Photovoltaics (PV) Power the future. Innovative insurance solutions for the PV industry and investors in renewable energies

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Photovoltaics (PV) Power the future Innovative insurance solutions for the PV industry and investors in renewable energies

The international photovoltaics industry is facing challenges; but also tremendous opportunity. In this environment, investors and lenders value investment security. While accustomed to growth and expansion, the sector is confronted with price erosion and optimistic ROIs which are exerting increasing pressure on all stakeholders. PV module manufacturers need liquidity to keep innovating and growing, and to survive challenging times. Investors and banks are also keeping a close eye on the situation. While falling costs can result in substantial returns, long-term investment security in the form of stable performance and reliable warranties is becoming more important. Corporate Insurance Partner offers manufacturers and investors innovative, global risk management solutions to deliver greater planning security to the entire industry. This stability helps navigate uncertainty and promote the renewables industry.

A win-win situation for the industry Corporate Insurance Partner offers innovative solutions tailored specifically to the requirements of market participants, thereby supporting the entire industry as it continues on the path to embracing new forms of energy. For PV manufacturers: more liquidity with the PV Corporate Cover Our PV Corporate Cover insurance solution supports manufacturers in ensuring that module performance meets the guaranteed levels in the long term. The result: manufacturers have the liquidity they need to cope with unexpectedly high claims from performance warranties for periods of up to 25 years. For investors and project developers: investment protection with Solar Park Performance Cover and Lack of Sun Cover Together with PV Corporate Cover, our Solar Park Performance Cover protects investors in PV plants against the insolvency of the manufacturer of the modules. With our Lack of Sun Cover, we offer an insurance solution that can counteract the volatility of the weather and the consequent fluctuations in the power output of PV parks. Performance warranty insurance for solar projects Both manufacturers and investors benefit from our solutions. PV Corporate Cover: Performance warranty Contract XYZ Solar Inc. (manufacturer) 2017 production: 100 MW MR policy limit: 20 MW Park D 20 MW Solar Park Performance Cover: 100% of value of XYZ modules (50 MW) Contract Warranty provider Solar park A LLC (SPV) 50 MW Park B 25 MW Park C 5 MW Delivery of modules

Example of performance-degradation claim scenario Our solution covers all the modules produced within the insured production period and its associated long-term warranty liability period (up to 25 years). Even if you incur losses due to warranty obligations, you can still achieve a certain profit margin. 210 Wp 200 Wp Annual degradation 0.2% 90% Expected case 80% 2017 2027 2042 1.1% Degradation over time Warranty claim PV Corporate Cover: Protect your balance sheet Greater stability and financial flexibility for PV module manufacturers: we offer long-term protection from performance deterioration in PV modules. Your warranties are credible; your balance sheet protected. PV module manufacturers offer 25-year performance warranties as a market standard, so they carry a significant financial burden on their balance sheets, along with creditworthiness and industry reputation. Warranty issuers must honour their obligations and back them up with reserves. Provisions in manufacturers balance sheets for this sole purpose are a tight constraint on capital. However, these provisions often cover just a fraction of the liabilities that could actually arise. Just one series of losses could jeopardise a manufacturer s market position or, in the worst case, its very existence. Corporate Insurance Partner s PV Corporate Cover mitigates this risk by covering the warranties of modules sold within the policy year. Despite a liability period of 25 years, the insurance is non-cancellable, to provide the planning and contract security needed for a manufacturer to build its business. Manufacturers optimise liquidity and financial stability, even with unexpectedly high warranty claims. This not only cultivates certainty in strategic planning, it also instils confidence among enduser customers and investors. Where a manufacturer opts for PV Corporate Cover, its clients (owners, banks and investors) qualify for our speclialist product for PV park stakeholders. Clients of manufacturers who do not require PV Corporate Cover also qualify for this product by means of the PV Framework Agreement. Under this non-insurance agreement we conduct our technical due-diligence that enables a lean underwriting process for PV parks. Your advantages at a glance: Protect your balance sheet Count on reliable security in difficult times Increase degree of business certainty Reduce risk provisions and capital costs and enhance shareholder value

Your advantages at a glance: Protection against module underperformance Solar Park Performance Cover: Protection for investors Protection against insolvency of the modules warranty provider Transfer of Munich Re s expertise and creditworthiness directly to your Solar Park Preferential financing conditions Higher price on the secondary market Availability in financing phase (pre-construction) More security for solar park owners, investors, contractors and operators. Corporate Insurance Partner protects you against underperformance and insolvency of the modules warranty provider. Security of investment is a major concern and an even greater concern during industry developments that lead to many manufacturers disappearing. Insecurity threatens projected cash flows and can make a project uneconomical. This has left many investors in a situation in which the technological risk of underperforming PV modules can no longer be transferred to the warranty provider and must be carried by the investors themselves. Our tailor-made Solar Park Performance Cover can hedge that risk at the time of financing or during module procurement. If the manufacturer later becomes insolvent and the modules underperform, Munich Re will pay financial compensation directly to the investors with dedicated capacity allocated to an individual PV park. Limit, triggers and indemnification can be customised to specific requirements. While the premium is a one-off payment, the insurance is in place for a period of time up to the debt period for new parks with capacities greater than 15 MW. Where multiple, smaller parks are to be insured, we can offer a combined portfolio solution. In addition, we are happy to introduce our new Solar Park All-Round Cover which goes beyond the insurance of modules by covering yield deviations and inverter failures. The yield section in particular, based on deviations of module performance, inverter availability and solar radiation, provides additional planning and revenue certainty for your projects. Comparison of performance warranty covers Our covers compared. The Solar Park Performance Cover is adapted to the financing structure, but tracks the same technical triggers as the Corporate Cover. PV Corporate Cover Solar Park Performance Cover Policyholder Module manufacturer Solar park SPV or equity holder with owner/lender as beneficiary Deductible 2 5% requirement (annual) No deductible, but insured s skin in the game is secured by additional trigger Co-insurance 10 20% loss shared by manufacturer No co-insurance/quota share (see above) Policy limit Policy term Waiting ( blackout ) period 10 20% of module (revenue of insured production year) Warranty period, non-cancellable, up to 25 years Minimum 2 years Purchase price of all modules in the solar park Individual, non-cancellable, up to 20 years No blackout period, follows terms of debt/equity financing Known manufacturers Period of liability up to 20 years One-off initial premium Solar Park Performance Direct contract between investor and Munich Re Tailormade Variable structures Availability for parks >15 MW Performance degradation triggers = faulty manufacturing/material defect/material ageing

