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Energy & Natural ResourcesProject Finance in Poland – Wind sector
CaixaBank - Confidencial
José Mª Arzac
Director de Negocio Internacional
Financiaciones Estructuradas
Disclaimer
Important NoteImportant Note
The purpose of this presentation is purely informative. In particular, regarding the data provided by third parties, neither CaixaBank,S.A. (“CaixaBank”), nor any of its administrators, directors or employees, is obliged, either explicitly or implicitly, to vouch that thesecontents are exact, accurate, comprehensive or complete, nor to keep them updated, nor to correct them in the case that anydeficiency, error or omission were to be detected. Moreover, in reproducing these contents in any medium, CaixaBank may introduceany changes it deems suitable, may omit partially or completely any of the elements of this document, and in case of any deviationbetween such a version and this one, assumes no liability for any discrepancy.
This document has at no time been submitted to the Comisión Nacional del Mercado de Valores (CNMV – the Spanish Stock Marketsregulatory body) for approval or scrutiny. In all cases its contents are regulated by the Spanish law applicable at time of writing, and itis not addressed to any person or legal entity located in any other jurisdiction. For this reason it may not necessarily comply with theis not addressed to any person or legal entity located in any other jurisdiction. For this reason it may not necessarily comply with theprevailing norms or legal requisites as required in other jurisdictions.
This presentation on no account should be construed as a service of financial analysis or advice, nor does it aim to offer any kind offinancial product or service. In particular, it is expressly remarked here that no information herein contained should be taken as aguarantee of future performance or results.
Without prejudice to legal requirements, or to any limitations imposed by CaixaBank that may be applicable, permission is herebyexpressly refused for any type of use or exploitation of the contents of this presentation, and for any use of the signs, trademarks andlogotypes which it contains. This prohibition extends to any kind of reproduction, distribution, transmission to third parties, publiccommunication or conversion into any other medium, for commercial purposes, without the previous express permission ofCaixaBank and/or other respective proprietary title holders. Any failure to observe this restriction may constitute a legal offencewhich may be sanctioned by the prevailing laws in such cases.
Energy & Natural ResourcesEnergy & Natural Resources
Introduction
CaixaBank Structure Overview
CaixaBank International Presence
Project Finance International Experience Project Finance International Experience
Project Finance “To Date”
Project Finance Assessment
Investment Case
Project Finance Prospects
CaixaBank: structure overviewCaixaBank: structure overview
Introduction
4Asociación Española Eólica: Wind Sector in Poland
(1) Including the conversion of the exchange of Bonds issued by “la Caixa”(2) As of end of June 2014(3) Proposal approved by the Board of Directors of “la Caixa” that was presented at “la Caixa” Annual General Assembly scheduled for May 22, 2014
CaixaBank: international presenceCaixaBank: international presence
Introduction (cont´d)
5Asociación Española Eólica: Wind Sector in Poland
(1) Market Value as of 30th January 2014(2) As of Dec 2013
Project Finance: international experienceProject Finance: international experience
US / CANADA / LATAM CENTRAL / EASTERN EUROPE
COUNTRY TECHNOLOGY INSTALLED POWER
Germany Wind 237 MW
France District Heating NA
Netherlands Wind Off-Shore 600 MW
Italy PV 35 MW
Portugal Wind 681 MW
Poland Wind 57 MW
Romania Wind 228 MW
TOTAL 1.838 MW
COUNTRY TECHNOLOGY INSTALLED POWER
USA Wind 382 MW
Transmission Line NA
Bioenergy NA
Mexico Wind 210 MW
Cogeneration 300 MW
Regasification NA
Canada Regasification NA
Chile1 Photovoltaic 146MW
TOTAL 1.038 MW
Inversión 2008-2013: 600 MM €
Introduction (cont´d)
6Asociación Española Eólica: Wind Sector in Poland
Active Markets Potential Markets
1 Proyecto Laberinto: en cierre financiero
Nº Deals: 14 Nº Deals: 8
Inversión 2008-2013: 600 MM €
Energy & Natural ResourcesEnergy & Natural Resources
Introduction
CaixaBank Structure Overview
CaixaBank International Presence
Project Finance International Experience
7Asociación Española Eólica: Wind Sector in Poland
Project Finance International Experience
Project Finance “To Date”
Project Finance Assessment
Investment Case
Project Finance Prospects
Project Finance AssessmentProject Finance Assessment
Parameter Requirements
Electricity market
Electricity output
Price
Off-taker
Construction phase risk
Contracting
• Remuneration system (Feed-in, PTCs, Certificates)?• Certificates purchase obligation? Priority access? Are the balancing
market costs fix?• Credit-worthiness of the off-taker?• Grid extension & operation: public or private?• How often does the remuneration law change?
