Non-recourse Project Financing - Oost NL...Non-recourse Project Financing Drijvend Zonnepark Lingewaard Oost NL Workshop sessie, 29 November 2018 ... •Flexibility of funding •Limited
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ING Wholesale Bank
Non-recourse Project Financing
Drijvend Zonnepark Lingewaard
Oost NL Workshop sessie, 29 November 2018
ING & Sustainability
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[xxx] | Briefing Package | January 2016
ING Bank at a glance
2
ING Bank well-positioned for growth
• Market Leaders: Leading Retail and Wholesale Bank in the Benelux with a customer base of 10.9 million individuals
• Growth Markets: Strong positions in fast-growing countries in Europe, such as Poland, Romania and Turkey. Potential for growth in our strategic positions in Europe
• Challengers: Organically-built leading direct bank in Germany/Austria, Spain, Italy, France and Australia. Merging Retail Banking with Wholesale Banking to turn into domestic banks
Strong Wholesale Bank with international network
• Leading Wholesale Bank in Benelux and CEE: Supporting domestic economy. Leaders in specialised finance and financial markets
• Global franchise in Financial Markets, global provider of specialised banking products such as Structured Finance and European provider of cash management, leasing and wholesale finance products
• Only Dutch bank with a large international network
ING holds strategic positions in TMB Bank in Thailand, Bank of Beijing in China and ING Vysya Bank in India
◼ Wholesale Banking
◼ Wholesale and Retail Banking
◼ Alliance Banking
ING is strongly committed to sustainability20 year track record in sustainability
First ESR policy Launch of Business
Principles
First Sustainability report
Creation of ING Groenbank
Launch of
Sustainability
Equity Fund
Partnership with
UNICEF
Start carbon
offsetting
Sustainability
targets
Start of Sustainable Lending Team
1997 199919981996 2000 2005 2007 2010 2012 2014
Sustainability embedded in strategy and purpose
2015
ING issues own Green Bond
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Sustainability direction supported by
• Sourcing renewable energy
• Operating carbon neutral
• Integrating sustainable procurement
• Offering simple and easy products and services
• Supporting customer decisions
• Creating societal impact
• Client assessment
• Publicly disclosed environmental risk framework
• Applied to business globally
• Creatingawareness
• Accelerating sustainable business innovation
• Developing new (sustainable) business models
Environmental and social standards
Sustainable business
Financially empowering customers
Our own transition & &Supporting clients’ transition to sustainable business
Our CEO’s commitment to sustainability
Companies that address climate change and resource scarcity, companies that make sustainable transitions: they will be the winners of tomorrow’s economy.
And we want to back those winners!
–Ralph Hamers
CEO of ING Group
2016
Rated as the most sustainable bank
2017
Introduction of Sustainability Improvement Loan
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The clear need for sustainable businessEnvironmental challenges require businesses to act
Climate change Resource scarcity Water distress
• Melting of ice and the rising of theseas results in flooding and erosion ofcoastal and low lying areas.
• Extreme weather causing floods anddecreasing water quality.
• Globally effecting all regions, bothrural and urban.
• Introducing risks for human health,society, economy and wildlife.
“It takes communities, cities, states, industry, business and everyday people…
… to transform high-level decisions into real-world action.”
Patricia Espinosa, UNFCCC Executive Secretary, COP23
By 2050, the global population is expected to reach 9 billion—…
… increasing pressure not only on Earth’s natural resources, but also on many of the world’s most environmentally sensitive regions WWF, 2017
1,5x
4x
2,5x
Current resource consumption compared to the earth’s regenerative capacity differs by region
If no changes are made, …
• Projected 2% annual demand growthfor freshwater will lead to seriousconstraints.
• One out of two countries is prone towater stress.
• Flood-prone zones need betterprotection.
…global water demand is forecasted to outpace the sustainablewater supply in 2040 by 35%.. ING, 2017
Project financiering in general
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Overview of different financing structures
Structure Pros Cons
Balance sheet financing
• Flexibility of funding
• Limited due diligence requirements
• Straightforward documentation, quick execution
• Corporate terms, covenants and pricing
• Shorter tenor, refinancing risk with owners
• All debt raised on balance sheet of owners
• Project risk remains entirely with the owners
Project financing
• Long tenors potentially up to the tenor of the off-take agreements possible
• Higher leverage possible
• Inclusion of possibly cheaper EIB/EBRD funding and ECA cover
• Stringent due diligence requirements
• Stricter on going monitoring and debt covenants
• Longer execution time of 6-9 months
• Higher cost of debt
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Typical project structure
• A project has a number of phases:
• Development
• Construction
• Operation
• During the development phase the project developer seeks an appropriate site and obtains permitting, land leases and (specifically for wind projects) performs a wind measurement campaign
• Funding (non-recourse) during the construction phase is received from the investors and the banks to pay for the various construction contracts
• Once the construction is complete, the operational phase starts. The revenues from the PPA will pay for the repayment of the loans and if available dividends to the shareholders
Typical project structure
OpCo
Investor A Investor n
Lenders
Construction
O&M
Permits and Land
Grid Connection
PPA
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Contracts
Shareholders and Equity Subscription Agreement
• Implements the corporate governance amongst the shareholders and the funding arrangements
Finance Agreements
• Implements the commercial, reporting and security agreements with the financing banks
Construction Agreements
• Allocates work packages to the construction contractors, often project finance banks require direct agreements with contractors
Long Term Maintenance and Project Management Agreement
• Retains and incentives the contractor to perform O&M services in the most cost effective manner
Permits and Land leases
• Outlines the responsibilities of the project manager during construction and operating phase
Grid Connection Agreement
• Secures the grid access of the project in a timely fashion
Power Purchase Agreement (“PPA”)
• Standard agreement with a buyer of the generated electricity
OpCo
Investor A Investor n
Lenders
Construction
O&M
Permits and Land
Grid Connection
PPA
Financing documents and Project documents
Pro
ject
Do
cum
en
ts
Financing Documents
Case Study Drijvend Zonnepark Lingewaard
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Financing structure Drijvend Zonnepark Lingewaard
Analysing the business case for Drijvend Zonnepark Lingewaard
Capex
PV panels
Inverters
Floatingstructure
GRID connection
Financing costs
Contingencies
Opex
O&M fees
Insurance
Surface lease
Assetmanagement
GRID connection
WOZ
Revenues
Irradiation
SDE+
PPA
Analysing the business case for Drijvend Zonnepark Lingewaard
• Overall several +/-, conclusion per business case may differ• Prices floaters is expected to come down• Water based solar PV installations require more and periodic cleaning• SDE+ is capped at 950 FLH• Many of the other points will be location specific
• More uncertainty given that:• Permitting process• Legal framework for taking security is not entirely clear (water surface)• Technically more complex
• But in the case of Lingewaard, all things came together!
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