How our solution protects you in less sunny times The chart illustrates how a Lack of Sun Cover can protect your cash flow in a 95% to 85% corridor. Your advantages at a glance: Rely on healthy returns, even in cloudy years Attract investors and buyers Provide a yield guarantee Cash flow Years Actual cash flow 85% of expected cash flow Expected cash flow Cash flow with Lack of Sun Cover 95% of expected cash flow Lack of Sun Cover: When there is less sun than expected While solar energy is considered the most abundant energy source on our planet, it is by no means a constant source. Our Lack of Sun Cover supports investors and operators in mitigating the risks of a reduced output and thus a reduced return on investment. Mitigate risks with weather derivatives Munich Re offers traditional weathercontingent financial instruments that can be used as part of an overall risk management strategy to reduce the risks associated with adverse or unexpected weather conditions. Many aspects influence the power output of a PV park: system losses caused by damaged solar modules, inverters or other technical problems can be detected and fixed easily. Weather volatility, however, makes planning much more difficult. Focus on irradiation In many cases, business plans rely on solar irradiation maps for the location of a PV park and hope that, over a period, the calculated irradiance will be as projected. Fluctuations in irradiation caused by longer winters, more snow or other adverse weather situations, will influence the output of the PV park. Our solution focuses on the irradiation of PV parks.

Munich Re your strong and reliable partner Our solutions provide you with greater certainty for your planning, giving you more scope to grow in a dynamic market. With our innovative covers, we provide protection against financially threatening scenarios in such a way that you remain solvent and thus competitive, even in emergencies. Munich Re provides valuable solutions across the entire value chain of the PV industry: an enterprise risk management tool to preserve manufacturers going concern, and flexible covers that protect long-term investment in PV solar projects. About In, Corporate Insurance Partner pools expert resources and know-how in the field of renewable energies. Numerous innovative insurance solutions for photovoltaic, concentrated solar power, wind and other green technologies such as LEDs are being offered by this team in its worldwide activities. About Munich Re Munich Re s strong balance sheet, a solid AA rating and extensive operations worldwide means we have the expertise and capacity to deal with a wide range of different risk events. Contacts Dr. Ulrich Bohnert Tel.: +49 89 38 91-38 29 ubohnert@munichre.com Jascha Prosiegel Tel.: +49 89 38 91-20 33 jprosiegel@munichre.com Álvaro Núñez (US) Tel.: +1 212 887 6067 anunez@munichreamerica.com Dr. Ronald Sastrawan (Hong Kong) Tel.: +852 2536 6942 rsastrawan@munichre.com Business Suite PV manufacturers who are insured with Munich Re: investors have an interest in manufacturers being better insured against risks that could threaten business. In our exclusive online portal, GTS Business Suite, we offer access to valuable information for your investment decisions. Find PV manufacturers who are insured by Munich Re and rely on Munich Re s expertise and capacity. Sign up to access our portal: www.munichre.com/gts Michio Matsuda (Japan) Tel.: +81 3 52 51-68 57 mmatsuda@munichre.com Daniel Kopf Lack of Sun Cover Tel.: +49 89 38 91-93 74 dkopf@munichre.com

Legal notice 2017 Münchener Rückversicherungs- Gesellschaft Königinstrasse 107 80802 München Germany www.munichre.com Responsible for content Picture credits Cover: shutterstock p. 6: Fotostudio Meinen Printing Gotteswinter und Aumaier GmbH Joseph-Dollinger-Bogen 22 80807 München Germany Order number 302-08282 Disclaimer Corporate Insurance Partner refers to a number of business units across different legal entities of Munich Re that provide individual solutions for mediumsized and large industrial clients. The legal entities include Munich Reinsurance Company in Munich (and its branches in Paris, Singapore and Hong Kong), Munich Reinsurance America, Inc. and Great Lakes Reinsurance (UK) SE (and its branches in Australia, New Zealand and Switzerland). Through our ongoing cooperation with other international units of Munich Re, we are always close to our clients. Policies are written by Munich Re Group companies. Certain products are not available in all countries and jurisdictions. Some covers may be written on a non-admitted basis. Covers provided by surplus lines insurers are available only through licensed surplus lines brokers. Any description in this document is for general information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product. NOT IF, BUT HOW