Evolving Times: Developing 2 NE Wind Projects G O R D O N D E A N - - PowerPoint PPT Presentation

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Palmer Capital C O R P O R A T I O N Evolving Times: Developing 2 NE Wind Projects G O R D O N D E A N E , P R E S I D E N T P A L M E R C A P I T A L C O R P O R A T I O N July 8, 2015 Mass Wind Working Group 1 Palmer Capital C O R P

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SLIDE 1

Evolving Times: Developing 2 NE Wind Projects

G O R D O N D E A N E , P R E S I D E N T P A L M E R C A P I T A L C O R P O R A T I O N

July 8, 2015 Mass Wind Working Group 1

Palmer Capital

C O R P O R A T I O N

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SLIDE 2

Palmer Capital

  • Developer and Investor in Energy for over 30 Years

History

  • $2.2 Billion in Energy Project Financings

Track Record

  • Landfill Gas, Synfuel, Biomass, PV Solar, Community

Wind and will look at others

Technologies

  • Smaller, Similar Projects

Portfolio Approach

  • Chicago, Cohasset, New York, Los Angeles, Seattle

Offices

  • From Maine to Hawaii

National Footprint

2

Palmer Capital

C O R P O R A T I O N

July 8, 2015 Mass Wind Working Group

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SLIDE 3

Community Based Renewables

Conce cept pt

  • Commercial-scale renewable projects that provide benefits to host community

Small aller er Capacit acity

  • 200 kW – 20 MW

Comm mmunit nity y Involv lvem ement ent

  • Direct: Municipal Public Works and Utility Departments, Co-op, Local Businesses
  • Lease of Public or Private Land
  • Power Purchase Agreement (PPA) with Purchase Option – Sales to Municipality, Business, Utility

Comm mmuni nity y Benef nefits ts

  • Income from Site Lease and Property Taxes/PILOT
  • Energy Savings and/or Long-term Price Stability
  • Environmental and Public Relations Benefits

Why Pa Palme mer (or

  • r any privat

ate e develo elope per) r)

  • Experienced and Specialize in Field
  • Not Risking Limited Public Capital
  • Ability to Pursue Available Incentives to Improve Project’s Economics

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Palmer Capital

C O R P O R A T I O N

July 8, 2015 Mass Wind Working Group

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SLIDE 4

Project Development: A Snap Shot

  • Progressive Local and State Policies
  • Low Interest Rates
  • Mature Technologies
  • Evolving Financing Models

The Good

  • National Project Finance Banks: Bigger is Better
  • Regional Banks: Lack of Energy Experience
  • Tax Equity  YieldCos

The Bad

  • Inconsistent Local, State and Federal Policies
  • Incentive Uncertainty

The Ugly

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Palmer Capital

C O R P O R A T I O N

July 8, 2015 Mass Wind Working Group

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SLIDE 5

Financing: Evolution

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Palmer Capital

C O R P O R A T I O N

Pre-Recession

  • Multiple tax-equity

partnerships

  • Production based

tax credits (PTC)

  • Utilized

partnership-flip model

  • Emergence of tax

credit safe-harbor

Recession

  • Tax equity dried up
  • 1603 Grant in lieu
  • f PTC or ITC
  • CREBs & QECBs
  • Palmer = TE for

projects

  • Commencement of

Construction vs Placed in Service

Post-Recession

  • Tax credits expired

but possible extension with phase out for PTC?

  • Start Construction

safe-harbor relaxed

  • Tax equity

returning

  • Emergence of

YieldCos

July 8, 2015 Mass Wind Working Group

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SLIDE 6

Two Projects: Bird’s Eye View

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Palmer Capital

C O R P O R A T I O N

Item em Smaller aller Larger ger

Turbine 2 x Sinovel 1.5 MW 5 x GE 2.85 MW Landowner Town of Fairhaven, MA Private Location Waste Water Treatment Facility Jericho Mountain, Berlin, NH Project Cost Almost $9 million Over $30 million Anticipated Output 7.2 MM kWh 31.8 MM kWh “Local” Power Consumption 100% 70% Power and RECs 100% of Power & RECs under long-term contracts 100% of Power & RECs under long-term contracts Power Price Risk Project shares a portion of NMC risk with Town Potential negative pricing

July 8, 2015 Mass Wind Working Group

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SLIDE 7

Two Projects: The Nitty Gritty

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Palmer Capital

C O R P O R A T I O N

Smaller

  • Debt from one local bank
  • $3.04 MM QECBs
  • $3.28 MM Term Loan
  • $2.10 MM Bridge Loan
  • Bridge Loan - paid off from

1603 Grant

  • QECB and Conventional Loan –

Interest only for 1-Year then 15- year amortization schedule

  • Equity -- Balance of Costs

Larger

  • Debt from two local banks
  • $4.095 MM QECB
  • $13 MM Term Loan
  • $13.8 MM Bridge Loan
  • QECB and Term Loan – Interest
  • nly for 18 months then 15-

year amortization schedule

  • $1 MM NHPUC Grant
  • Equity – Pays off Bridge Loan

and Balance of Costs

July 8, 2015 Mass Wind Working Group

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SLIDE 8

Qualified Energy Conservation Bonds

  • Increased national bond cap by $2.4 Billion to $3.2 Billion
  • Capital expenditures for renewables, efficiency, mass transit,

demonstrations, green communities, education

American Recovery and Reinvestment Act of 2009

  • Interest Rate Subsidy: 70% of Federal Tax Credit Bond Rate
  • n Bond Sale Date
  • QECB issuer pays taxable coupon and receives quarterly

rebate in arrears from U.S. Treasury

Taxable Direct Subsidy Bonds

  • Formula based on population of states with sub allocation to

communities

  • Up to 30% of allocation allowed for private activity projects
  • MA -- $67.41 MM; NH -- $13.65 MM

