French Overview on Renewable Energy Financing

Transcription

1 French Overview on Renewable Energy Financing Franco-German Renewable Energy Office On November the 13th, 2014

2 Agenda 1. Context: French Market Outlook 2. Renewable Energy Financing Tools 11/11/2014 2

3 Context : French market outlook Evolution of the installed capacity A steady decline of the installed capacity since 3 years Source : Commissariat Général du Développement Durable, August 2014 A recovery is expected for 2014thanksto: Wind : validation of a FIT at 82 /MWh in July and simplification of the administrative procedure Solar : construction of PV plants based on tenders set-up by the government + impact on a bonus given until April for European modules 11/11/2014 3

4 Context : French market outlook A favorable regulatory environment At European level In 2008, set-up of the Energy-Climate package for 2020, the plan : 1. Reduce greenhouse gas emissions by 20%, 2. Increase the proportion of renewable energies to 20% 3. Makeenergysavingsof20% In October 2014, set-up of a new Energy-Climate package, with 3 objectives for2030: 1. Reduce greenhouse gas emissions by 40%, 2. Increase the proportion of renewable energies to 27% 3. Makeenergysavingsof27% At French level Grenelle 1 Law in2009 : Same objectivesaseuwith the willingnesstoachieve 23% of renewable energies by 2020 Energy transition Law in 2014 (in discussion) : Same objectives as EU with the willingness to achieve 32% of renewable energies by 2030 => To date, the renewable energies represent 13% of the French energy consumption 11/11/2014 4

5 Context : French market outlook A limited development in the last decade compared to EU % of renewable energy in energy consumption 11/11/2014 Source : REN21, Renewables 2013 Global Status Report 5

6 Context : French market outlook Potential market perspective Wind Goal: 25 GWpen2020 To date : 8,6 GWp(mid 2014) Potential market : 16 GWp 10 GWponshore = MWpx 1,3m = 13bn 6 GWpoffshore = MWpx 3m = 18bn Potential market ( ) = 31bn Solar Goal : 5,4 GWp+ 800 MWp* 6 years = 10 GWp To date : 5,1 GWp(mid 2014) Potential market : 10 GWp 5,1 GWp= 4,9 GWc Potential market ( ) = 4,9 GWcx 1,20m = 5,9bn Biogas Goal : plants by 2020 To date : 200 plants Potential market : x 300 kwe= 390 MWe Potential market ( ) = 390 x 5m = 2bn Size of the market 5bn per year 1bn per year 0,3bn per year 11/11/2014 6

7 Agenda 1. Context: French Market Outlook 2. Renewable Energy Financing Tools 11/11/2014 7

8 Renewable Energy Financing Tools Overview Renewable Energy Financing Tools Traditional Financing - Project Financing - Corporate Financing Innovative Financing - Green Bonds - Crowdfunding 11/11/2014 8

9 Traditional Financing Project Financing vs Corporate Financing Key features Non-recourse financing = no warranties from the shareholders Financing based on the project profitability => Cash flow analysis Benefits Better financial structure => Investment amount no integrated in the Balance Sheet Risks only supported by the SPV => Risks limited to the equity contribution Limitations Project Financing Long time to implement Expensive costs Key features Financing with warranties from the shareholders Financing based on the Balance Sheet of the company => Financial structure analysis Benefits Fast implementation Cheaper costs Limitations Corporate Financing Unlimited exposure Incorporation in the balance sheet => Limited capacity to develop new projects 11/11/2014 9

10 Traditional Financing Legal and Financial Structuring Renewable energy transaction : Base case Equity Investors % of Financing: (average) Solar / Wind : 20% Biogas : 30% Debt Financing % of Financing: (average) Solar / Wind : 80% Biogas : 70% Special Purpose Vehicle (SPV) Secure revenues : Solar : FIT of 20 years based essentially on French tenders Wind and Biogas : FIT of 15 years 11/11/

