10 filip audenaert - dg infra
TRANSCRIPT
The Solar Future in Belgium Infrastructure Investor: DG Infra+ / DG Infra Yield
March 23, 2011
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Infrastructure activities launched end 2007 through a joint-venture of GIMV and Dexia
2 dedicated and complimentary infrastructure investment funds with EUR 250m of capital committed and available for investment
DG Infra+
DG Infra Yield
Team of 8 professionals, located in Antwerp and The Hague (at the premises of Gimv)
Capital raised from 3th party investors including insurance companies and pension funds
Investments across different target sectors:
Public Private Partnerships
(Renewable) energy
Transport / Logistics
Selective real estate
DG Infra+ and DG Infra Yield sponsored and managed by GIMV and Dexia
Waste
Water
Social infrastructure
Telecom / ICT
DG Infra+ DG Infra Yield
Investment Focus Infrastructure and selective real estate
Infrastructure and selective real estate
Geographical Focus
Predominantly Benelux Predominantly Benelux
Risk Profile Development and/or construction risk allowed
Limited exposure to development and construction risk (only when subordinated or senior debt investments)
Return Profile Focus on value creation and capital gains
Focus on periodic cash distributions
Financing solution Equity, Equity-linked debt Secondary equity, Subordinated debt, Senior debt
Fund Size 135 million 116 million (first Closing)
Incorporation 2007 2011
Term 12 years 30 years
DG Infra+ and DG Infra Yield Key terms and features
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Not interesting for industrial companies
Capital intensive - often burden on financial structure
Not a core asset for industrial companies
Value destructive: return on asset often lower than capital cost of an industrial company
Project developers mostly prefer to set up a separate dedicated structure for the financing of PV installations:
Focus on developing – prefer to free-up capital for the next project(s)
Often not capital intensive companies
Investment funds / Institutional (direct) investors
Subject to correct risk / return profile
Perception of the sector often important (e.g. renewable energy is hot)
PV Installations : who will invest ?
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Different project phases:
Development phase
Operational phase
End phase - dismantling
Each project phase has its specific risks:
Who is bearing a specific risk ?
How is the risk managed ?
Allocate the risk to the participant who can best manage that risk
Investors are not prepared to take some of the risks
PV Installations : an easy investment ?
Main participants:
Client
Project developer (PD)
EPC contractor (EPC)
O&M contractor (O&M)
Manufacturers of parts
Bank (or leasing company)
Investor
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Main risks in the development phase
Stability of the roof
Grid capacity
Building permit in place (land based)
Find appropriate financing
Construction delays
Quality and performance of installation
Quality of parts (PV module, inverter, …)
Quality of monitoring and reporting
Damage (building or PV installation)
PV Installations : an easy investment ?
… to be allocated to …
Client
Client
Client
PD / Client
PD / EPC
PD / EPC
Manufacturer
PD / EPC
Insurance comp.
… and managed through …
Building right agreement
Insurance contract
Building right agreement
Building right agreement
Building right agreement
Building right agreement
EPC guarantee*
Techn. DD / EPC guarantee
Techn. DD / suppl. guarantee
Techn. DD / EPC Agreement
Insurance contracts
* remark: the value of a guarantee also depends on the strength of the guarantor
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Main risks in the operational phase
Performance of the PV Installation
Availability of the PV Installation
Interruption of parts (module, inverter, …)
Roof renovation
Damages (building or PV installation)
Retroactive changes to regulation
Radiation
Client bankruptcy
% of local use of electricity
Evolution of market electricity prices
Evolution of market interest rates
Delayed cash flows
Event of default in financing agreement
PV Installations : an easy investment ?
… to be allocated to …
EPC / O&M
EPC / O&M
Manufacturer
Client
Insurance comp.
Client / Investor
Investor / Bank
Investor / Bank
Investor / Bank
Investor / Bank
Investor / Bank
Investor / Bank
Investor / Bank
… and managed through …
Guarantee EPC / O&M
Guarantee EPC / O&M
Supplier agreement
Building right agreement
Insurance contracts
Building right agreement
building right agreement
Local PPA
Local / Excess PPA
Hedging agreement
Financing Agreement
Financing Agreement
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Main risks in the dismantling phase
Ownership of the PV Installation
Dismantling cost
PV Installations : an easy investment ?
… to be allocated to …
PD / EPC / Client
PD / EPC / Client
… and managed through …
Building right agreement
Building right agreement
Conclusion
Investing in PV installations is not an easy and straight-forward exercise
Varying deal structures, risk allocations and definitions of risk management can have a large impact on the returns for investors
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The return requirement of the investor is not just a fixed rate, but will depend on:
Deal structure
Risk allocation and management
The strength of the guarantor related to a guarantee
Some projects can possibly not be financed
Extensive due diligence:
Technical due diligence (installation + PV modules)
Building right agreement
Insurance contracts
Local / excess PPA
EPC Agreement + EPC Contractor itself
Supplier agreement + Supplier itself
O&M Agreement
Financing and hedging agreement
Return Requirements ?
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2011 and 2012 ?
The Solar Future in Belgium will definitely depend on the evolution of the following items:
Minimum guarantees on the green certificates
Market electricity prices
Price of the PV modules
Market interest rates
However, the Solar Future will also depend on how risks have been and will be allocated and managed. If not, this could have detrimental consequences:
For the client:
Development phase: delayed PV installation at less favorable conditions
Operational phase: less local electricity and / or less rental fees
For the investors / banks: lower returns or even write-offs
And in the end also for the solar sector itself as it would become more difficult to get new clients and investors.
Hence, the solar sector itself is to a certain extent also responsible for its own future.
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Questions ?