Course dates
A 5–day intermediate training course featuring:
- Economic analysis of renewables
- Development phase analysis of wind and solar projects
- Modelling exploration and development options
- Break even development probability
- Resource assessment of wind, solar, geothermal and hydro
Featuring:
Case study: Throughout the five day course, we will use a case study on a solar, on-shore and off-shore wind farm project. General information on the case will be provided to course participants ahead of the course.
Who should attend
The course will be of value to professionals in the following areas:
- Corporate Finance / Corporate Treasury
- Capital Markets
- Audit / Product Control / Risk Management / ALM
- Research & Analysis
- Sales & Trading
- Investment Management
- Origination
- Securitisation / Syndication
- Structured Finance
- Money Markets / Repo
- Systems Programming
- Funding
- Government / Agency Funding & Investment
- Regulation / Compliance / Documentation
General Objectives And Teaching Methodology
The objective of the course is to provide participants with a general background on economic and financial issues in the context of renewable energy investments. As cost of capital is one of the most important elements in renewable project costs, the course will demonstrate how various transaction structures affect debt and equity costs. After completing the course, participants should understand project finance terminology; the economic and financial theory that underlies different transaction structures; the motives of different parties in a transaction; and, the importance of various financial and contract provisions. The teaching approach is to first discuss theory, then review case studies and finally work hands-on using excel exercises using solar, geothermal, hydro and wind farm transactions. The course will be structured assuming that participants have little or no hands on experience in project finance.
Resources Received by Participants
Other than the instruction in how to build, use and analyse financial models in evaluating renewable energy projects, all participants will receive a comprehensive suite of financial modelling software, tailored teaching exercises and research articles on a series of compact disks which include a variety of template models and excel add-ins. The software includes project finance models that measure the effect of alternative elements in a cash flow waterfall including debt service reserves, junior debt, covenants, defaults and pre-payments; corporate models that accept historic financial data and generate alternative valuation measures; M&A models that consolidate two companies using alternative financing assumptions and produce accretion and dilution estimates; LBO models that measure the debt capacity of a transaction; option pricing models that account for alternative structures; and debt valuation spreadsheets, Monte Carlo simulation models, tornado diagram and sensitivity analysis.
In addition to the software resources, participants will receive databases on actual projects, commodity price history and case studies. Finally, participants will receive a financial library and a manuscript from the book titles The Valuation Mirage, which addresses many modelling and valuation issues covered in the course.
Day 1
Part 1: Definition Of Terms, Renewable Costs, Levelised Cost Of Electricity
Overview of Terms in Renewable Energy and Project Finance Terms
- Renewable Energy Terms
- Economic Issues Associated with Renewable Energy
- Alternative Contract Structures
- Grid Parity
- Carrying Charges
- Feed-in Tariff Policy
Drivers of Value in Renewable Energy Projects
- Resource Assessment
- Development Cost and Timing
- Electricity Pricing
- Capital Costs
- Taxes and Financing
- Operating Costs, Maintenance Costs and Availability
Capital Intensity and Levelised Cost of Alternative Technologies
- Definition of Capital Intensity and Cost of Capital
- Four Factors that Drive LOCE
- Capital Cost of Project
- Capacity Factor of Project
- Operation and Maintenance Expenses
- The Carrying Charge Rate
Exercise on Computing Grid Parity
- Databases for Electricity Costs
- General Discussion of Cost Trends in Wind, Solar, Natural Gas and Other Technologies
- Review of IEA Cost Analysis for Various Types of Renewable and Non-Renewable Plants Including On-Shore and Off-Shore Wind, Solar PV, Solar Thermal, Geothermal, Wave Energy, Hydro and Biomass
- Natural Gas Prices by Region and Over Time
- Excel Techniques to Select Individual Plants from Databases
- Grid Parity with Different Capital Cost, Carrying Charge Rates and Natural Gas Prices
Case Study: Throughout the course, we will use case studies on a solar, on-shore, off-shore wind farm project, a hydro plant and a geothermal facility (an up-to-date database of costs will be used to facilitate the analysis). The first part of the case will focus on the cost of renewable energy relative to non-renewable energy with and without credit for capacity and with and without carbon cost.
