Non-recourse Project Financing

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1 Non-recourse Project Financing Drijvend Zonnepark Lingewaard Oost NL Workshop sessie, 29 November 2018 ING Wholesale Bank

2 ING & Sustainability Insert filepath here

3 ING Bank at a glance ING holds strategic positions in TMB Bank in Thailand, Bank of Beijing in China and ING Vysya Bank in India Wholesale Banking Wholesale and Retail Banking Alliance Banking ING Bank well-positioned for growth Market Leaders: Leading Retail and Wholesale Bank in the Benelux with a customer base of 10.9 million individuals Growth Markets: Strong positions in fast-growing countries in Europe, such as Poland, Romania and Turkey. Potential for growth in our strategic positions in Europe Challengers: Organically-built leading direct bank in Germany/Austria, Spain, Italy, France and Australia. Merging Retail Banking with Wholesale Banking to turn into domestic banks Strong Wholesale Bank with international network Leading Wholesale Bank in Benelux and CEE: Supporting domestic economy. Leaders in specialised finance and financial markets Global franchise in Financial Markets, global provider of specialised banking products such as Structured Finance and European provider of cash management, leasing and wholesale finance products Only Dutch bank with a large international network [xxx] Briefing Package January

4 ING is strongly committed to sustainability 20 year track record in sustainability First Sustainability report Creation of ING Groenbank Launch of Sustainability Equity Fund Start carbon offsetting Start of Sustainable Lending Team ING issues own Green Bond Introduction of Sustainability Improvement Loan First ESR policy Launch of Business Principles Partnership with UNICEF Sustainability targets Sustainability embedded in strategy and purpose Rated as the most sustainable bank Sustainability direction supported by Our CEO s commitment to sustainability Sourcing renewable energy Operating carbon neutral Integrating sustainable procurement Financially empowering customers Our own transition & & Offering simple and easy products and services Supporting customer decisions Creating societal impact Supporting clients transition to sustainable business Environmental and social standards Client assessment Publicly disclosed environmental risk framework Applied to business globally Sustainable business Creating awareness Accelerating sustainable business innovation Developing new (sustainable) business models Companies that address climate change and resource scarcity, companies that make sustainable transitions: they will be the winners of tomorrow s economy. And we want to back those winners! Ralph Hamers CEO of ING Group 3

5 The clear need for sustainable business Environmental challenges require businesses to act Climate change Resource scarcity Water distress It takes communities, cities, states, industry, business and everyday people By 2050, the global population is expected to reach 9 billion If no changes are made, Melting of ice and the rising of the seas results in flooding and erosion of coastal and low lying areas. Extreme weather causing floods and decreasing water quality. Globally effecting all regions, both rural and urban. Introducing risks for human health, society, economy and wildlife. Current resource consumption compared to the earth s regenerative capacity differs by region 1,5x 2,5x 4x Projected 2% annual demand growth for freshwater will lead to serious constraints. One out of two countries is prone to water stress. Flood-prone zones need better protection. to transform high-level decisions into realworld action. Patricia Espinosa, UNFCCC Executive Secretary, COP23 increasing pressure not only on Earth s natural resources, but also on many of the world s most environmentally sensitive regions WWF, 2017 global water demand is forecasted to outpace the sustainable water supply in 2040 by 35%.. ING,

6 Project financiering in general Insert filepath here

7 Overview of different financing structures Structure Pros Cons Balance sheet financing Flexibility of funding Limited due diligence requirements Straightforward documentation, quick execution Corporate terms, covenants and pricing Shorter tenor, refinancing risk with owners All debt raised on balance sheet of owners Project risk remains entirely with the owners Project financing Long tenors potentially up to the tenor of the off-take agreements possible Higher leverage possible Inclusion of possibly cheaper EIB/EBRD funding and ECA cover Stringent due diligence requirements Stricter on going monitoring and debt covenants Longer execution time of 6-9 months Higher cost of debt 6

8 Typical project structure Typical project structure A project has a number of phases: Development Construction Operation Investor A Investor n During the development phase the project developer seeks an appropriate site and obtains permitting, land leases and (specifically for wind projects) performs a wind measurement campaign Lenders OpCo Funding (non-recourse) during the construction phase is received from the investors and the banks to pay for the various construction contracts Once the construction is complete, the operational phase starts. The revenues from the PPA will pay for the repayment of the loans and if available dividends to the shareholders Construction O&M Permits and Land PPA Grid Connection 7

9 Project Documents Contracts Shareholders and Equity Subscription Agreement Implements the corporate governance amongst the shareholders and the funding arrangements Financing documents and Project documents Investor A Investor n Finance Agreements Implements the commercial, reporting and security agreements with the financing banks Construction Agreements Allocates work packages to the construction contractors, often project finance banks require direct agreements with contractors Financing Documents Lenders OpCo Long Term Maintenance and Project Management Agreement Retains and incentives the contractor to perform O&M services in the most cost effective manner Permits and Land leases Outlines the responsibilities of the project manager during construction and operating phase Grid Connection Agreement Secures the grid access of the project in a timely fashion Power Purchase Agreement ( PPA ) Standard agreement with a buyer of the generated electricity Construction O&M Permits and Land Grid Connection PPA 8

10 Case Study Drijvend Zonnepark Lingewaard Insert filepath here

11 Financing structure Drijvend Zonnepark Lingewaard

12 Analysing the business case for Drijvend Zonnepark Lingewaard Capex Opex Revenues PV panels Inverters Floating structure GRID connection Financing costs Contingencies O&M fees Insurance Surface lease Asset management GRID connection WOZ Irradiation SDE+ PPA

13 Analysing the business case for Drijvend Zonnepark Lingewaard Overall several +/-, conclusion per business case may differ Prices floaters is expected to come down Water based solar PV installations require more and periodic cleaning SDE+ is capped at 950 FLH Many of the other points will be location specific More uncertainty given that: Permitting process Legal framework for taking security is not entirely clear (water surface) Technically more complex But in the case of Lingewaard, all things came together!

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