GO EAST. Finanzierungsmöglichkeiten von Windenergieanlagen in Polen. Agenda. 1. Commerzbank & CoC. 2. Current status wind energy in Poland

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1 GO EAST Finanzierungsmöglichkeiten von Windenergieanlagen in Polen Rosa Tarragó CoC RE RM Berlin, Agenda 1. Commerzbank & CoC Current status wind energy in Poland Ressource potential: wind atlas 2.2 Current network condition 2.3 Environment aspects: Natura Support system 3. Project financing & BRE Bank Conclusions

2 Commerzbank - An Overview Domestic Banking 796 domestic branches 6.7 million account holders Telebanking business with 115,000 customers 850,000 deposits with assets of 130bn comdirect - Europe s fastest growing on-line broker International Banking 21 branches outside Germany Private Banking 780,000 high net worth customers with assets in excess of 12bn Total Assets: 608bn (inc. Eurohypo) Market Capitalisation: 20.1bn Based: Frankfurt, Kaiserplatz Founded: 1870 in Hamburg Employees: 36,000 worldwide No. of clients: c.8,000,000 worldwide Rated A / A2 Centralized unit in Hamburg responsible for national and international RES projects Portfolio of app. 3.5 billion EUR BRE Bank and Eurohypo CB hold >98% of equity in Eurohypo, Europe s largest realestate lender Acquired 66.2% in November from DBK and DrKW CBK also owns controlling stake in BREbank Corporates and Markets Corporate Relationship Management Capital Markets & Advisory Debt Capital Markets Brokerage Derivatives Research Asset Management No 5 in German Asset Management 3 Renewable energy is growing worldwide & Commerzbank is worldwide Countries representing 90% of worldwide wind energy growth. Future emerging markets Source: Global wind energy outlook GWEC 4

3 CB presence in CEE / CIS - strong platform for further growth Poland BRE Bank* (70.2%) Headcount: 3,878 Total assets: 11,099m Pre tax profit: 135m Russia CB (Eurasija) SAO* (100%) Headcount: 83 Total assets: 1,070m Pre tax profit: 34m Czech Republic/ Slovakia Hungary Prague branch incl. Bratislava* (100%) Headcount: 148 Total assets: 2,101m Pre tax profit: 16m CB Budapest Rt* (100%) Headcount: 113 Total assets: 843m Pre tax profit: 12m Ukraine Promsvyazbank (15.32%) Financial investment Bank Forum* (60%) Headcount: 2,506 Total assets: 1,102m Pre tax profit: 2.5m Representative offices Belarus / Croatia / Kazakhstan / Romania / Russia / Serbia- Montenegro / Ukraine / Uzbekistan * Data as per 12 / 2006 ProCredit Banks Albania / Bosnia-Herzegovina / Bulgaria / Georgia / Kosovo / Romania / Serbia 5 Center of Competence renewable energies - your first choice for renewable energy financial services- Track record in renewable energy projects since 1986 One of Europe s leading banks in the renewable energy sector Portfolio of app. 3.5 billion debt finance Arranger of structured finance transactions Extensive market knowledge (techniques, legal framework, business evaluation) Project and corporate financial service along the value added chain 6

4 Poland: strong platform for further growth in wind business (1/2) Existing (indicative) national target: 7.5% RES by 2010 Wind: 2.3% of energy consumption MW from base case of ca 234,6 MW Comparison: Spain s (realistic) target MW by 2010 New (binding) EU target: 20% from RES by 2020 PL will have to comply with this new target or risk penalties 7 Poland: strong platform for further growth in wind business (2/2) Project Capacity SoO Tymién windfarm, 50 MW Puck Gniewino Barzowice 5,1 MW 2002 Tymién Kisielice Cisowo 18 MW 2001 Zagórze 30 MW 2002 Gniewino 8,4 MW 2005 Tymién 50 MW 2006 Puck 22 MW 2007 Kisielice 40,5 MW 2007 Kamieńsk 30 MW 2007 Jagniątkowo 30,6 MW 2007 Source: PWEA Status 01/10/2007 Till now, 9 commercial windfarms All located on the Nord 788 Km of coast with high potential for offshore winfarms 8