Part 2: Overview Of Project Finance, Cost Of Capital And Pricing Contracts For Renewable Energy
Economic and Financial Theory of Project Finance
- General Discussion of Risks for Renewable Projects
- Capacity Factor Risk (Solar, On-Shore Wind, Off-Shore Wind, Hydro)
- Construction Risk (Off-Shore Wind versus Solar)
- Operation and Maintenance Risk
- Contract Risk
- Measurement of Risk using Traditional Finance Theory and WACC
- Review of Solar Manufacturers
- Theory of Cost of Capital, Beta and Equity Risk Premium Applied to Renewable Energy
- Contrast of Solar and Off-shore Wind from Traditional Cost of Capital and Free Cash Flow Perspective
- Measurement of Value and Risk using Project Finance
- Debt Capacity and Credit Analysis of Different Transactions
- Use of Equity IRR versus Project IRR
- Relying on External Cash Infusions Rather than Internal Analysis
- Financing for Different Types of Projects
- Debt Capacity and Project Finance Terms
- Debt Service Coverage Ratio Definition and Targets
- Debt Tenor, Alternative Repayment Structure, Average Life
- Credit Spreads and Target Credit Ratings in Project Finance
- Debt Service Reserve and Maintenance Reserve
- Covenants, Cash Flow Sweeps and Subordinated Debt
Project Finance Valuation for Renewable Energy
- Project IRR to Screen Projects
- Equity IRR to Structure Projects and Minimum Required
- Equity IRR for Different Renewable Projects
- Equity IRR Complexities from Re-Financing and Development Fees
Part 3: Review Of Costs, Capacity Factors, And Pricing Structures For Alternative Renewable Technologies And Build-Up Of Project Finance Model
Discussion of Wind and Solar Technologies
- On-Shore Wind
- Historic and Current Trends in Capital Cost
- Review of Financial Data for Suppliers
- Fixed and Variable O&M Cost
- Capacity Factors and General Discussion of One-year versus Long-term P90, P75 etc.
- General Contract Terms
- Feed in Tariffs and PPA Agreements for On-Shore Wind
- Off-Shore Wind
- Capital Cost Data Base, Distance, Depth and Height
- Balance of System Costs for Off-Shore versus On-Shore
- Operating Costs and Availability Issues
- Capacity Factors
- Feed-in Tariffs
Case Study of Princess Amelia Financing
- Solar PV
- General Discussion of Technology
- Demand and Supply and Changes in German Feed-in Tariffs
- Review of Solar Companies and Financial Issues
- Financial Performance of Manufacturers
- Balance of System Costs and Inverter Costs
- Performance Guarantees and Other Contract Terms
First Solar Case Study
- Solar Thermal
- Costs and Capacity Factor
- Operating Cost
- Potential Trends
Desetec Case
Part 4: Valuation And Project Finance Modelling For Renewable Projects
Financial Statement Analysis in Renewable Project Finance
- Source and Use of Funds Statement
- Income Statement and use of EBITDA
- Interpretation of Cash Flow Statement
- Evaluation of Operating and Debt Service Reserve Accounts
- Computation of Equity Cash Flow and Free Cash Flow
General Discussion of Project Finance Models
- General Objectives of Financial Models and Financial Forecasts
- Objectives of Project Finance Models
- General Flow and Design of Project Finance Models
- Examples of the Structure of Actual Project Finance Models
- Creation of Project Finance Model Structure
Mechanical Issues in Creating and Interpreting Project Finance Models
- Phases in Project Financing for Renewable Projects
- Sources and Uses Analysis in Models
- Importance of Debt Module
- Fixed Asset Analysis
- Profit and Loss Statement and Tax Analysis
- Cash Flow Waterfall
- Tax Flip Structures
Model Complexities for Renewable Finance Projects
- Accelerated Tax Depreciation, Investment Tax Credit, Production Tax Credits and Renewable Energy Pricing
- Mechanics and Rational for Alternative Incentive Schemes
- Benefits of Investment Schemes Relative to Feed-In Tariffs
- Effects of Incentives on the Overall Cost and Require Feed-in Tariffs of Different Renewable Projects
- Flips and Allocations of Cash Flow to Different Equity Investors – Interpretation of Risk and Return with Different Cash Flow Allocations
Part 5: Resource Assessment
Overview of Resource Assessment in Renewable Projects
- Resource Assessment of Wind – working with hourly wind speeds, Wiebull Distributions and Statistical Analysis (P90, P50 etc.)
