or more

Tests beyond

„Standard“

- >50C (Standard 25C)

- 60C over 3h (50C – 3h)

- Several fuses (1 fuse)


1. Longterm spare parts strategy:

2. Predictive Maintenance

>Optimal quantity

>Right quality

>Fixed price

>Remote Monitoring

>Comprehensive Data Collection

>Data Analysis (complex

Algorisms/Experience)

>Planned Maintenance possible (e.g. at

night)

Service- increased cash flow – reduced risk


Technology- Efficiency and Selfconsumption Topic: Inverters with similar performance (efficiency) show strong difference in self consumption.

Problem: 1. Higher Costs2. Higher thermal strain on components =

shorter life !!

Comparable product of a competitor


Technology and Money cheaper can be more expensive !

TotalScenario 2

TotalScenario 1

Year 2014 2033Operational Year 1 … 20

Revenue 257,77 257,77 Mio. EUR 11,864 12,942

OPEX 36,33 36,33 Mio. EUR 1,672 … 1,824

EBITDA 221,44 221,44 Mio. EUR 10,192 11,118

CAPEX 103,20 103,20 Mio. EUR 0,000 0,000

Interest 44,06 44,06 Mio. EUR 5,184 0,000

FREE CASH FLOW FOR DISTRIBUTION 73,27 73,27 Mio. EUR 1,539 … 8,807

RATIOS

Debt Service Cover Ratio Average 1,34 1,34 1,80 … -----

Net Present Value 21,33 21,33 Mio. EUR 1,539 … 8,807

Equity IRR 10,00 10,00 % 1,539 … 8,807

LCOE 6,75 6,75 Ct/kWh


Financial simulation: Higher efficiency

Efficiency 98,4%

TotalScenario 2

TotalScenario 1


Revenue 258,83 257,77 Mio. EUR 11,913 12,996

OPEX 36,33 36,33 Mio. EUR 1,672 … 1,824

EBITDA 222,50 221,44 Mio. EUR 10,241 11,172

CAPEX 103,20 103,20 Mio. EUR 0,000 0,000

Interest 44,06 44,06 Mio. EUR 5,184 0,000


RATIOS



Equity IRR 10,15 10,00 % 1,584 … 8,849



Financial simulation: Lower self consumption

Efficiency 98,4%

Self consumption

1.900 W

TotalScenario 2

TotalScenario 1


Revenue 258,83 257,77 Mio. EUR 11,913 12,996

OPEX 34,96 36,33 Mio. EUR 1,609 … 1,755

EBITDA 223,87 221,44 Mio. EUR 10,304 11,241

CAPEX 103,20 103,20 Mio. EUR 0,000 0,000

Interest 44,07 44,06 Mio. EUR 5,184 0,000


RATIOS



Equity IRR 10,39 10,00 % 1,641 … 8,923



Financial simulation: Higher availabilty

Efficiency 98,4%

Self consumption

1.900 W

Availability 99,3%

TotalScenario 2

TotalScenario 1


Revenue 261,46 257,77 Mio. EUR 12,034 13,128

OPEX 34,96 36,33 Mio. EUR 1,609 … 1,755

EBITDA 226,51 221,44 Mio. EUR 10,425 11,373

CAPEX 103,20 103,20 Mio. EUR 0,000 0,000

Interest 44,07 44,06 Mio. EUR 5,185 0,000


RATIOS



Equity IRR 10,78 10,00 % 1,752 … 9,026



PV poses huge threat to grid stability-> big challenges to utilities

> Growing PV penetration -> “tougher” regulations> In new markets frequent changes and introduction of new

requirements

Important to “understand” utilities

> Grid Stability = highest priority> Potential for additional revenue streams

- Reactive Power at night (optional !!)- “Utility supporting” services

“Future proof” Projects

> “Investment Grade” inverters possess comprehensive grid management functions

> Easy Software upgrades possible if required

Grid Stability / Grid Management- reduced risk + potentially new revenue streams


Summary- Selection Criteria Inverter

Experience

Quality

Service

Technology

Grid

Mgmt.

-> Project Size

-> “Harsh” Conditions

IN

CR

EA

SE TH

E

CA

SH

FLO

W

LO

WER

IN

VES

TM

EN

T

RIS

K

-> Relevant Certificates

-> Modern Test Equipment

-> Local Footprint /

Experience

-> Spare Parts Supply

(longterm !)

-> Predictive Maintenance

-> Efficiency

-> Self consumption

-> Temperature Behaviour

-> Grid Code Compliance

-> Future Proof

20


Thank You

2121

1. Inverter = „brain“ of a PV Installation2. Determines performance and risk3. Difference between great and distressed4. Just converting DC to AC is not enough

GREAT Asset DIS

TR

ES

SE

D

Ass

et

Thomas GötzVice President SalesPower Plant Solutions

Tel. +49 561 9522-421431Mob. +49 151 44623121E-Mail: [email protected]

mailto:[email protected]

Solar PV as an Investment Grade Asset PV Plant Conference 2014 – Istanbul, 9th April 2014 Increase...

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