ING Wholesale Bank

Non-recourse Project Financing

Drijvend Zonnepark Lingewaard

Oost NL Workshop sessie, 29 November 2018

ING & Sustainability

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[xxx] | Briefing Package | January 2016

ING Bank at a glance

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ING Bank well-positioned for growth

• Market Leaders: Leading Retail and Wholesale Bank in the Benelux with a customer base of 10.9 million individuals

• Growth Markets: Strong positions in fast-growing countries in Europe, such as Poland, Romania and Turkey. Potential for growth in our strategic positions in Europe

• Challengers: Organically-built leading direct bank in Germany/Austria, Spain, Italy, France and Australia. Merging Retail Banking with Wholesale Banking to turn into domestic banks

Strong Wholesale Bank with international network

• Leading Wholesale Bank in Benelux and CEE: Supporting domestic economy. Leaders in specialised finance and financial markets

• Global franchise in Financial Markets, global provider of specialised banking products such as Structured Finance and European provider of cash management, leasing and wholesale finance products

• Only Dutch bank with a large international network

ING holds strategic positions in TMB Bank in Thailand, Bank of Beijing in China and ING Vysya Bank in India

◼ Wholesale Banking

◼ Wholesale and Retail Banking

◼ Alliance Banking

ING is strongly committed to sustainability20 year track record in sustainability

First ESR policy Launch of Business

Principles

First Sustainability report

Creation of ING Groenbank

Launch of

Sustainability

Equity Fund

Partnership with

UNICEF

Start carbon

offsetting

Sustainability

targets

Start of Sustainable Lending Team

1997 199919981996 2000 2005 2007 2010 2012 2014

Sustainability embedded in strategy and purpose

2015

ING issues own Green Bond

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Sustainability direction supported by

• Sourcing renewable energy

• Operating carbon neutral

• Integrating sustainable procurement

• Offering simple and easy products and services

• Supporting customer decisions

• Creating societal impact

• Client assessment

• Publicly disclosed environmental risk framework

• Applied to business globally

• Creatingawareness

• Accelerating sustainable business innovation

• Developing new (sustainable) business models

Environmental and social standards

Sustainable business

Financially empowering customers

Our own transition & &Supporting clients’ transition to sustainable business

Our CEO’s commitment to sustainability

Companies that address climate change and resource scarcity, companies that make sustainable transitions: they will be the winners of tomorrow’s economy.

And we want to back those winners!

–Ralph Hamers

CEO of ING Group

2016

Rated as the most sustainable bank

2017

Introduction of Sustainability Improvement Loan

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The clear need for sustainable businessEnvironmental challenges require businesses to act

Climate change Resource scarcity Water distress

• Melting of ice and the rising of theseas results in flooding and erosion ofcoastal and low lying areas.

• Extreme weather causing floods anddecreasing water quality.

• Globally effecting all regions, bothrural and urban.

• Introducing risks for human health,society, economy and wildlife.

“It takes communities, cities, states, industry, business and everyday people…

… to transform high-level decisions into real-world action.”

Patricia Espinosa, UNFCCC Executive Secretary, COP23

By 2050, the global population is expected to reach 9 billion—…

… increasing pressure not only on Earth’s natural resources, but also on many of the world’s most environmentally sensitive regions WWF, 2017

1,5x

4x

2,5x

Current resource consumption compared to the earth’s regenerative capacity differs by region

If no changes are made, …

• Projected 2% annual demand growthfor freshwater will lead to seriousconstraints.

• One out of two countries is prone towater stress.

• Flood-prone zones need betterprotection.

…global water demand is forecasted to outpace the sustainablewater supply in 2040 by 35%.. ING, 2017

Project financiering in general

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Overview of different financing structures

Structure Pros Cons

Balance sheet financing

• Flexibility of funding

• Limited due diligence requirements

• Straightforward documentation, quick execution

• Corporate terms, covenants and pricing

• Shorter tenor, refinancing risk with owners

• All debt raised on balance sheet of owners

• Project risk remains entirely with the owners

Project financing

• Long tenors potentially up to the tenor of the off-take agreements possible

• Higher leverage possible

• Inclusion of possibly cheaper EIB/EBRD funding and ECA cover

• Stringent due diligence requirements

• Stricter on going monitoring and debt covenants

• Longer execution time of 6-9 months

• Higher cost of debt

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Typical project structure

• A project has a number of phases:

• Development

• Construction

• Operation

• During the development phase the project developer seeks an appropriate site and obtains permitting, land leases and (specifically for wind projects) performs a wind measurement campaign

• Funding (non-recourse) during the construction phase is received from the investors and the banks to pay for the various construction contracts

• Once the construction is complete, the operational phase starts. The revenues from the PPA will pay for the repayment of the loans and if available dividends to the shareholders

Typical project structure

OpCo

Investor A Investor n

Lenders

Construction

O&M

Permits and Land

Grid Connection

PPA

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Contracts

Shareholders and Equity Subscription Agreement

• Implements the corporate governance amongst the shareholders and the funding arrangements

Finance Agreements

• Implements the commercial, reporting and security agreements with the financing banks

Construction Agreements

• Allocates work packages to the construction contractors, often project finance banks require direct agreements with contractors

Long Term Maintenance and Project Management Agreement

• Retains and incentives the contractor to perform O&M services in the most cost effective manner

Permits and Land leases

• Outlines the responsibilities of the project manager during construction and operating phase

Grid Connection Agreement

• Secures the grid access of the project in a timely fashion

Power Purchase Agreement (“PPA”)

• Standard agreement with a buyer of the generated electricity

OpCo

Investor A Investor n

Lenders

Construction

O&M

Permits and Land

Grid Connection

PPA

Financing documents and Project documents

Pro

ject

Do

cum

en

ts

Financing Documents

Case Study Drijvend Zonnepark Lingewaard

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Financing structure Drijvend Zonnepark Lingewaard

Analysing the business case for Drijvend Zonnepark Lingewaard

Capex

PV panels

Inverters

Floatingstructure

GRID connection

Financing costs

Contingencies

Opex

O&M fees

Insurance

Surface lease

Assetmanagement

GRID connection

WOZ

Revenues

Irradiation

SDE+

PPA

Analysing the business case for Drijvend Zonnepark Lingewaard

• Overall several +/-, conclusion per business case may differ• Prices floaters is expected to come down• Water based solar PV installations require more and periodic cleaning• SDE+ is capped at 950 FLH• Many of the other points will be location specific

• More uncertainty given that:• Permitting process• Legal framework for taking security is not entirely clear (water surface)• Technically more complex

• But in the case of Lingewaard, all things came together!

https://vimeo.com/286176915