- Resource Assessment of Solar – Direct and Diffuse Radiation, Sunlight Angles and RetScreen.)
- Resource Assessment of Geothermal and Hydro
- Probability Distributions of Resources
Modelling Resource Distributions of Wind
- Overview of Wind Data
- Wiebull Distribution and Wind Data
- Power Curve for Wind Turbines
- Distribution of Wind Resources and Wind Studies
- Simulation of Power Distribution
- Computation of P95, P90, P75 and P50 Statistics
Modelling Resources for Hydro Power
- Fundamental Hydro Power Equation
- Sizing of Hydro Plants and Exceedence Curves
- Variance in Rainfall and River Flow
- Computation of P95, P90, P75 and P50 Statistics for Hydro Capacity Factor
Interpretation of Resource Assessment for Risk Analysis
- Mean Reversion of Resources
- Aspects of Probability Distribution other than Resources
- Use of Probabilities in Financial Analysis
- Contrast Among Different Risks
Part 6: Risk Analysis Of Renewable Energy
General Discussion of Risk in Renewable Energy Projects
- Discussion of Differences in the Nature of Risks for On-Shore Wind (Wind Resource), Off-Shore Wind (Maintenance and Life Expectation), Solar (Small Risks become Big with High Leverage), Hydro (Capacity Factor and Merchant Price Risk), Wave (Refurbishment Timing), Geothermal (Development Probability).
- Risk Matrix, Risk Classification and Risk Mitigation
- Risk Evaluation Using Break-Even and Sensitivity Analysis
- Risk Evaluation Using Scenario Analysis with Focus on the Manner in which Bankers Apply Downside Analysis
- Risk Analysis Using Spider and Tornado Diagrams
Credit Analysis in Renewable Project Finance
- Background on Probability of Default and Loss Given Default
- Definition and Calculation of DSCR
- Use of DSCR in Base (P50 Cases) and Downside (P90, P95 Cases) in Determining Debt Capacity
- Application of LLCR and PLCR
Contract Structuring in Renewable Project Finance
- Importance of EPC Contract in Different Projects (Off-Shore Wind and Hydro)
- Performance Contracts in Solar Projects
- Power Curve and Availability Guarantees in Solar and Wind Projects
- O&M Contracts and Warranties
- Insurance
- Counterparty Risk in Different Projects
Case Study on Interpretation of P75, P90, P95 and P99
- Review of Credit Analysis for Wind Projects
- Analysis of Resource Risk in Different Reports
- P90/P50 for One Year and for Ten Years
- Case Study on Detailed Calculation of Resource Distribution
Part 7: Re-Financing, Electricity Pricing, Biomass And Geothermal Issues
Re-Financing for Renewable Projects
- Types of projects where re-financing is important – offshore wind, wave energy, merchant hydro projects and geothermal
- Effects of re-financing on equity IRR and difficulty of defining the equity IRR with short-debt duration
- Structuring project finance models and analysis to measure the effect of re-financing on equity returns
Electricity Pricing Analysis in the Context of Renewable Energy
- Overview of Electricity Prices and Electricity Pricing Designs Around the World
- Relevance of Electricity Pricing to Renewable Analysis
- Short-term and Long-term Marginal Cost for Pricing Analysis
Pricing Analysis for Biomass Projects
- Capital Cost, Heat Rates and Operating Costs of Biomass Projects
- Examples of Biomass Projects
- Tipping Fees and Construction of Price Curves from Local Supply and Demand Data
- Evaluation of Project Finance Model for Biomass
Other Economic Issues in Renewable Energy
- Mean Reversion of Resource Evaluation – Hydro Power versus Wind Power
- Mean Reversion of Wind versus Non-Mean Reversion of Power Curve
- P90 and P95 for One Year Versus Ten Year
- Value of Different Tax and Financing Incentives
- Feed-In Tariff versus Tax Depreciation and Investment Tax Credit
- Renewable Energy Credits
- Production Tax Credits and Problem with Taxable Income
Development Costs in Renewable Projects
- Development Time Frame and Costs in Wind and Solar Projects
- Exploration Costs and Time Frame in Geothermal Projects
- Fees and Compensation for Development and Treatment of Development Fees when Computing Equity IRR.
