A 3–day financial training workshop
You will learn about:
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Structuring renewable energy projects
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Risk assessment and allocation in renewable transactions
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What incentives? What countries?
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Carbon–credits and trading markets
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Cash–flow analysis and structuring alternatives
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Debt and equity alternatives and incentives
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Commodity price hedging for wind and other deals
- Managing international risks
Course background
In 2008 an estimated USD120 billion was invested new renewable assets, projects and biofuels globally. Despite enormous potential to produce more electricity from abundant wind, solar, hydro, waste and other renewable resources Africa has however lagged behind other parts of the world in undertaking such projects. This program describes how chronic power shortages on the continent may be addressed by taking advantage of rich renewable resource supplies, while conserving finite fossil fuels and reducing noxious greenhouse gases and other atmospheric emissions.
Course Content
By the end of the three-day session participants will have learned how to analyse many different types of renewable energy transactions, negotiate contractual terms and allocate project risks among various players. They will see how a wide variety of transactions may differ from conventional power deals and hear about possible benefits from government incentives designed to promote clean technologies. Aside from feed-in tariffs, tax incentives, tendering and other schemes, the program also explains how carbon credits or certified emissions reductions (CERs) may be used to enhance transaction returns or access additional funding. Potential sources of foreign and local currency funding for these deals are identified in detail. In addition, means for enhancing terms or funding through the World Bank and other International Financial Institutions or other official players Export Credit Agencies are described fully.
Throughout the program case studies and examples from Africa and elsewhere, are used extensively to ensure understanding and give participants practice in the application of concepts. Cashflow analysis and key sensitivities of various renewable energy technologies and project types are emphasised and explained thoroughly.
Day 1
Themes: renewable financing, energy initiatives and project economics; wind projects in detail
Overview of renewable energy project financing
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Global growth of the market
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Various types of renewable energy projects
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Comparative costs per installed MW and ‘levelised’ energy costs
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Wind farms
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Solar power and solar water heating
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Bio-mass
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Small-scale hydro plants
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Geothermal energy
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Municipal waste, land-fill gas and other waste
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Incentive programs (Europe, US., India, China, South Africa, Morocco, Kenya and others)
Feed-in tariffs
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Renewable portfolio standards and renewable energy credits
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Tax incentives, depreciation, allowances, etc.
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Competitive tenders
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Financing structures and players
Risk identification, allocation, and structuring considerations in a wind project
Different approaches/differing risks
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How do risks differ by technology?
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Construction and warranty issues; turnkey, equipment supply and balance of plant contractual bifurcation
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Technology advances and operational issues, standard performance guarantees (wind compared to solar and other)
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Transmission, interconnection and tariffing
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PPA considerations: availability, energy and environmental credits
Workshop: cash flow modelling for renewable projects
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Building a renewable model
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Forecasting techniques and limitations
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Key features and sensitivities
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Cashflow analysis and creditor considerations
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Sponsor return calculations
- Tax-equity investors vs. strategic investors
Case study: financing a wind farm
Participants break into small groups to evaluate this security package for a wind facility. They look at financing choices, structure, project cash flows and quantify their risk assessments.
Day 2
Themes: legal issues; sources of finance and credit enhancement; solar power
Further legal issues and contractual considerations
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Key contractual agreements and structuring considerations
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Power purchase agreements (pricing structures, milestones and penalties)
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Equipment supply and time lines
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Balance of plant agreements
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Land lease
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Shareholder structures
Bank debt and capital markets as funding alternatives
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Bank debts and the disappearance of syndications
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Club deals in the renewable sector and most active banks
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Domestic and international capital markets access
Eurobonds, private placements
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Rating agencies, Basel II, and the demise of credit wraps
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Electricity price hedging for credit enhancement
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Commodity pricing and hedging mechanisms
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Gas and heat-rate hedges for wind and other renewable energy projects
Leasing structures for renewable projects
Case examples: Wind and Solar
Solar power and technologies
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Solar photovoltaic systems and solar thermal
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Issues of scale, cost and application of different technologies
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Crystalline and thin film
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Concentrating solar power
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Insolation measures and considerations
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Financing challenges and ppa solutions
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Roof and ground leasing issues; other site requirements
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Environmental and permitting issues
- Panel and other equipment warranties
Case study: financing a Solar Park
Evaluating the security package for a Photovoltaic (PV) Solar Park. Participants will construct a simplified a cash flow model to estimate revenues and costs as well as debt capacity and investor returns.
Day 3
Themes: international risks; carbon credits; hydro-and geothermal projects
Biomass projects
Case examples: wood-fired bio-mass
Bio-fuels: what are the prospects for these technologies?
Developing projects in international markets: sources of official support for international renewable projects
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Official funds providers and political risk enhancers
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Development banks and other IFIS
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ECAS and others
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Private political risk coverage and providers
Carbon credits and renewable projects
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Growth of the carbon credits market and prospects beyond 2012
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Suppliers, intermediaries, and end users
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EU emission trading scheme (ETS) and clean development mechanism (CDM)
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‘Project cycle’ and qualifying for certified emissions
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Calculations of carbon reductions for various energy projects
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Issues of doe validation and verification and liability
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Monetising carbon credits and negotiating an emissions reduction purchase agreement (‘ERPA’)
- Risk insurance for carbon credits?
Case Example: Comparing increases to investor return and incremental debt capacity for a small-scale hydroproject with a signed ERPA.
Base-load renewable producers: geothermal and hydro plants
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Where are these facilities located? Technologies?
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Geothermal dry and flash steam plants, binary plants
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Resource assessment and risk
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Construction and transmission issues
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Government role
Example: geothermal production in Nicaragua
Case study: financing a small-scale hydro-electric facility
Considering risks of financing a small-scale hydro plant. Evaluating plans for hard currency generation though sale of carbon credits.
Course summary and close
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Meg Osius
Margaret Osius specializes in capital markets, and risk management, as well as international project finance. She works with corporations, financial institutions, public agencies, law firms, and private equity investors. Training and advisory work has covered approaches to financing infrastructure build-out and facilities acquisition, selecting among debt, equity, and hedging alternatives, and related topics. She has considerable professional experience with the oil and gas, power, transport, and telecom sectors.
Ms. Osius began her career at JP Morgan Chase Manhattan Bank, where, as a Vice President, she structured highly leveraged transactions and project financings and advised clients on foreign exchange and other price risk management strategies. Ms. Osius was responsible for a team of analysts responsible for evaluating the quality of the bank's global loan portfolio as well as that of its newly acquired affiliates. In that role she had extensive experience with workout and distressed debt.
Ms. Osius has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures. The World Bank has published her articles on approaches to financial analysis in emerging markets. She is a primary speaker in a series of video sessions created to cover the topic of Sound Banking Principles during executive training sessions in Moscow.
Until 2008 Ms. Osius was Chair of the Technical Advisory Panel (TAP) of the Public Private Infrastructure Advancement (PPIAF that provides technical assistance to emerging market governments. She is a member of the council on Foreign Relations and received an M.B.A. from INSEAD, the European Institute of Business Administration. Her B.A. degree is from Princeton University.
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