Solar Focus 2014 MDV SEIA Creative Solar Financing: Matching Funds and Projects 1
Overview Learning Objectives and Key Take-Aways Format 1 Moderator 3 Panelists 4-5 Case Studies Please do NOT hold your questions Audience participation through polling 2
Introductions grosolar Industry leading solar EPC contractor for over 15 years Based in Columbia, Maryland Provide turnkey solar solutions to commercial & utility clients Project Development Services Engineering, Procurement, & Construction (EPC) Asset Management and O&M Designed and built over 120 MWs of solar PV projects Timothy Heinle Director of Business Development 20 years experience in the development and financing of independent power projects Expertise across renewables (solar, wind, landfill gas, biomass) and conventional power generation (gas-fired and coal) Held management positions with Siemens, Duke Energy, Community Energy and Magellan Resources Education: BA in Government from Georgetown University; MBA from the College of William & Mary 3
Sol Systems Sol Systems provides a suite of sophisticated solutions for solar developers and installers SREC Aggregator PPA Provider Tax Equity Syndicator Lender Advisory Services $300M in assets under management 165 MW and $600M financed to date Colin Murchie Director, Project Finance Co-leads Sol Systems' Project Finance Team, which sources capital for Sol Systems' developer clients 12 years of experience in the solar industry in various roles including business development, finance, and policy 4
Nextility Energy services company serving small commercial customers (apartment buildings, Laundromats, hotels, etc.) First offering was solar water heating, now largest developer/operator of commercial SHW assets in US. Offerings expanded to solar PV and energy brokerage Company rebranded in August 2014 after 5 years as Skyline Innovations Zach Axelrod Founder and CEO 8 years of experience in distributed energy asset structuring and power plant valuation Structured 4 funds for small commercial solar finance for Skyline/Nextility 5
Hannon Armstrong 32 year old private investment bank went public in the form of a REIT in April 2013 Leading investor in sustainable infrastructure assets including energy efficiency, renewable energy, water and other assets that make more efficient use of natural resources Typically invest in the most senior slice of capital, with a particular focus on distributed energy assets Client base primarily consists of vendors, contractors and developers Solar investments to date include the entire customer spectrum: residential, commercial, industrial, institutional, and utility scale, as well as land Rhem Wooten EVP, Origination at HASI 30 years experience in project development, commodity trading/risk management and project finance Former President/CEO of Duke Energy s domestic and international independent power units, two commodity trading firms and a gasification technology commercialization effort B.S. in Business Administration with honors from UNC Chapel Hill 6
15 MW AC portfolio of 3 projects Case Study 1: Solid Portfolio, Underfunded Developer Strong off-take agreement with overall good project economics (bundled PPA and SREC Contract) PPA Off-taker: utility (strong credit rating) Federal tax equity investor engaged and prepared to provide 40% of the capital stack Developer does not have the ability to fund remaining 60% of the capital stack 7
Case Study 1 (continued): Solid Portfolio, Underfunded Developer Q: What is the most likely way to fund the remainder of project s capital stack? A B C D Pursue nonrecourse, project level debt Pursue a loan from the bank Raise equity capital Sell project assets and fund through milestone payments 8
Case Study 2: One Off Net Meter Project 2 MW AC net meter project on Municipality s landfill Strong PPA with overall good project economics (unbundled PPA and SREC Contract) PPA Off-taker: Municipality (no credit rating) SREC Contract is in negotiation: term is 3-5 years Project developer is considering the pro and cons of project financing vs. outright sale of the project 9
Case Study 2 (continued): One Off Net Meter Project Q: What is the most likely next step for the project developer? A B Sell the project into a fund-type structure Maintain project ownership and structure tax equity 10
Case Study 3: Which Non-Profit Deal To Pursue? A B C D Large County w/ investment grade credit rating; large load; seeks a 3 MW Virtual Net Meter project on countyowned landfill Large School District; seeks 10 x 200 kw rooftop projects Large Public Hospital with high avoided cost (high potential PPA rate); seeks 5 MW solar procurement Investment grade university; seeks 5 MW procurement 11
Case Study 4: Maryland Aggregated Net Meter Project ANM is only available to three classes of customers: (1) agricultural, (2) non-profit, and (3) municipal governments and their affiliated entities ANM projects are subject to the PSC CPCN process if the system is larger than 1.5MW. Customer and developer must be careful to locate the system on a site that can support the 10% on-site consumption requirement to obtain CPCN exemption Separate site requires another set of diligence items; customer must own/control site for MD ANM 12
Case Study 4 (continued): Maryland Aggregated Net Meter Project Q: What is the most important aspect of a Maryland aggregated net meter project? A B C D Site lease PPA / Off-take agreement Aggregated Net Metering Requirements Customer credit 13
Case Study 5: Large Industrial, Large Project 10 MW AC ground mount project Strong PPA with overall good project economics (unbundled PPA and SREC Contract) PPA Off-taker: US-based industrial with 100+ year history, two notches below investment grade credit SREC Contract is in negotiation and looking good 14
Case Study 5 (continued): Large Industrial, Large Project Q: What funding source is the best fit for this project? A B C D E Tax equity: large syndicator Tax equity: individual one-off Strategic buyer: Utility IPPs Private equity None of these 15
MDV Market Round Up Market Biggest Challenge to Financing Best Quality for Financing Thumbs Up Or Thumbs Down Virginia DC Maryland 16
Q & A 17
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