- Probabilities of Proceeding Beyond Development
- Value and Costs of Development and Research Stage
- Value of Development Expenditures versus Construction Expenditure
- Payment of Development Fees
- Development Costs and Real Option
- Valuation of Development as Real Option
- Compensation for Development Costs
Modelling Exploration and Development Options – Geothermal Case
- General Cost and Resource Parameters for Geothermal Projects
- Review of Project Finance Model for Geothermal Project
- Exploration and Development Cost, Probability Time Frame
- Segregating Development Phases
- Discount Rates for Different Stages
- Computation of Expected Value
Interpretation of Development Value
- Relative Effect of Development Cash Costs and Construction Costs
- Break-even Development Probability
- Length of Development Period
New York Hotel (energy), New York, United States
All Euromoney Energy Training courses are held at four or five star hotels. We strive to provide you with a training environment of the highest quality, to ensure that the whole learning experience exceeds your expectations.
Your training venue will be confirmed by one of our course administrators approximately 3-4 weeks before the course start date.
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Ed Bodmer
Edward Bodmer has created innovative forward pricing, productivity measurement and investment valuation software for consulting clients throughout the United States. He has taught energy economics and finance throughout the world, and formulated significant government policy and corporate strategy in the U.S.
Mr. Bodmer's consulting clients include investment banks, commercial banks, research institutions and government agencies on a wide variety of complex valuation and advisory matters. He has constructed a unique framework for electricity price forecasting and valuation using production cost modelling techniques combined with option price theory and Monte Carlo simulation.
Mr. Bodmer is also an adjunct professor at leading University where he teaches courses in microeconomics. Along with his practical experience that covers a multitude of major advisory projects, he has taught specialised courses in financial modelling, electricity pricing, option valuation, mergers and acquisitions and contracting to investment banks, commercial banks, industrial corporations and electric utility companies.
Mr. Bodmer was formerly Vice President at the First National Bank of Chicago where he directed analysis of energy loans and also created financial modelling techniques used in advisory projects. He has used the models in providing expert testimony on subjects ranging from capital structure to investments in multi-billion dollar nuclear plants to complex valuation of new investments.
Mr. Bodmer received an MBA degree specialising in econometrics (with honours) from the University of Chicago and a BS degree in finance from the University of Illinois (with highest university honours). He has written many articles and is in the process of completing a textbook on valuation of electricity assets.
Courses run by this instructor
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
10-13 Jul 2012 (London, UK)
This intensive four-day course will shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques.
Each session focuses on a particular aspect of modelling and applies it to the case model.
18-22 Jun 2012 (London, UK)
17-21 Dec 2012 (London, UK)
This course will provide you with a general background on economic and financial issues in the context of renewable energy investments. As cost of capital is one of the most important elements in renewable project costs, the course will demonstrate how various transaction structures affect debt and equity costs. After completing the course, participants should understand project finance terminology; the economic and financial theory that underlies different transaction structures; the motives of different parties in a transaction; and, the importance of various financial and contract provisions.
11-14 Sep 2012 (Singapore, Singapore)
15-18 Jan 2013 (Singapore, Singapore)
This intensive four-day Financial Modelling in Excel for the Power Sector course will shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques. Each session focuses on a particular aspect of modelling and applies it to the case model.
24-26 Sep 2012 (Hong Kong, Hong Kong)
This Fundamentals of Developing an Independent Power Project course will provide you with a greater understanding of: 1. The necessary conditions (legal, regulatory, market/commercial, technical, financial) for the successful development of IPPs including renewable energy projects; 2. The risk management tools and
techniques available to maximise value and to understand, calculate and manage risk in IPPs including
renewable energy projects; 3. The requirements of lenders necessary to be met to secure project financing for IPPs including renewable energy projects.
