Back stop of performance guarantees in solar and storage

Transcription

1 2 Back stop of performance guarantees in solar and storage Dr. Ronald Sastrawan Green Tech Solutions Special Enterprise Risks Corporate Insurance Partner

2 Content 1. Green Tech Solutions within Munich Re 2. Project revenue: Solar and Solar & Storage 3. Long term performance guarantees 4. Back stop of performance guarantees 5. Conclusion 2

3 Green Tech Solutions within Munich Re the world s largest reinsurer s financial strength for a greener world Munich Re (Group) World s largest reinsurer by premium volume Founded 1880 Revenue 2015: 50.4bn Munich Re (Group): Reinsurance, Primary Insurance, Health and Asset Management approx. 43,000 employees Group Results bn 3.2 bn 3.3 bn 3.2 bn Rating A.M Best A+ (Superior) stable Fitch AA (Very Strong) stable Moody s Aa3 (Excellent) stable S&P AA- (Very Strong) stable 3

4 Project revenue: Solar and Solar & Storage Solar Irradiation of the sun Performance of the solar park Feed-in-Tariff / PPA Revenue 4

5 Project revenue: Solar and Solar & Storage Solar Irradiation of the sun Performance of the solar park Feed-in-Tariff / PPA Politics: Guaranteed longterm FiT Revenue 5

6 Project revenue: Solar and Solar & Storage Solar Irradiation of the sun Performance of the solar park 25 years performance guarantee by Feed-in-Tariff / PPA Politics: Guaranteed longterm FiT Revenue 6

7 Project revenue: Solar and Solar & Storage Solar Solar & Storage Irradiation of the sun Irradiation of the sun Performance of the solar park Feed-in-Tariff / PPA 25 years performance guarantee by Politics: Guaranteed longterm FiT Performance of the solar park with storage Feed-in-Tariff / PPA Peak shaving Frequency regulation Night time balancing... Revenue Revenue 7

8 Project revenue: Solar and Solar & Storage Solar Solar & Storage Irradiation of the sun Irradiation of the sun Performance of the solar park 25 years performance guarantee by Performance of the solar park with storage Feed-in-Tariff / PPA Politics: Guaranteed longterm FiT Complex business case with multiple revenue streams Feed-in-Tariff / PPA Peak shaving Frequency regulation Night time balancing... Revenue Revenue 8

9 Project revenue: Solar and Solar & Storage Solar Solar & Storage Irradiation of the sun Irradiation of the sun Performance of the solar park 25 years performance guarantee by Less experience with long-term performance of energy storage Performance of the solar park with storage Feed-in-Tariff / PPA Politics: Guaranteed longterm FiT Complex business case with multiple revenue streams Feed-in-Tariff / PPA Peak shaving Frequency regulation Night time balancing... Revenue Revenue 9

10 Long-term performance guarantees: Solar and Solar & Storage Solar Percentage of nominal module power Standard 25 years PV module performance warranty 100.0% guaranteed performance 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% Year Industry standard has evolved over years 10

11 Long-term performance guarantees: Solar and Solar & Storage Solar Energy Storage System (ESS) Percentage of nominal module power Standard 25 years PV module performance warranty 100.0% guaranteed performance 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% Year Percentage of nominal capacity 100% 90% 80% 70% 60% 50% 40% No standard exists for ESS performance warranty - guaranteed period? - years or cycles? - guaranteed level? - constant or linear? Year Industry standard has evolved over years Industry standard still has to evolve Defined conditions: DoD, C-rate, Temperature, Certain standards are evolving in e-mobility sector 11

12 Performance warranty risk for equipment Sponsor Equity Bank Debt SPV Solar & Storage Park Owner EPC O&M Performance Warranties (+ Long Term Service Contract) PV module ESS 12

13 Performance warranty risk for equipment Sponsor Equity Bank Debt SPV Solar & Storage Park Owner EPC O&M Standard cover in the PV industry Performance Warranties (+ Long Term Service Contract) Balance Sheet Protection by PV Performance Warranty Insurance PV module ESS 13

