Tendering of new offshore wind parks in the Netherlands 12 June 2015 - - PowerPoint PPT Presentation

▶
tendering of new offshore wind parks in the netherlands
SMART_READER_LITE
LIVE PREVIEW

Tendering of new offshore wind parks in the Netherlands 12 June 2015 - - PowerPoint PPT Presentation

Aug 21, 2022 226 likes •438 views

Tendering of new offshore wind parks in the Netherlands 12 June 2015 David Orobio de Castro, Ingmar de Groot Contents 1. Introduction 2. Regulatory framework in a nutshell 3. SDE+ subsidy 4. Tender planning and risk allocation 5.

slide-1
SLIDE 1

Tendering of new offshore wind parks in the Netherlands

12 June 2015 David Orobio de Castro, Ingmar de Groot

slide-2
SLIDE 2

Tendering of the new offshore wind parks 2

Contents

1. Introduction 2. Regulatory framework in a nutshell 3. SDE+ subsidy 4. Tender planning and risk allocation 5. Infrastructure tenders 6. Comparison between infrastructure and offshore wind park tenders

slide-3
SLIDE 3

Tendering of the new offshore wind parks 3

  • 1. Introduction

 Netherlands: long tradition in wind power. Recent projects include:

  • Egmond aan Zee

(completed: 2006) 108 MW

  • Prinses Amalia

(completed: 2008) 120 MW

  • Luchterduinen

(completed: 2015) 129 MW

  • Gemini

(completed: 2017) 600 MW  New investments due in the Netherlands. Dutch Energy Agreement:

  • 2015-2019: 5 x 700 MW (10 x 350 MW)
  • Target: 40% cost reduction through efficiency
  • State to commission the building of an offshore grid

 Novelty:

  • State determines location and prepares spatial planning
  • Competitive tendering for subsidy and right to build and operate windpark
slide-4
SLIDE 4

Tendering of the new offshore wind parks 4

 Site decision (Kavelbesluit)

  • locations for the offshore windparks
  • location-specific requirements for construction and operation of the windparks

 Wind permit (Windvergunning)

  • based on site decision
  • to be granted only to the winner of the subsidy tender
  • provides the exclusive right to build and operate the wind park

 SDE+ subsidy (Stimuleringsregeling Duurzame Energieproductie)

  • subsidy per kilowatt-hour actually delivered to the grid
  • term: 15+1 year
  • mechanism to balance out peaks in energy production

 Other legislation, including Water Decree (Waterbesluit)

  • 2. Regulatory framework in a nutshell
slide-5
SLIDE 5

Tendering of the new offshore wind parks 5

  • 3. SDE+ subsidy (i)
slide-6
SLIDE 6

Tendering of the new offshore wind parks 6

 No prequalification  Pursuant to its most recent annual report, the applicants’ equity capital (eigen vermogen) must be at least 10 % of the total investment cost of the wind park  Subsidy applications:

  • must be submitted before the later of

(a) 31 March 2016 ; and (b) the fifth Thursday following the date the Regulation on Offshore Wind Energy 2015 entered into force

  • may be filed for Borssele I, Borssele II and/or Borssele I + II
  • must be between 351 MW (minus capacity of smallest turbine) and 380 MW
  • must be below the maximum tender amount set by the government
  • 3. SDE+ subsidy (ii)
slide-7
SLIDE 7

Tendering of the new offshore wind parks 7

 Pursuant to letter by Minister of Economic Affairs to House of Representatives (dated 19 May 2015):  Relevant amounts for Borssele I and II (i.e. the sites that will be put to tender in 2015)

  • maximum tender amount:

12.4 ct/kWh

  • base electricity price:

2.9 ct/kWh  Maximum tender amounts for other windpark zones (i.e. the sites that will be put to tender in 2016-2019)

  • Borssele (2016):

11.975 ct/kWh

  • South Holland Coast (2017):

10.75 ct/kWh

  • South Holland Coast (2018):

10.325 ct/kWh

  • North Holland Coast (2019):

10.0 ct/kWh

  • 2. SDE+ subsidy (iii)
slide-8
SLIDE 8

Tendering of the new offshore wind parks 8

 Subsidy grant will be subject to the condition precedent that the preferred bidder:

  • provides a € 10 mln bank guarantee; and
  • enters into Realisation Agreement:
  • obligation to commence operation of the windpark within 5 years from the date of the

subsidy grant

  • obligation to provide a € 35 mln bank guarantee
  • penalties if windpark does not become operational in time
  • if site decision is amended post-appointment of preferred bidder, the latter may

cancel the subsidy grant without incurring a penalty

  • preferred bidder to waive any claims in connection with the research reports

(i.e. site data) provided by the State

  • commencement of construction before site decision has become irrevocable:

applicants’ risk

  • 3. SDE+ subsidy (iv)
slide-9
SLIDE 9

Tendering of the new offshore wind parks 9

 Evaluation of the tender (pass or fail): is it sufficiently feasible?

