financial tsdhdrhurmoil clapp
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Implications of Financial Turmoil for High Capital ProjectsJuly 2009
John D. ClappManaging DirectorGlobal Power Sector Specialist388 Greenwich Street, 34th FloorNew York, NY 10013Tel - 212-816-8588
Fax - 646-291-1879
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Executive Summary
Market capacity remains an issue for large projects:
Withdrawal of many banks from project bank market
Project finance bank market universe is considerably smaller than 24 months ago
Some European banks retrenching in home markets
Capital allocation remains a major constraint
Relationships and returns driving deal selection
Capital constraints reducing hold positions, requiring more banks to syndicate large projects Ticket sizes more typically in the $30-$50mm range, not the $80-$100mm clubs of the past
More lenders = potentially greater execution risk, extended time to close
Corporate bond market has stabilized after a spike in spreads at the end of 08
Remains an attractive market for utility level finance of major CAPEX programs
Potential rating agency concerns if anticipated debt metrics deteriorate due to projected CAPEX spend
Private placements remain open as an option to project sponsors, but project size is limited
DOE loan guarantee program could relieve some of the capacity issues in the market and allow a larger number ofconventional projects to go forward than would otherwise occur particularly those of size
Capital markets remain challenged for large projects (>$500mm) despite tightening credit spreads. SomeUS project developers now waiting on the release of the Stimulus Act (ARRA) US DOE loan guaranteeprogram rules before accessing the capital markets with large projects
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Trans-Allegheny Interstate Line Company
Transaction Overview
The Project is divided into five segments, each of which can beindependently constructed, energized and placed into service, with theexception of two segments located in Virginia; total cost is estimated at$1,079 million
The Project receives stable and predictable cash flow during and postconstruction; asset is entitled to earn a rate of return for 50 years afterconstruction while O&M, taxes and depreciation are fully recoverable as perFERC declaratory orders
During construction, project costs are funded 1/3 from equity contributionsand 2/3 from the Credit Facilities; at completion, equity contributions arerequired from the Sponsor to establish a debt to equity ratio of 50:50
The Credit Facilities benefit from structural features such as limitedavailability on a per-segment basis prior to state sitting permits beingissued and flexibility to abandon certain segments if state permits cannotbe obtained
Investment Highlights
Strong and experienced sponsorship in Allegheny Energy with liquidity ofmore than $760 million as of March 31, 2008
A valuable and strategic transmission asset with strong federal and regionalsupport
Substantial free cash flow of $205 million during the construction periodfrom 2008 to 2011; avg/min DSCR over the term of the Credit Facilities is3.72x/2.40x
Low construction and operation risk
A strong credit counter party in PJM, one of the largest and mostestablished markets in the US
Conservative capital structure post completion, TrAILCo will have 50%leverage and Debt to EBITDA ratio of 3.4x
Syndication
The Credit Facilities were oversubscribed with approximately $750 millionin total commitments
9 banks participated at the Agent (>55 million) and Co Agent level (>50million) while another 8 participated at the Manager (>35 million) andLender level (>20 million)
Borrower: Trans-Allegheny Interstate Line Company(TrAILCo), a special purpose entity created by
Allegheny Energy to develop, construct, own andfinance a 215 mile 550 kV transmission linespanning Pennsylvania, West Virginia and Virginia
Facilities: $530 million Senior Secured Construction Facility
$20 million Senior Secured Revolving Facility
Sponsor: Allegheny Energy, Inc
Maturity: 7 Years
Amortization Bullet
Pricing: L + 187.5 bps (Yr 1-5); L+ 200bps (Yr 6-7)