14 Performance warranty risk for equipment Sponsor Equity Bank Debt SPV Solar & Storage Park Owner EPC O&M Standard cover in the PV industry Performance Warranties (+ Long Term Service Contract) First cover will now be issued in e-mobility sector Balance Sheet Protection by PV Performance Warranty Insurance PV module ESS Balance Sheet Protection by ESS Performance Warranty Insurance 14

15 Insolvency risk of warranty provider Sponsor Equity Bank Debt SPV Solar & Storage Park Owner EPC O&M PV module ESS 15

16 Insolvency risk of warranty provider Sponsor Equity Bank Debt Strong Insurance as Back-Stop of Supplier s PV Performance Warranty SPV Solar & Storage Park Owner Standard cover in Japan Option Cover > 10 MWp Option Cover Light < 10 MWp EPC O&M PV module ESS 16

17 Insolvency risk of warranty provider Sponsor Equity Bank Debt Strong Insurance as Back-Stop of Supplier s PV Performance Warranty SPV Solar & Storage Park Owner Strong Insurance as Back-Stop of Supplier s ESS Performance Warranty Standard cover in Japan Option Cover > 10 MWp Option Cover Light < 10 MWp EPC O&M Tailor-made for specific technologies Several covers have been issued in the fuel-cell sector PV module ESS 17

18 Risk assessment of technology Sponsor Equity Bank Debt SPV Solar & Storage Park Owner EPC O&M Standardized Risk Assessment e.g. VDE Quality Tested enables access to insurance PV module ESS Industry is still lacking standards such as IEC in solar 18

19 Case Study: Back-stop by insurance vs financial reserve Assumption 1: Risk is mitigated by either Back-Stop by Insurance or Financial Reserve Assumption 2: No excessive degradation or serial defect occurs Module value USD 50,000,000 Loan tenor in years 15 Reserve requirements 5% Insurance premium 2% Tax rate 25% Expected IRR (leveraged, after tax) 8% With Financial Reserve Year Year 0 15 Reserve account -USD 2,500,000 USD 0 With Back-Stop by Munich Re Year Year 0 15 Premium after tax effect -USD 750,000 -USD 750,000 Gained opportunity USD 1,750,000 USD 2,100,000 Munich Re vs Reserve after tenor USD 1,350,000 19

20 Case Study: Back-stop by insurance vs financial reserve Assumption 1: Risk is mitigated by either Back-Stop by Insurance or Financial Reserve Assumption 2: No excessive degradation or serial defect occurs Module value USD 50,000,000 Loan tenor in years 15 Reserve requirements 5% Insurance premium 2% Tax rate 25% Expected IRR (leveraged, after tax) 8% With Financial Reserve Year Year 0 15 Reserve account -USD 2,500,000 USD 0 With Back-Stop by Munich Re Year Year 0 15 Premium after tax effect -USD 750,000 -USD 750,000 Gained opportunity USD 1,750,000 USD 2,100,000 Munich Re vs Reserve after tenor USD 1,350,000 Additional advantages 1. Back-Stop by Munich Re enables smooth sales or refinancing of the project, in particular if the equipment manufacturer has become at risk. 2. In case of excessive degradation or serial defect, the project owner and lender will receive significantly higher indemnity than Reserve. 20

21 Back stop of performance guarantees in solar and storage Back stop of performance guarantees in solar and storage Most cost-effective and powerful protection against PV module or ESS manufacturer s default compared to other risk mitigation solutions Very strong policy: No deductibles and policy limit up to 100% of equipments s purchase price Long-term policy, not-cancellable for up to 15 years Enables smooth sales or refinancing of the project Improvement of bankability Facilitating financing: Available during financing phase Business-enabling for new technologies 21

22 Thank you very much for your attention! 9 th Asia Solar Energy Forum March, Beijing 22