  • applicant’s equity capital
  • probability of timely construction
  • economic feasibility: base case
  • technical feasibility: no requirements specified (Minister expects that the required bank

guarantees will result in the submission of serious applications only)  Lowest price wins

  • 3. SDE+ subsidy (v)
slide-10
SLIDE 10

Tendering of the new offshore wind parks 10

  • 3. SDE+ subsidy (vi)

Risk Comment No prequalification Inefficient from a market’s perspective. The applicant’s equity capital 10% equity capital requirement is not a proper indicator of the applicant’s financial solidity. Unclear how equity capital must be calculated in case of a group company or joint venture. Furthermore, joint ventures are generally formed for a specific tender and will not yet have any annual report at the time of the application. Application period A period of 4 months is too short, let alone a period of 5 weeks. Minister: time limits are feasible because the applicants will already have important project information at their disposal (e.g. seabed surveys). No support letters from financiers required; short application period; only sanction if preferred tenderer withdraws is € 10 mln penalty Opens the door to offer a low tender amount for opportunistic reasons.

slide-11
SLIDE 11

Tendering of the new offshore wind parks 11

 Borssele tender: interested parties should participate in the consultation on the draft SDE+ subsidy decision and the draft site decisions. Consultation to start in 2nd or 3rd quarter of 2015.

  • 4. Tender planning and risk allocation (i)

2015 Q1/Q2 Draft SDE+ subsidy decision open for consultation Q2 Draft site decisions regarding Borssele I and II open for consultation Q3 Draft site decisions formally filed for public inspection Q4 Publication of (i) SDE+ subsidy decision and (ii) site decisions Q4 Anticipated start SDE+ subsidy tender 2016 Q1 Application for SDE+ subsidy up to 31 March 2016 or 5 weeks from entry into force of the Regulation on Offshore Wind Energy 2015 Q2 Appointment winner of the subsidy tender

slide-12
SLIDE 12

Tendering of the new offshore wind parks 12

 Allocation of major risks

  • 4. Tender planning and risk allocation (ii)

Risk Comment Offshore grid is not ready when windpark is ready Legislation is being prepared. The State will provide for compensation to operator of the windpark in case of delays. Compensation to include loss of income up to a certain level. Site decision is suspended or nullified Site decision should be irrevocable when bids are made. However, in the Borssele tender this will probably not be the case. Objections may lead to a change in

  • requirements. This may necessitate a change to the bid.

Wind permit or SDE+ subsidy grant is suspended or nullified Wind permit and subsidy grant: normal appeal procedures apply. Risk of delays in case

  • f appeals against outcome of the tender by losing bidders.

Site data (geology, geomorphology, archaeology, wind) incorrect Reports will be prepared at the instruction of the State. The State's current position is that it will not accept liability for errors / incompleteness in these reports. UXO's (unexploded ordnance) The presence of UXO’s may cause substantial delay. Pursuant to desktop studies, this risk is limited. The State will not commission any further investigations.

slide-13
SLIDE 13

Tendering of the new offshore wind parks 13

 Allocation of major risks

* We expect the legislator to increase the penalty for late start of the operation to € 3.5 mln per month with a maximum of € 35 mln.