18-19 Jun 2012 (London, UK)
After a gap of 15-20 years and with the need to observe Climate Change requirements, nuclear power is now back on the agenda for many governments. The challenges, however, are daunting. Nuclear power is expensive, the funding needs huge, and nuclear projects take years to implement. Finance, therefore, will be a key issue and on the critical path for many projects. This course addresses the issues and provides a detailed understanding as to the financial difficulties the sector will face.
29-31 May 2012 (Paris, France)
19-21 Nov 2012 (Paris, France)
This intensive three day hands-on course will provide a
comprehensive analysis of issues associated with independent electric power projects ranging from economic analysis of PPA contracts to financial modelling of projects. In working through analysis of projects, a mixture of case studies, lectures and analytical exercise will be used to evaluate electricity price forecasts, debt structuring, technology choice, cost of capital, and architecture of financial models.
12-15 Nov 2012 (Singapore, Singapore)
The Energy Risk Management: Mastering Volatile and Complex Markets course is a comprehensive and systematic introduction to risk management for complex energy markets. The course will detail why and how risks in energy – particularly gas and electricity - are more acute than in other traded market sectors, and how classic risk management techniques must be adapted and extended to meet these demanding conditions.
16-19 Jul 2012 (London, UK)
People coming to energy risk management for the first time are taken aback by the extreme market conditions that are commonplace in the complex markets of oil, coal, and above all, gas and electricity. Levels of volatility and basis risk are unprecedented: and there are additional risks that are unique to energy. This course shows delegates how to deploy traditional risk management tools in the challenging context of volatile energy markets, and to extend these techniques to master the unique risk characteristics of gas and electricity.
20-21 Aug 2012 (Singapore, Singapore)
This Traded Electricity Markets course is a comprehensive and systematic introduction to traded electricity markets. The course will detail why and how electricity – the most challenging of all commodities – presents complexities more acute than in other traded market sectors, and how to understand, model and manage these demanding conditions. Case studies will illustrate how companies have resolved these issues, including Centrica, one of very few companies to have made a successful entry into this most difficult of markets.
25-26 Jun 2012 (London, UK)
10-11 Dec 2012 (London, UK)
This Traded Electricity Markets course is a comprehensive and systematic introduction to traded electricity markets. The course will detail why and how electricity – the most challenging of all commodities – presents complexities more acute than in other traded market sectors, and how to understand, model and manage these demanding conditions.
21-24 Aug 2012 (Lagos, Nigeria)
Many business models fail due to poor planning,
haphazard development, inherent errors and lack
the ability to provide clear financial analysis. This course shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques.
22-25 Oct 2012 (Paris, France)
Electricity Economics and Financial Analysis is a four day intensive, technical hands-on course in which attendees receive comprehensive instruction on the theory and practice of making price forecasts and assessing risk in the electricity generating industry.
16-18 Jul 2012 (Singapore, Singapore)
This intensive three day hands-on course will provide a
comprehensive analysis of issues associated with independent electric power projects ranging from economic analysis of PPA contracts to financial modelling of projects. In working through analysis of projects, a mixture of case studies, lectures and analytical exercise will be used to evaluate electricity price forecasts, debt structuring, technology choice, cost of capital, and architecture of financial models.
12-16 Nov 2012 (Singapore, Singapore)
This course will provide you with a general background on economic and financial issues in the context of renewable energy investments. As cost of capital is one of the most important elements in renewable project costs, the course will demonstrate how various transaction structures affect debt and equity costs. After completing the course, participants should understand project finance terminology; the economic and financial theory that underlies different transaction structures; the motives of different parties in a transaction; and, the importance of various financial and contract provisions.
23-25 Jul 2012 (Paris, France)
30 Jul 2012 - 3 Aug 2012 (Accra, Ghana)
This Financing Independent Power Projects (IPPs) and Power Stations course on IPP project finance best practice is a useful tool for lenders and borrowers alike. The course director will walk candidates through the best practices of IPP project finance and at the end of the course candidates will be better prepared to successfully navigate through the current credit climate.
Course dates