11 Traditional Financing Legal and Financial Structuring Equity Investors Private entities (French and foreign companies) Dedicated investment funds Family Offices IPP : Independent Power Producers Public entities Caisse des Dépôts SEM (semi public companies) Debt Financing Private Banks < 5m : Local Bank financing > 20m : Project Financing from Banks based in Paris or abroad (Belgium Germany) [ 5m - 20m] : Only a few Banks focused on this size of projects Publics Banks Direct financing (BPI) Counter-guaranteed Bank (EIB) Special Purpose Vehicle (SPV) 11/11/

12 Traditional Financing Legal and Financial Structuring 1/3 Renewable energy transaction : Sophisticated case Quasi-Equity investors Equity Investors Private Financing Mezzanine Debt structured in convertible bondsor shareholder current accounts Generally on operating plants Publics Financing Subsidies (Biogas) Reimbursable advances Senior Debt Financing Special Purpose Vehicle (SPV) 11/11/

13 Traditional Financing Legal and Financial Structuring 1/3 Renewable energy transaction : Financial conditions summary Equity Investors IRR (average) 7/8% : Wind or ground-mounted PV projects 9/10% : Rooftop PV projects 15% : Biogas projects Mezzanine Debt Financing IRR : 8-10% Maturity : 5-8 years Deal Fees : 0,5%/1,0% Special Purpose Vehicle (SPV) Senior Debt Financing Interest Rate: 4,0% E3M:0,08% BankMargin:2,30%-2,70% SwapCost:1,50%(10years) Maturity : years (included a grace period of at least 6 months) Dealfees: Up-frontFees:1,0%(LeadBank)+ 0,5%(Follower Bank) AnnualFees:notalwaysthecase VAT Financing: 2,0% E1M:0,01% BankMargin:1%-2% 11/11/

14 Traditional Financing Focus on Debt Financing Key Covenants 1. DSCR : Debt Service Coverage Ratio Goal : To be sure annual cash flow generated by the project will be enough to paybacktheloan Calculation:(EBITDA Taxes)/ Debt servicing Market practice: Solar/Wind:DSCR>120% Biogas:DSCR>130% 2. DSRA : Debt Service Reserve Account Goal : To have a treasury reserve in order to pay back the loan even if the project couldn t generate enough cash flow Market practice: 6 months of the Debt servicing constituted in both ways: Directly financed in the initial investment amount Withdrawn from the first cash flow generated by the projects 11/11/

15 Traditional Financing Bank Guarantees Pledge on the shares of the SPV Pledge on the assets (PV plant, wind turbine) Mortgage on the land Assignment of EDF OA receivables under the Dailly Law mechanism Delegation of the insurance contracts towards Banks Lock-up on dividends distribution : During the first years in order to constitute the DSRA If DSCR < 105%/ 110% Partial or Total Corporate Guarantee Swap contract : to hedge 70 /80% of the loan over 10/15 years 11/11/

16 Innovative Financing Green Bonds Bonds issued by corporate companies or public entities Examples : French Development Agency September 2014 Size: $1,3bn Annual Return : 1,375% Maturity: 10 years EDF November 2013 Size: $1,4bn Annual Return : 2,25% Maturity: 7,5 years Ile de France Region April 2014 Size: $0,6bn Annual Return : 2,375% Maturity: 12 years 11/11/

17 Innovative Financing Crowdfunding Financing directly raised from citizens Crowdfunding in France represented in H m, twice H figures 1 million people involved in crowdfunding in France since the beginning Favorable regulatory environment New law (September 2014) which creates a dedicated status for crowdfunding platforms and permits to finance till 1m per project(crowdfunding loan) Renewable energy examples : Energie Partagée Creation: citizens 6,6m raised Return:4% Lumo Creation: 2012 Signature of a partnership with a public entity tofinance2pvprojectsof250kwp 11/11/

18 Thankyoufor yourattention Damien Ricordeau 52, Boulevard du Montparnasse PARIS T + 33 (0) P +33 (0) /11/