  • 4. Tender planning and risk allocation (iii)

Risk Comment Security over wind permit, subsidy? New legislation provides that both the wind permit and subsidy are transferable, subject to consent from the Minister. Hence, both the wind permit and subsidy can be pledged (verpand) if the Minister cooperates. Obligation to commence operation within 5-6 years Any delay (or aggregate of delays) is at the expense and risk of the preferred bidder, regardless of the cause. The penalty for a late start of operation

  • f the windpark amounts to € 2.5 mln

per month, capped at € 25 mln* Additional interest and the reduction of the subsidy period provide sufficient incentive to start operation of the windpark in good time. There’s no use in adding a penalty. Distribution of risks Risks not dealt with include:

  • Changes to the site decision
  • Changes in law
  • Force majeure
slide-14
SLIDE 14

Tendering of the new offshore wind parks 14

 Dutch infrastructure and accommodation projects (PPP/DBFM(O)):

  • to date: the Dutch government has tendered over 20 projects (total value over € 6 bn)
  • recent projects include:
  • Zaanstad prison PPP project

(€ 210 M)

  • A12 roads PPP project

(€ 120 M)

  • SAA A9 PPP roads project

(€ 600 M)

  • IJmuiden Sea locks PPP project

(€ 850 M)

  • until 2020: 19 projects in pipeline
  • 5. Infrastructure tenders (i)
slide-15
SLIDE 15

Tendering of the new offshore wind parks 15

  • 5. Infrastructure tenders (ii)

Contractor (“SPV”) Bank Shareholders Subcontractor (“DBMO-CO”) Authority bank debt equity subordinated debt Parent Company Guarantees Contract structure ‘non-recourse’ or ‘limited recours’ financing Shareholders

slide-16
SLIDE 16

Tendering of the new offshore wind parks 16

 Characteristics of non-recourse or limited recourse financing:

  • financing and repayment of loans solely based on (future) cash flow of the project
  • lenders have no other recourse than the assets of the project company
  • Risk allocation is of the essence
  • 5. Infrastructure tenders (iii)

Construction Exploitation Bank Debt

X = t y = €

slide-17
SLIDE 17

Tendering of the new offshore wind parks 17

 ‘Committed tenders’ means the requirement for a bidder to submit a letter of a financier with a commitment to finance the project at bid submission.  ‘Committed tenders' have major impact on the structuring of the tender procedures and preparations of the bid/application  ‘Committed tenders' in Dutch infrastructure projects:

  • unconditional offer, no negotiations with the Authority following bid submission
  • lenders commit to fund the project prior to bid submission (subject to final credit approval and

satisfactory documentation)

  • lenders' due diligence (technical, legal, tax), prior to bid submission
  • all major subcontracts commercially agreed upon, prior to bid submission (possibly heads of

terms)

  • 5. Infrastructure tenders (iv)
slide-18
SLIDE 18

Tendering of the new offshore wind parks

  • 6. Comparison between infrastructure and offshore wind park tenders

Start tender 01-12-2015 01-12-2015 01-05-2016 01-12-2016 01-05-2017 Start tender OFFSHORE WIND PARK TENDER BORSSELE FICTITIOUS INFRASTRUCTURE TENDER Submission subsidy request 31-03-2016 Appointment winner subsidy tender 01-05-2016 01-05-2017 Ultimate date: commencement of subsidy Wind park operational? Ultimate date FC Bank guarantee of € 10m Bank guarantee of € 35m construction phase 12 months 5 years 5 months 7 months 4 months 1 months

  • perational phase

Shortlisting x >3 Bid submission Appointment Preferred bidder Financial Close Availability Date construction phase

  • perational phase
slide-19
SLIDE 19

www.stibbe.com

Amsterdam

Stibbetoren Strawinskylaan 2001 1077 ZZ Amsterdam The Netherlands T +31 20 546 06 06 F +31 20 546 01 23 amsterdam@stibbe.com

Brussels

Central Plaza Loksumstraat 25 BE-1000 Brussels Belgium T +32 2 533 52 11 F +32 2 533 52 12 brussels@stibbe.com

Luxembourg

Rue Jean Monnet 6 2180 Luxembourg Grand Duchy of Luxembourg T +352 26 61 81 F +352 26 61 82 luxembourg@stibbe.com

Dubai

Dubai International Financial Centre Gate Village 10 Level 3 Unit 12 P.O. Box 506912 Dubai UAE T +971 4 401 92 45 F +971 4 401 99 91 dubai@stibbe.com

Hong Kong

Hutchison House 10/F, Suite 1008-1009 10 Harcourt Road Central Hong Kong T +852 2537 0931 F +852 2537 0939 hongkong@stibbe.com

London

Exchange House Primrose Street London EC2A 2ST United Kingdom T +44 20 74 66 63 00 F +44 20 74 66 63 11 london@stibbe.com

New York

489 Fifth Avenue, 32nd floor New York, NY 10017 USA T +1 212 972 40 00 F +1 212 972 49 29 newyork@stibbe.com