• Construction plan & mitigation of commissioning delays, PLA´s? Testperiod defects?
• EPC-Contractor or Multi-Contracting? Subcontractor‘s clauses?
Project Finance “To Date”
8Asociación Española Eólica: Wind Sector in Poland
Operational risks
Proven Technology
O & M
Due Diligence
Resource Assessment
Securing of Assets
• Resource assessment from independent consultants• Secured legal title to the land? (rental, lease, usufruct)• Collaterals concept based on experienced international legal advisors• Comprehensive DDs (Legal DD, Tax DD, Technical and Insurance DD)
Construction phase risk
Construction
Macroeconomicframework
• Dependence on supplier‘s know-how? /Alternative Reliable providers?• Volatility of O&M costs? Loss of licences?• Environmental monitoring plan? Business interruption?• Operational efficiency problems?• Interest rate changes? Cash-sweep?
• EPC-Contractor or Multi-Contracting? Subcontractor‘s clauses?• Turbine supply alternatives & purchase contract details, performance
guarantee, completion guarantees?
Investment Case: context of financing decisionInvestment Case: context of financing decision
Law Context
Access Priority: TSO/DSO obliged to give priority for transport/distribution of RES electricity
Obligation to purchase renewable electricity: last-resort suppliers whose grids are interconnected with specific RES. The price tobe paid to the operator of the RES was the average price of the sale of electricity on the competitive market in the previouscalendar year
Green certificates: those entities which generate electricity from RES would recover the difference between their operating costsand the average market price payable by the last-resort suppliers by trading in certificates for renewable energy, so-called ‘green
The Polish energy market: hard-coal and lignite based / Limited number of renewable energy sources / Very good resourceconditions (wind)
Project Finance “To Date” (cont´d)
9Asociación Española Eólica: Wind Sector in Poland
and the average market price payable by the last-resort suppliers by trading in certificates for renewable energy, so-called ‘greencertificates’ (no time limit for obtaining GC´s)
Substitute Fee: last resort suppliers to satisfy their statutory obligations by either acquiring GC´s or paying a fee (“Substitute fee”)
Quota• EU Directive: 15% for 2020
• Polish Law: 12,9% for 2017
Revenue
Price• Fixed price
• Combination of the statutorily guaranteed priceof electricity and Substitute Fee
• Long-term contract for both the electricity andthe green certificates
• Selling to DSO under the priority dispatch rulesand trading green certificates on the EnergyExchange
• Modelling electricity prices on power stock exchange, powercommodities
• PPA’s: Off takers’ creditworthiness / Term of the PPA’s
• CoO max price = substitution fee (248,46 PLN/MWh2008) +annual inflation -None low limit!
• Changes (detrimental or beneficial?)
• EU Directive not yet implemented - Tenor
Investment Case: 24 MW Wind Farm (2010)Investment Case: 24 MW Wind Farm (2010)
Project Finance “To Date” (cont´d)
Construction
• Full EPC Contract with tier I Contractor
• Subcontracts
Turbine Supply Agreement (“TSA”) – Enercon
BoP & Interconnection: Elbud
Resource• Hqn P-50 Scenario: 2.325
• Hqn P-90 Scenario: 1.910
Asset • Wind Project - 24 MW
Location• Kisielice Municipality, located in the Northen part of
the country (237 KM from Varsovia).
