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Cat Power Finance

Biogas Projects –

A Lender’s Perspective

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Agenda:

1. Krabi Waste to Energy

2. Typical biogas commercial structures

3. Key financing questions

4. Bank due diligence – Process and

Requirements

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Krabi Waste to Energy – CPF’s 1st

project financed biogas project

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Case Study – Krabi Waste to Energy

CPF signed loan documents with project company May 2014

Palm oil mill that generates 500 cbm/day of POME wastewater

In-ground biodigester reactor

2.4MW gross of Cat engines

Total capital cost: About US$5MM / 150 MTHB

Financing Terms:

56% project financed loan facility US$2.8M / 84 MTHB

8 year term, Thai fixed rate

First priority security position in all project assets and pledge of shares

Assignment of contracts to lender

No corporate guarantee from shareholders

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Case Study – Krabi Waste to Energy

Project took 3.5 years to reach financial close

CPF was in the deal throughout; providing financial advisory and

supporting developer in stakeholder discussions

Review of key project agreements for project financeability

Review of financial model; finalizing bank base case

Drafting of project finance loan agreements, assignment agreements,

pledge of shares – CPF now has a reference list of documents

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Case Study – Krabi Waste to Energy

Project Financing Terms Explanation

56% project financed loan facility

US$2.8M / 84MTHB

Lender financed 56% of the total project cost, including soft costs,

civil works, Cat engines, biodigester and scrubber

8 year term, Thai fixed rate Lender offered Thai Baht fixed rate loan over 8 years

First priority security position in all

project assets and pledge of shares

Lenders loan is senior debt; If required, CPF can exercise the

pledge of shares to sell the shares of the project company to

realize value, or to take over shareholder responsibilities

Assignment of contracts to lender

CPF can “step-into” any of the key project agreements to become

the counterparty in that specific agreement

No corporate guarantee from

shareholders

The shareholders are not required to put up corporate guarantees

during the term of the loan; the loan will be paid purely from the

cashflows of the project

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Typical biogas commercial

structures

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COMMON KEY CONTRACTUAL

RELATIONSHIPS: TYPE 1

Assets: Biogas Digester, Mill Assets and

Power Plant

Government

Utility

Power Purchase Agreement

Govt approvals,

environmental permits

Power

Plant

O&M Co

Power Plant

O&M

Agreement

EPC Contractor

Project Company

EPC

Contract

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COMMON KEY CONTRACTUAL

RELATIONSHIPS: TYPE 2

Assets: Biogas Digester and Power Plant

Government

Utility

Power Purchase Agreement

Govt approvals,

environmental permits

Power

Plant

O&M Co

Power Plant

O&M

Agreement

Palm Oil Mill

Host

Agreement

EPC Contractor

Project Company

EPC

Contract

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COMMON KEY CONTRACTUAL

RELATIONSHIPS: TYPE 3

PowerCo

Government

Utility

Power Purchase Agreement

Assets:

*Power Plant

Biogas

Supply

Agreement

WasteCo

Assets:

Biogas Digester

Govt approvals,

environmental permits

Power

Plant

O&M Co

Power Plant

O&M

Agreement

Palm Oil Mill

Host

Agreement

EPC Contractor

Project Company

*Power plant will include any significant grid interconnect

EPC

Contract

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Key Financing Questions

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Key Financing Questions Host /

Feedstock

supplier

Electricity

Tariff

Biodigester

Technology

Generator EPC Contractor Shareholders Operators

Economic

incentive to

supplier

High enough

return to

incentivize

investors?

Operating and

financing

precedents

Reliability Full "Wrap" (Full

performance

guarantee based

on plant output)

Strong balance

sheet

(Development

spend &

equity)

Able to

mobilize

local labor

Alternate

sources of

supply for

project

Known

history of

tariff

Feedstock

matching

technology?

Type of

maintenace

contract

signed

Installation /

Integration

experience

Technical /

Operating

Experience

Technical /

Operating

Experience

Seasonal

variability of

feedstock

Offtaker

motivation /

alternatives

Safety record? Operating

precedents

with biogas

Strong balance

sheet (managing

sub-contractors /

posting bonds)

Development

experience

(Financial,

regulatory etc)

Able to

access

parts and

equipment

supplyAvailability Known

performance

parameters of

technology?

Willing to put up

performance

guarantees on

entire plant

Relationships

with other

parts of project

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Bank Due Diligence –

Biogas Projects

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Documents Required & Why

Document Reason

Information Memorandum Summary document for project commercial and economic concept

Financial Model Provides cashflow forecast of project; key in understanding financeability

of project for lender

Shareholder Structure Allows lenders to understand shareholder composition of project

Project Technical Concept

Report

Sets out technical parameters of biodigester

Reference List of projects Builds out developer and EPC contractor experience with technologies

Key Project Agreements Especially required in Project Finance; lenders need to review key project

agreements before execution to ensure project is financeable

Project Closing List Agreement between lender and developer of all documents to be delivered

before first draw; Helps set expectations on timeline and deliverables

Loan Agreement and

Assignment Docs

Form and content to be agreed between lender and developer

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Documentation – What’s needed at which point

Development

begins

Screening

Project Info Memo

Financial Model

Project Structure

Shareholder Structure

Docs Closing List

Project Schedule

Credit

Approval

Finalized Financial

Model

Updates from A

90% finalized Docs

Closing List

Project Agreements

A B Loan Agmt

Assignment

Agmt

Bonds

Shareholder

Resolutions

Indicative offer Commitment Letter

First Draw on

loan facility

C

Equity

Invested

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Sample Closing List

Item Ok? Expected

Completion

EPC Contract √

Power Purchase Agreement 31-Dec-14

Insurance Policies √

Wastewater characterization √

BOOT Agreement √

Generation Licence √

Factory Licence √

Public Hearing 30-Sep-14

Construction Permit 15-Aug-14

Key Project Agreements

Permits and Environmental Clearances

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Sample Closing List Item Ok? Expected

Completion

Secured Rights of Way √

Land Title √

Shareholder resolutions √

SPV resolutions 30-Jun-14

Deed of subordination for shareholder

loans

√

SPV articles of association √

Loan Agreement √

Pledge of Shares √

Assignment of various crts √

Land Use

Corporate Documents

Financing Documents

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Any Questions?