5 Poland wind ressources: onshore at 30 m and offshore at 100 m Onshore Offshore Source: Institute of Meteorology and Water Management Baltic Renewable Energy Center estimates: MW, i.a., 30% of the Polish land surface is economically suitable for wind turbine applications, with 5% classed as very favorable Resources on Baltic Sea coast and North-Eastern Poland, some potential on complex terrain on the South Wind energy potential in Poland has been analysed many times. Lack of objective results. Therefore, wind studies for each site are more than ever necessary. 9 How much wind can tolerate the MV & HV networks? Very favorable wind sites are located in rural areas with none or poor grid systems Underdeveloped distribution network does not allow connection of wind farms over MW in the next 5 years Source: PSE Operator S.A. PSE assumes the following amounts of installed power in wind sources: MW MW MW MW MW MW MW MW Controversy about financing of necessary investment required for WP connection Requirement for developers to prepare the grid impact assessment Improvement on energy balancing regulation DSO have determined and agreed with the TSO the connection conditions for 49 farms (2.146 MW) There are plans in place to expand the existing transmission and distribution networks. These investments in the electricity industry are estimated to cost around USD50 billion over the next 15 years. Much of this cost, though, is proposed to be covered in the process of privatization Transmission system operator, PSE, has already defined a Development Plan to meet the target of RE production 10

6 Network capacity & Balancing system Network capacity for wind famrs: limited to a reserve capacity Energy balance Reduction of the electricity production schedule from 48 to 2 hours In case of unbalancing: Balance energy sale: 37,52 /MWh Balance energy purchase: 20,37 /MWh Difference: 17,15 /MWh It is expected, gov t will set a capacity guarantee to improve competitiveness Balancing costs have to be deducted from electricity remunertion. New regulation allows to reduce balancing costs. Source: PSE Operator S.A. 11 Natura2000: environmental issues that need to be addressed Source: ETC Biological / Diversity (European Environment Agency) 72 areas of special birds protection (9.7% of the country s area) 240 special habitats protection (5,4% of the contry s area) Lack of training of local institutions in charge of NATURA 2000 & of transparency regarding sources on presence of priority species on particular areas Increase in the amount of land considered as legimitmate for being qualified as NATURA2000 Approval of an environmental impact assessment (EIA) Source: EBREC, Krzysztof Gierulski 12

7 Attractive remuneration system, though volatile PLN/MWh Prices for Green Certificate ,00 OTC transactions 240,00 220,00 OZEX 229,39 236,95 237,89 239,24 Electricity price 117,49 PLN/MWh (ca. 3 c/kwh) 201,54 200,38 200,00 191,55 180,00 196,54 197,84 198,89 199,35 201,62 187,38 183,73 180,13 181,66 174,97 211,82 194,69 190,44 196,28 205,85 191,11 Green certificates max. 240 PLN/MWh (ca. 6 c/kwh) + inflation 160,00 164,66 140,00 Emission Reduction Unit (CO 2 certificates) 120,00 January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 July 2006 August 2006 September 2006 October 2006 November 2006 December 2006 ca. 5 /ERU Feed-in Tariff Germany Annual revenues: 30 MW Kamiénsk Hill Windfarm 1) Electricity: MWh = ) Certificates: MWh = ) ERU: CO 2 t = Total annual cash-flow: Quantification of emission reductions CO 2 emissions (within project boundaries) Baseline emissions without JI project (business as usual) reduced CO 2 emissions Emissions with JI project real CO 2 emissions crediting period Project Implementation years 14

8 Power Purchase Agreements: with whom? PPA with distribution companies or energy trading companies PPA lifetime should be longer than the loan lifetime PPA prices use to be 20% lower than market prices ERU-certificate can improve bankability if provided with an ERPA agreement Map of distribution companies 15 Our product range for Poland Debt Equity Other Debt Equity Other PF loan, loan syndication, club deal, bilateral lending Financing structures for all RE technologies Multicurrency lending Bonds Matching of investors and project developers Investment advisory Operating accounts and commercial banking needs Investment banking needs Currency and interest rate management Asset management 16

9 Finance plan for the various stages of PF Pre-construction Construction Phase Operational Phase Turbine Finance Specific criteria (planning permissions, land use, grid connections) To finance turbine deposits Debt to Equity ratio t.b.d. Tenor for individual project max. of e.g months depending on the delivery lead times Turbine supplier: (several) Delivery lead time is t.b.d. Debt to be taken at the project holding level for a portfolio of development projects Financial Close Commissioning Seasoning period Construction Finance Finance part of Capex including refinancing of the turbine deposits Debt to Equity ratio [t.b.d.] Tenor e.g months construction period plus e.g. 2 years seasoning period Capex consists of external hard and development costs Debt to be taken at the project holding level same as turbine deposit finance for a portfolio of the same projects that move into construction phase Bridge Finance Refinancing of part of equity funded hard and development costs during construction phase (excluding any uplift in equity valuation of each project) The proceeds to be reinvested into projects at development / pre-construction phase The seasoning period is up to 2 years for individual projects Bridge Finance is secured by the dividend cash flows with a minimum coverage ratio of x:y, e.g. 2:1 Seasoning complete (with proven performance) Take out Finance Pre-agreed and structured to take out the Construction and Bridge Finance. Take out option include: - Bank syndication - ABS - Funds - Bond 17 Poland: project finance structure Sponsors Utility Lenders Subordinated Debt Equity Subscription Subordinated Loan Agreement Shareholders Agreement Power Purchase Agreement Credit/Facility Agreement Insurance policies Swap/ Option Agreements Project Company Security Insurers Hedge Providers EPC Contract Supply & Erection Warranty Operating and Maintenance Contract Construction Contractor Turbine Manufacturer O&M Contractor Which parties are involved? Which are the relations of these parties among each other? Extensive contract review for diversification of risks Legal, Financial & Techncial DD 18