TSA • Enercon E-82 2MW
PPA
Counterpart Energa Obrot
ObjectSale by the Seller to the Buyer of all of the Electricity
generated by the wind farm
Tenor 15y
CPA
Counterpart Energa Obrot
ObjectSale by the Seller to the Buyer of all of the Property Rights
arising from the Certificates of Origin
10Asociación Española Eólica: Wind Sector in Poland
Vigencia de PPA + GCPA (Offtaker: Energa-Obrot)
2/2010 06/2025
Fin vida útilestimada activos
10/203506/2010
Construcción
06/2023
VencimientoPPA y GCPA
Vigencia de la Deuda Senior
VencimientoCrédito
Recálculo delCaso Base
2013
Full Cash Sweep
Cuotas fijadas en RW
2017 2020
Polonia UE
Tail s/ PPA y GCPA
Vto teórico en aplicación del Cash Sweep (si procede)
Tenor 15y
PriceAverage sale price of electric energy in the competitivemarket in the preceding calendar year (i.e 2010: 197,21
PLN/MWh)
arising from the Certificates of Origin
Tenor 15y
Price []% of the Substitute Fee published by the ERO
Energy & Natural ResourcesEnergy & Natural Resources
Introduction
CaixaBank Structure Overview
CaixaBank International Presence
Project Finance International Experience
11Asociación Española Eólica: Wind Sector in Poland
Project Finance International Experience
Project Finance “To Date”
Project Finance Assessment
Investment Case
Project Finance Prospects
Project Finance Prospects
Context and main issuesContext and main issues
Fossil fuels big concern
• EU energy emission targets - Transitional Plan gives additional 4 years (2016 to 2020)
• High cost for the economy - paying for carbon emissions
• Free carbon emission allowances for 5Y – not for new fossil power plants
Prospects of electricity deficit once demand picks up again
• Decomissioning of about 4-5GW of ageing capacity (hard coal fired)
Pressure to reduce carbon emissions and diversify away from coal does boost the prospects for Renewables
New Facilities - AuctionExisting Facilities – GC´s / Auction
12Asociación Española Eólica: Wind Sector in Poland
Obligation to purchase renewable electricity: “obligedsupplier” (YoY designation)
Green certificates:
• 15 years (retroactive?)
• Coeficient factor for Co-fired / no GC´s for Hidro (>5MW)
Substitute Fee:
• Fixed at 2014 level (PLN 300)
• Not possible if GC´s are bellow 75% of penalty level (3months) – Demand of GC´s - still a CAP
Quota:
• 20% maximum (government to control quota within thatrange for several years capped at 20%)
Existing Facilities – GC s / Auction
Pre-cualification
• Zonning Plan / Planning Permit• Grid Connection: conditions issued - agreement signed• Construction Permit
Reference Price
Volume ofElectricity
• Failure to deliver will be sanctioned through penalties(50% of awarded price for volume not delivered)
• Will be set annually• Existing projects: average of Black Energy and GC´s of
previous year
FiP
• Differences between market price and awarded priceto be paid/received
• Creditworthiness of State Owned Company? /Settlement procedure? /
State Aid• Total value of State Aid to be specifies in 2ry legislation• Implications??
ContactsContacts
José Mª ArzacJosé Mª Arzac
Daniel ParejoDaniel Parejo
Head Energy & Natural Resources
Tel: +3491 412 11 10
dparejo@lacaixa.esDavid FerreronsDavid Ferrerons
National Business
Tel: +3493 404 65 34
dferrerons@lacaixa.es
International Business
Tel: +3491 412 14 56
jmarzac@lacaixa.es
13Asociación Española Eólica: Wind Sector in Poland
Antoni JofreMarisa Cobos
Tel: +3491 412 11 43
mlcobos@lacaixa.es
Tel: +3493 404 65 13
ajofre@lacaixa.es
Joan Gaitx
Tel: +3493 404 43 88
jgaitx@lacaixa.es
Olga Salvó
Tel: +3493 404 45 93
osalvo@lacaixa.es
Gema I. López
Tel: +3491 412 11 83
gilopez@lacaixa.es
Lourdes Moreno
Tel: +3491 412 14 56
lourdes.moreno.a@lacaixa.es
Juan F. Fernández
Tel: +3491 412 16 14
juan.felipe.fernandez@lacaixa.es
Energy & Natural Resources
Thank you!!
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