Allocation

  • Award Determined by Department of Energy Resources
  • Issued and Administered by each state’s respective bond

finance agency

  • Bond financing adds additional complexity and cost

Process

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Palmer Capital

C O R P O R A T I O N

July 8, 2015 Mass Wind Working Group

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SLIDE 9

NH PUC Grant

  • Funded through Alternative Compliance Payments, RPS

State Level Incentive

  • Taxable grant (seen as income to project)

Taxes

  • Capital expenditures for renewables (REC generating

projects)

Use of Proceeds

  • Available funds vary with ACP -- $1-19 MM

Funding Level

  • Annual competitive solicitation

Process

9

Palmer Capital

C O R P O R A T I O N

July 8, 2015 Mass Wind Working Group

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SLIDE 10

Two Projects: Step by Step

10

Palmer Capital

C O R P O R A T I O N

Smaller

  • 2004 – Town Passes Wind Bylaw
  • 2006 -- Public RFP
  • Mid-2007 –Town Meeting Approval, Sign

Lease–20 years with Two 5-Year Options

  • 2007/08 -- Design & Permitting; NIMBYs

appear

  • July 2008 – Green Communities Act
  • December 2009 – NSTAR Net Metering Tariff

is Finalized

  • 2010 – Rewrite PPA Provisions to Be

Compatible with Net Metering Rules; Pursue Interconnection Options

  • 2011 – Financing and commence

construction; lawsuit

  • 2012 – Commence operations; more

lawsuits

  • 2013 – Election and noise curtailment plan
  • 2014 – Won last lawsuit

Larger

  • 2011 – Meet landowner, commence

construction to preserve 1603 grant for 3 MW project

  • 2012-- Interconnection requirement requires

a larger project to amortize costs; project size increases to 8.55 MW

  • 2012-13 – Permitting larger project; local

and NH Site Evaluation Committee

  • Late 2013 – IMBY -- adjacent landowner

wants expanded project; commence construction on Phase 1

  • 2014 – Permitting, design, construction,

debt financing for 14.25 MW; all foundations installed prior to 1/1/2015

  • 2015 – Complete construction & financing
  • 4th Q 2015 –Commercial Operation

July 8, 2015 Mass Wind Working Group

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SLIDE 11

Two Projects: Lessons Learned

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Palmer Capital

C O R P O R A T I O N

Smaller

  • Projects benefit from forward thinking

and supportive local leaders

  • Majority of residents are supportive
  • Demonstrated via election and

Friends of Fairhaven Wind

  • Similarly demonstrated in Scituate
  • Home rule provides varying results
  • Opposition can organize and does not

care about real facts

  • MA DEP noise policy is biased against

wind energy and unpredictable

  • Be prepared to spend money on

lawyers

  • Small project financing is difficult

Larger

  • Projects benefit from forward thinking

and supportive local leaders

  • Helps to be rural
  • State level review provides a means of

bringing expertise to the table

  • Opposition less likely in areas already

hosting power plants and other infrastructure

  • Opposition needs ring leaders to stir

the pot

  • Neighbors can be (overly) friendly
  • Even somewhat larger project

financing is difficult

  • YieldCo approach is dominant

July 8, 2015 Mass Wind Working Group

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SLIDE 12

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Palmer Capital

C O R P O R A T I O N

Successful But Much Room for Improvement

  • MA needs

ds predictable ictable noise se polic icy y that at does not discrimi criminat ate e again inst st wind energy rgy

  • MA, like

e NH NH, , should uld provid vide e more re sup uppor

  • rt

t to local l bo boards ds for factual ual permitti mitting g revie iew

  • Net

et met eter erin ing g needs ds to be ext xtended nded, , at least ast for munic icipali ipalitie ties

  • Need bett

etter er recogni

  • gnition

tion of all benefit its from m renewable ble energy rgy vs. costs ts of fossil il fuels

  • Unc

Uncer erta tainties inties at Federal, ral, stat ate e and local l levels ls make e develo lopm pment nt risky ky given en the timelines imelines

July 8, 2015 Mass Wind Working Group

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SLIDE 13

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Palmer Capital

C O R P O R A T I O N

Bu But t th the F e Futu uture re Is s Sti till ll Br Bright ght

Pa Palmer er Capi pital tal

July 8, 2015 Mass Wind Working Group

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SLIDE 14

Thank You

Gordon L. Deane Preside ident nt Pa Palmer r Capital ital 13 Elm Street, et, Suite 200 Cohass sset et, , MA 02025 25 Phone: e: 781-383 383-3200 200 Email: l: GDeane@pal @palmcap.co mcap.com

www.palm palmcap.c ap.com

  • m

14

Palmer Capital

C O R P O R A T I O N

July 8, 2015 Mass Wind Working Group

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SLIDE 15

QU QUEST STION IONS? S?

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Palmer Capital

C O R P O R A T I O N

July 8, 2015 Mass Wind Working Group