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I M P A X I M A P X ETTC – Montreal August 2004 Equity Finance for Renewable Energy

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I. M. P. A. X. Equity Finance for Renewable Energy. ETTC – Montreal August 2004. Renewable Energy in Europe. A Broad Agenda. £19,575,000 Construction Finance for the Crystal Rig Wind Farm. - PowerPoint PPT Presentation


  • ETTC MontrealAugust 2004

    Equity Finance for Renewable Energy

  • Renewable Energy in Europe

  • A Broad AgendaOnshore wind

    Offshore Wind


    Portfolio Refinancings


  • Lessons in Europe

    Regulation is key to Renewable Energy Tariffs/Businesses- Debt oriented tariffs = Germany, Spain, Denmark, Italy CIP 6- Equity oriented tariffs = UK ROCs, Italy CVs Project Debt Is Widely Available - Skills in the banking sector - familiarity with regulatory issues- Capital allocated by banks - even post Basel 2! Returns are Infrastructure Returns - 12%-18% IRR is proven to be acceptable to institutions- 5%-12% IRR plus tax breaks was briefly a retail product where capital markets were reasonably developed

  • Appearances vs Reality

  • Renewable Energy in

    Emerging Markets

  • International Mezzanine Finance$10 Million Deal with Nordic Hydropower and EDF

  • GEF and IFC Micro-finance for PVDeal Example:Barclays Bank of Kenya Barclays Bank of Kenya co-invests with PVMTI to provide loans to multiple Kenyan Savings and Credit Co-Operatives (SACCOs) in partnership with KUSCCO, an umbrella organisation representing over 1,500 SACCOs.

    SACCOs will on-lend funds to their members to purchase PV systems, which will be supplied by Solagen and other quality PV companies.

  • Lessons in Emerging Markets

    Government Regulation is key to Renewable Energy Tariffs- Tariffs may be new, changing or not widely available Project Debt Is Less Widely Available - Skills exist in the banking sector- Regulatory support not as developed- Capital allocations vary - country debt risk ratings, etc. Returns are Infrastructure Returns and less! - 12%-18% IRR less proven to be acceptable to institutions given additional risks- 5%-12% IRR not acceptable to traditional investors

  • Bridging the Market Grant Gap!Technology TransferApplications not R&DLong term, market forces are more sustainableRegulation can support investment

    Applications Require Private Funding:IRR levels create market funding gap

    ODA funds:Country Co-financing process is heavy as you know!Even risk being drawn into debt relief debateLargely focussed on non-energy issuesMay need to be given more leverage and efficiency

  • Existing Funding Programmes [1]* DEG, FMO and IFC usually invest in minimums of 5-15 million, not in smaller deals.

  • Key Issues Addressed by the PCITechnology TransferApplications not R&D

    Only market forces are sustainable long termRegulation can support investment

    ODA funds:Miss the Energy-Poverty LinkNeed to recognise the oil bill impact = debt bill impactMay need to be given more leverage and efficiency

    Points remain:IRR levels create market funding gap

  • Patient Capital Initiative

    Global Renewable Energy Fund of Funds

    Presented at the World Conference for Renewable EnergyBonn, June 2004

    In Support Of The Johannesburg Renewable Energy Coalition

  • Public Private Partnership Process2003 - Private Sector Informs Public Sector (JREC context)

    Expert Group meetings and high-level political discussion Equity Funding Gap Defined Patient Capital Initiative Emerges

    2004 - Public Sector Engages Private Sector to Address Issues

    EC Feasibility Study of Patient Capital InitiativeExpert group meetings Financial and market feasibility reviewPublic presentations/consultations

    2005-2006 - Public Sector invests in Public-Private Partnership

    Subject to private sector co-investment - leverageRequiring private sector execution skills

  • Basics of the PCI Fund of FundsOutsourcing what is most economically done by othersPolicy guidelines in forcePrivate sector executes what policy investors cannot achieve directly

    Separation of Strategic and Operational Roles Policy controls retained Top Level RoleInvestment Identification and Execution on the ground

    Bring in Other Sources of Funds Leverage commercial and other co-investment funds multiply funds committed by the PCI at both the subfund level and the investee company level

    IRR Buy-downsubordination terms of patient capital!

  • Structure of PCI Fund of Funds







    Funding down by seed funding or through

    Patient A Share Investment

    Global Renewable Energy Fund of Funds

    Private and Public Co- Investors in Sub-Funds through Commercial B Shares

    Local co-investment in projects based on sub-fund investment requirements


    Project or Business Investments

  • The PCI = A One Stop Shop

    Co-funding for Local / Regional Subfunds

    Invest with local institutionsInvest with local experts on the groundOn subordinated terms first in, last out

    Funding for Carbon Credit purchase

    Funding for Technical Assistance

  • Prospective Carbon Credit Funding Structure

  • The PCI - What and Where?Funding for Specialist subfunds

    Regionally Specialised = Africa, AOSIS, LA, etc.SME and technology specialist options for the subfunds

    Solicitation Process

    Market changes, one cannot prejudge best opportunitySubfund proposal solicitationsWhere (policy), How much (leverage), Patience (Deal Terms)

  • Operational Structure of the Fund of Funds

    Investment Remit: Approves investments based on policy and economic criteria Policy remit: Oversees fund activities (and may include an audit subcommittee) Communicates official Fund instructions and reports to outside parties and investors

  • Base Case Full Life Cycle Sources and Uses of Funds

  • PCI Scenarios Altering Subfund Size, Number and Performance

  • Time FramesProject launch -- January 2004Bonn June 2004Draft Feasibility Study of Patient Capital VehicleDeal Flow to Substantiate the Investment AgendaVehicle structure reviewed with StakeholdersFinal Feasibility Analysis September 2004Report socialised with stakeholdersFund-raising for the Fund of FundsSubfund Solicitations in 2005-2006Investments on the Ground Late 2006 Target

  • Contact Us DirectlyPeter RossbachImpax Group plc

    Broughton House6-8 Sackville StreetLondon, W1S 3DGUK

    Tel: +44 207 434 1122

    E-mail: [email protected]