10 Cisowo Windfarm (18 MW - V.80) Owner: Energia Eco Sp. zo.o Developer: EPA Location: Cisowo (Koszalin region) ca 1,5 km from Baltic shore Generation: MWh/pa Commissioning: 1st stage (3 WT) in IVQ nd stage (6WT) in IQ 2002 Turbine type: Vestas V80-2,0MW Investment costs: PLN 94 mm (EUR 26.1 mm at rates 02/2002) Financing: Equity 20% Grant 27,3% EcoFundusz, NFOŚiGW 47,5% (National Fund for Environmental Protection and Water Management) (preferential loans for 10 years period) BRE Bank short term loan of 5,2% for VAT financing - fully repaid upon completion of the project; other facilities provided by BRE Bank for the 2nd stage of the project: (a) L/C (70% of the total amount of contract with Vestas 2nd stage of the project); (b) payment guarantee securing 75% of preferential loan provided for the 2nd stage of the project for 2,5 years. 19 Financing Windfarms: past & present Windfarm Investment 40% Sponsors Windfarm Investment Windfarms 20% Subsidies WP 10% Sponsors Hedge Providers EcoFund National Fund WP Subordinated Debt Equity Subscription 40% Debt 90% Debt EBRD World Bank Lenders Commercial Banks In the past, none international commercial banks provided debt finance The role of local commercial banks was limited to provide: short term VAT-financing, L/C, payment guarantees Financial close only possible with large grant amounts & international donor s providing debt finance Today: equity provided by renowned international players & commercial banks Portion Equity / Debt changed 20

11 Conclusion (1/2): Summary Resources: MW, i.a. 30% of land surface 234,6 MW installed WE potential has been analyzed many times. Need for objective results. Grid: MW reserved capacity at distribution level for next 5 years MW till 2014 at transmission level Weak grids in some areas with significant wind resources Specific balancing for wind energy allowed Environment: Natura2000 areas need to be limited Remuneration: allows to reach financial close in combination with a bankable PPA Electricity prices expected to increase Stable certificate (CoO) prices ERU prices expected to increase 21 Conclusion (2/2): Trends Estimated high wind potential contributed to the emergence of a large number of project developers and investors The market will change significantly in short-term perspective (refuse of weak developers, reduction of no. of non-feasible projects, growing importance of strong developers like Iberdrola ) Significant increase of installed capacity may start from The significant influencing factor will be the national policy and attitude to the WE (stability of law conditions, public support to the investment, declaration of will to meet national targets) New quota obligation and development of third party access (TPA) market EU 3x20 binding package is an important market driver for WE in Poland Growing experiences from wind farms operation, good practices to avoid planning mistakes and environmental, grid and social problems 22

12 For further information: Rosa M. Tarragó Relationship Manager P: M: Cap for Certificates of Origin (CoO) Maximal price for CoO limited to substitution fee (240 PLN/MWh) For 2006, average OTC-price was 186,87 PLN/MWh (48,24 /MWh) and 212,62 PLN/MWh (54,88 /MWh) on the free market Since 2007, substitution fee is indexed to the inflation New regulation to avoid double counting of certificates Tymién windfarm, 50 MW 24

13 Project financing with BRE Bank BRE Bank (formerly known as Bank for Export Development) was founded in 1986 In 1992 BRE Bank was privatized, since 1994 Commerzbank strategic investor Nowadays, Commerzbank AG owns ca 70.2 % of BRE Bank s shares Key figures of BRE Bank in Poland: 3,320 employees based in 23 commercial banking branches 1.63 million customers and a total of 1.9 million accounts in mbank (internet banking) and Multibank (retail network) BRE Bank has business relations with nearly every second company in Poland s to 500 list whole spectrum of financial services, incl. leasing, mortgage bank, factoring, insurance and brokerage services one of the leading banks in Poland in project finance (including renewable energy), LBO/MBO financing 25