for

Agenda

1. 2. 3. 4. 5. 6.

Presentation of the Green for Growth Fund Introduction to Renewable Energy Introduction to the specifics of Hydro Power Plants Case study of a hydro project Financing of Renewable Energy Projects Regulatory Conditions for Bankability

CONFIDENTIAL

for

Preparatory Summary (from previous presentations)

Project Participants Developer / Sponsor Landowners / Concession Authorities / Regulatory EPC / Turnkey construction O&M contractor Raw material provider Offtaker Debt provider Bankable documents Feasibility study Business plan Site, design, project participants Capital expenditures (CAPEX) Energy Revenues Operating expenditures (OPEX) Cash flow calculations with tax assumptions Financing strategy Legal documentation
CONFIDENTIAL
2

for

Preparatory Summary
Corporate Finance
Provision of investor data for corporate due diligence Investor develops the project and/or evaluates the project risk
Biomass Project SPV

Bank(s)
Disbursement of funds

Investor

Investment (with bank funds and own equity)

Project Finance
Bank(s) GGF
Provision of project data for project due diligence

Investor develops the project and/or evaluates the project risk

Investor

Investment

Equity Debt

Biomass Project SPV

Disbursement of senior and/or mezzanine funds directly to the SPV

CONFIDENTIAL
3

for

Preparatory Summary
Corporate Finance
Provision of investor data for corporate due diligence Investor develops the project and/or evaluates the project risk
Biomass Project SPV

Bank(s)
Disbursement of funds

Investor

Investment (with bank funds and own equity)

Project Finance
Bank(s) GGF
Provision of project data for project due diligence

Investor develops the project and/or evaluates the project risk

Investor

Investment

Equity Debt

Biomass Project SPV

Disbursement of senior and/or mezzanine funds directly to the SPV

CONFIDENTIAL
4

for

Project Finance
What means Project Finance? Project company (SPV) Capital structure (Debt Capacity Equity)
GGF
Project data

Bank(s)

Debt Structure (Syndication, Sub debt) Cash flow waterfall Due diligence Technical Legal & Tax Economic Project collateral Non-recourse vs. limited recourse Insolvency Proceedings
CONFIDENTIAL

Investor

Project SPV Energana d.o.o. Debt

Equity

for

Eligibility of Financing (Banks perspective)

Renewable Energy Technology must be eligible by the Bank, here GGF: Solar (thermal and photovoltaic) Small hydro (<30 MW) Biomass (including Biogas) Geothermal Small wind farms (<30 MW) Limitations for Banks: Banks long term funding is condition for long term funding to the project Long term fixed interest rate hedging (interest swaps provided by Bank) Credit margin according to project & country risk Exposure limitations (regarding technology or client )
CONFIDENTIAL
6

for

Typical Capital Structuring

Total invest = 10mn Total invest = 20mn Total invest = 20mn

Cash flow waterfall during operation

Cash injection during construction

Senior Debt provided by one Lender 7mn

Senior Debt divided among different Lenders Bank 8mn GGF 8mn

Senior Lender 12mn

Mezzanine Lender 4mn Equity 3mn Equity 4mn Equity 4mn

CONFIDENTIAL

for

Setting up a Cash flow Model

Define Input Data

CONFIDENTIAL

for

Setting up a Cash flow Model

Create (semi-) annual model

Extend this model with the periods of project lifetime

CONFIDENTIAL

for

Setting up a Cash flow Model

Calculate Debt Service Cover Ratio (DSCR)

CONFIDENTIAL

10

for

Debt Service Cover Ratio (DSCR)

DSCR measures how many times the cash flow after debt service (CFADS) can repay the scheduled Debt Service here 1.20 and 1.22 Minimum DSCR are usually defined in the banks risk policy with consideration of the financing structure, resource & technology risk The higher the risks, the higher the DSCR should be to have more cushion in downside years The DSCR can be used as loan covenant and prevent dividend payments (distribution lock-up) With the min. DSCR the debt capacity can be calculated in any year the minimum DSCR may not fall below the DSCR threshold
CONFIDENTIAL

Cashflow Available for Debt Service Debt Service (Repayment+Interest)

11

for

Debt Capacity
How much debt can be burdened to the project?

Adapt the loan amount until the min. DSCR has been reached
CONFIDENTIAL
12

for

Content of more detailed Cashflow Models

Consideration of Reserve Accounts Debt Service Reserve Maintenance & Repair Cost Reserves Decommissioning Reserves Interest / FX Risk Reserves Debt Structuring Grace periods Linear Repayment / Annuity Debt Service / Debt Sculpting Cash Sweep Other lenders (pari passu, subordinated)
CONFIDENTIAL
13

for

Content of more detailed Cashflow Models

Scenario Analysis (Impact on Cashflow) Construction Delays Changes in Interest Rate Changes in Foreign Exchanges Unexpected Increase of OPEX Cut-down of Feed-in-Tariff Other Tax modelling (loss carryforward, depreciation methods) Income statement & Balance Sheets (regarding overindebtedness)

CONFIDENTIAL

14

for

Structuring of a Debt Service Reserve Account

CONFIDENTIAL

15

for

Structuring of a Debt Service Reserve Account

CONFIDENTIAL

16

Thank you for your attention!

Contact: Dominic Hereth, Phone: +49 (0) 69 977 876 50-88,CONFIDENTIAL Fax: +49 (0) 69 977 876 50-10, E-Mail: d.hereth@finance-in-motion.com