Cat Power Finance Biogas Projects A Lenders Perspective Cat Power - - PowerPoint PPT Presentation

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Cat Power Finance Biogas Projects – A Lender’s Perspective

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Agenda:

• 1. Krabi Waste to Energy
• 2. Typical biogas commercial structures
• 3. Key financing questions
• 4. Bank due diligence – Process and

Requirements

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Krabi Waste to Energy – CPF’s 1st project financed biogas project

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Case Study – Krabi Waste to Energy

 CPF signed loan documents with project company May 2014  Palm oil mill that generates 500 cbm/day of POME wastewater  In-ground biodigester reactor  2.4MW gross of Cat engines  Total capital cost: About US$5MM / 150 MTHB

Financing Terms:

 56% project financed loan facility US$2.8M / 84 MTHB  8 year term, Thai fixed rate  First priority security position in all project assets and pledge of shares  Assignment of contracts to lender  No corporate guarantee from shareholders

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Case Study – Krabi Waste to Energy

 Project took 3.5 years to reach financial close  CPF was in the deal throughout; providing financial advisory and

supporting developer in stakeholder discussions

 Review of key project agreements for project financeability  Review of financial model; finalizing bank base case  Drafting of project finance loan agreements, assignment agreements,

pledge of shares – CPF now has a reference list of documents

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Case Study – Krabi Waste to Energy

Project Financing Terms Explanation

56% project financed loan facility US$2.8M / 84MTHB Lender financed 56% of the total project cost, including soft costs, civil works, Cat engines, biodigester and scrubber 8 year term, Thai fixed rate Lender offered Thai Baht fixed rate loan over 8 years First priority security position in all project assets and pledge of shares Lenders loan is senior debt; If required, CPF can exercise the pledge of shares to sell the shares of the project company to realize value, or to take over shareholder responsibilities Assignment of contracts to lender CPF can “step-into” any of the key project agreements to become the counterparty in that specific agreement No corporate guarantee from shareholders The shareholders are not required to put up corporate guarantees during the term of the loan; the loan will be paid purely from the cashflows of the project

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Typical biogas commercial structures

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COMMON KEY CONTRACTUAL RELATIONSHIPS: TYPE 1

Assets: Biogas Digester, Mill Assets and Power Plant Government Utility Power Purchase Agreement Govt approvals, environmental permits Power Plant O&M Co Power Plant O&M Agreement EPC Contractor Project Company EPC Contract

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COMMON KEY CONTRACTUAL RELATIONSHIPS: TYPE 2

Assets: Biogas Digester and Power Plant Government Utility Power Purchase Agreement Govt approvals, environmental permits Power Plant O&M Co Power Plant O&M Agreement Palm Oil Mill Host Agreement EPC Contractor Project Company EPC Contract

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COMMON KEY CONTRACTUAL RELATIONSHIPS: TYPE 3

PowerCo Government Utility Power Purchase Agreement Assets: *Power Plant Biogas Supply Agreement WasteCo Assets: Biogas Digester Govt approvals, environmental permits Power Plant O&M Co Power Plant O&M Agreement Palm Oil Mill Host Agreement EPC Contractor Project Company

*Power plant will include any significant grid interconnect

EPC Contract

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Key Financing Questions

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Key Financing Questions

Host / Feedstock supplier Electricity Tariff Biodigester Technology Generator EPC Contractor Shareholders Operators Economic incentive to supplier High enough return to incentivize investors? Operating and financing precedents Reliability Full "Wrap" (Full performance guarantee based

• n plant output)

Strong balance sheet (Development spend & equity) Able to mobilize local labor Alternate sources of supply for project Known history of tariff Feedstock matching technology? Type of maintenace contract signed Installation / Integration experience Technical / Operating Experience Technical / Operating Experience Seasonal variability of feedstock Offtaker motivation / alternatives Safety record? Operating precedents with biogas Strong balance sheet (managing sub-contractors / posting bonds) Development experience (Financial, regulatory etc) Able to access parts and equipment Availability Known performance parameters of technology? Willing to put up performance guarantees on entire plant Relationships with other parts of project

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Bank Due Diligence – Biogas Projects

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Documents Required & Why

Document Reason Information Memorandum Summary document for project commercial and economic concept Financial Model Provides cashflow forecast of project; key in understanding financeability

• f project for lender

Shareholder Structure Allows lenders to understand shareholder composition of project Project Technical Concept Report Sets out technical parameters of biodigester Reference List of projects Builds out developer and EPC contractor experience with technologies Key Project Agreements Especially required in Project Finance; lenders need to review key project agreements before execution to ensure project is financeable Project Closing List Agreement between lender and developer of all documents to be delivered before first draw; Helps set expectations on timeline and deliverables Loan Agreement and Assignment Docs Form and content to be agreed between lender and developer

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Documentation – What’s needed at which point

Development begins Screening

Project Info Memo Financial Model Project Structure Shareholder Structure Docs Closing List Project Schedule

Credit Approval

Finalized Financial Model Updates from A 90% finalized Docs Closing List Project Agreements A B Loan Agmt Assignment Agmt Bonds Shareholder Resolutions Indicative offer Commitment Letter

First Draw on loan facility

C

Equity Invested

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Sample Closing List

Item Ok? Expected Completion EPC Contract √ Power Purchase Agreement 31-Dec-14 Insurance Policies √ Wastewater characterization √ BOOT Agreement √ Generation Licence √ Factory Licence √ Public Hearing 30-Sep-14 Construction Permit 15-Aug-14 Key Project Agreements Permits and Environmental Clearances

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Sample Closing List

Item Ok? Expected Completion Secured Rights of Way √ Land Title √ Shareholder resolutions √ SPV resolutions 30-Jun-14 Deed of subordination for shareholder loans √ SPV articles of association √ Loan Agreement √ Pledge of Shares √ Assignment of various crts √ Land Use Corporate Documents Financing Documents

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Any Questions?