Bridging the Gap with Your Lender Laying the Foundation for a Smooth Financing of a Wind Project 7 TH CANADIAN GERMAN WIND ENERGY CONFERENCE FEBRUARY 8, 2011 Eric Bremermann Erik Richer La Flèche Melissa Schyven www.stikeman.com
OPPORTUNITIES FOR WIND PROJECTS IN CANADA Ontario Feed-in Tariff (FIT) Program 20 Year Power Purchase Agreement with the OPA Domestic Content Requirements Permitting Requirements Renewable Energy Approval Generating Licence Electrical Safety Authority Municipal Approvals First Nation Incentives Status of the FIT Program Completed projects What opportunities remain? SLIDE 1
OPPORTUNITIES FOR WIND PROJECTS IN CANADA Quebec Energy Strategy 10% of installed capacity by 2015 HQ Calls for Tenders Domestic Content Requirements Permitting Requirements PPA Special community and First Nation projects Completed projects What opportunities remain? SLIDE 2
CHALLENGES TO FINANCING A WIND PROJECT SATISFYING YOUR LENDER Important to Prepare Setting Expectations: North American vs. German perspective Legal and Financial vs. Engineering and Technical Drivers Preparing for Lender Diligence: be ready! Technical and Financial Matters Power Purchase Agreement Connection to Grid Supply Contracts and Procurement Permitting and Real Property SLIDE 3
CHALLENGES TO FINANCING A WIND PROJECT SATISFYING YOUR LENDER A) Technical and Financial Matters Financial Modeling Satisfying the Independent Engineer Technical Review SLIDE 4
CHALLENGES TO FINANCING A WIND PROJECT SATISFYING YOUR LENDER B) Power Purchase Agreement Issues Milestone Dates Domestic Content Requirements Procuring Early Uncertainty Until After Completion SLIDE 5
CHALLENGES TO FINANCING A WIND PROJECT SATISFYING YOUR LENDER C) Connection Issues Connection Agreements Connection Point Location/Rights SLIDE 6
CHALLENGES TO FINANCING A WIND PROJECT SATISFYING YOUR LENDER D) Supply Contract Issues Negotiate terms with your Lender in mind Contact Provisions and Allocation of Risk Force Majeure Liquidated Damages Warranties Transfer of Title Triparty Agreements and Opinions SLIDE 7
CHALLENGES TO FINANCING A WIND PROJECT SATISFYING YOUR LENDER E) Permitting/Property Issues Completing Required Studies Early Time to Complete Endangered Species Environmental Risks Site Access Exercising Options to lease or purchase Neighbour Issues First Nations Issues SLIDE 8
CHALLENGES TO FINANCING A WIND PROJECT SATISFYING YOUR LENDER Laying the Foundation for Your Lender s Diligence Takes Time and Funds Lenders will not take Permitting/Contract Risk Challenges for Smaller Developers to Fund Start Up Costs Balance sheet matters! Consolidation/Project Acquisitions in 2011 Typical Canadian Loan Structures Single Purpose Entity with Strong Sponsor Backstop Debt vs. Equity: 70/30 Who is Lending? SLIDE 9
Stikeman Elliott Overview January 2011 www.stikeman.com
Stikeman Elliott Overview Stikeman Elliott is one of Canada's leading business law firms, with Canadian offices in Toronto, Montreal, Ottawa, Calgary and Vancouver. We also have offices in London, New York and Sydney. Stikeman Elliott has been recognized by national and international legal directories as a Canadian leader in business law. #1 for Lexpert/American Lawyer ranked lawyers in M&A, Corporate Finance and Corporate-Commercial #1 for Lexpert ranked lawyers in M&A, Corporate Finance and Corporate- Commercial #1 in the Best Lawyers rankings for M&A, Securities, Corporate Law and International Arbitration Ranked Top-Tier in Corporate Law, M&A and Corporate Finance in Chambers Global s The World s Leading Lawyers and the International Financial Law Review IFLR 1000 Our 500+ lawyers include many of Canada s most prominent business practitioners and leading litigators. SLIDE 11
Renewable Energy at Stikeman Elliott Stikeman Elliott s Energy Group, one of the country s topranked energy practices, is among Canada s leading advisors to the renewable energy industry. Clients include: Developers Purchasers Suppliers Financing Entities SLIDE 12
Renewable Energy Group The Renewable Energy Group s experience in solar, wind, hydro, biomass and waste includes: Project Development Construction Supplier Contracts Power Purchase And Procurement Processes Real Estate And Leasing Municipal Matters Debt And Equity Financing Mergers And Acquisitions Tax (including government incentives for certain forms of renewable energy projects) Environmental Approvals And Related Regulatory Processes SLIDE 13
Recent Renewable Energy Experience Our recent experience includes acting for/in connection with: SunPower Corporation in connection with its entry into Canada and development of solar farms and in its agreement to design, build and operate a 20-MW $130 million solar power project. EDF EN Canada Inc., an EDF Energies Nouvelles company, in the financing of a 23.4-MW solar energy generating facility in Ontario and the development and financing of other solar projects in the province under the RESOP and FIT programs. Competitive Power Ventures concerning its investment in wind projects in Canada. Eolia Renovables de Inversiones, a publicly-listed Spanish developer of wind and solar power generating facilities, in connection with the development of six wind power sites in Ontario. BBVA loan to Shear Wind s Glen Dhu with respect to the construction of a 62.1 MW wind farm in Nova Scotia. Beaver Power Corporation in the acquisition of its four hydro-electric generating facilities in Northern Ontario by Brookfield Power. The lenders in connection with the Pickering methane project. Moses Lake Ethanol LLC in the development of the Moses Lake Ethanol project. Ontario Power Authority in connection with its procurement of 500-MW of renewable energy (RES III). Ontario Power Authority in connection with the Integrated Power System Plan, including its application to the Ontario Energy Board, the Procurement Process and power purchase agreements. SLIDE 14
For further information Eric Bremermann ebremermann@stikeman.com Erik Richer La Flèche ericherlafleche@stikeman.com Melissa Schyven mschyven@stikeman.com www.stikeman.com