Commitment Fee 50bps per annum; 37.5bps if more than 50% of theCredit Facilities are drawn
Security: A first priority perfected security interest in all equityinterests in TrAILCo
Closing Date: Aug 15, 2008
Citis Roles: Coordinating Bank
Joint Bookrunner and Joint Lead Arranger
Administrative Agent
US$ 530 Million Senior Secured Construction FacilityUS$ 20 Million Senior Secured Revolving Facility
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Noble Environmental Power - New York 08
Transaction Overview
Noble New York 08 Projects comprise three separate wind parkswith an aggregate generating capacity of 330 MW, utilizing 220General Electric 1.5 MW SLE wind turbines. Total project costs
were approximately $835 mm
NY 08 Projects are located in Chateaugay, Altona and Wethersfield,New York, in close proximity to Nobles existing NY 07 wind parks
Tax Equity: GE invested $222 mm Class A Equity at TermConversion. In addition, GE will make additional equity contributions(PAYGO payments) over the first ten years as the wind parksgenerate Production Tax Credits (PTCs)
Energy Hedge: Citigroup Energy Inc. entered into a 10-year EnergyHedge with the Borrower, fixing the price on the 1-year P95 energyproduction of the NY 08 Projects, approx 79% of P50 volume
REC Contracts: NYSERDA (NY state agency) entered into 10-yearfixed price contracts to purchase 95% of the Renewable EnergyCredits (RECs) produced by the NY 08 Projects
100% of projected cash flows are un-contracted in Years 11-15
Investment Highlights
Largest wind financing ($741 mm) completed in U.S. to date
Integrated financing and commodity hedging transaction, with Citi
leading the financing as Admin Agent and Jt Bookrunner andproviding 100% of the 10-Yr f ixed-for-floating Energy Hedge
Merchant tail in Yrs 11-15 provided Noble with incrementalleverage. Approx 55% debt-to-cap, $1,283 per kW at COD
Construction delay risk during a PTC expiry year was mitigatedthrough a flexible Class A Equity agreement and with incrementalcontingent equity and sponsor support
Transaction successfully syndicated during ongoing civil inquiryconducted by the New York State Attorney General regardingbusiness practices of wind developers in upstate New York
Borrower: Noble Environmental Power 2008 Hold Co, LLC
Facilities: $632 mm Sr Sec Construction & Term Loan Facility(converted to $412 mm Term Loan at COD)
$109 mm Letters of Credit & Cash Collateral Loans
Sponsor: Noble Environmental Power (majority owned byCCMP Capital Advisors and Canada Pension Plan)
Maturity: Construction + 15 Years
Amortization 15-year sculpted amortization post-COD with aTarget DSCR of 1.00x based on 1-year P-99 wind
Pricing: L+175 (Yr 1-4); L+187.5 (Yr 5-8); L+200 (Yr 9-10);L+225 (Yr 11-12); L+250 bps (Yr 13-15)
Commitment Fee 50 bps per annum
Security: First lien on all assets, accounts, and equity interestsof the Borrower & the Project Companies
Financial Close: June 30, 2008
COD: April 3, 2009
Distributions: 1.2x DSCR Yrs 1-10. 1.4x DSCR Yrs 11-15
DSR Account: 6 mos Yrs 1-10. 12 mos Yrs 11-15.
Citis Roles: Administrative Agent and Joint Bookrunner
Energy Hedge Provider (Citigroup Energy Inc.)
Wind Study / IE: Garrad Hassan America, Inc.
US$ 632 mm Senior Secured Construction & Term Loan FacilityUS$ 109 mm Letters of Credit & Cash Collateral Loan Facility
2008 Americas RenewablesDeal of the Year
-Project Finance International andProject Finance Magazine
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Capital Markets Overview - Then & Now
Credit Market IndicatorsSummary Observations
Interbank lending rates(LIBOR) continue to fall as
interbank credit concernsdiminish
Treasury rates rising fromhistoric lows
High grade bond marketcontinues its strong start to2009, reflecting investor
demand for low-risk assets
High yield bond market hasalso improved fromOct/Nov, with BB creditsnow seeing market access
Equity markets remaindepressed, complicatingcapital raising forcorporates and financialsneeding to recapitalize
Gas and oil decoupling
Low gas depressing peakpower prices, affecting newproject economics
(1) February 1-28, 2008 vs. December 1-31, 2008 vs. June 1-26, 2009
February 1, 2008 December 1, 2008 June 29, 2009
3 Month LIBOR 3.10% 2.22% 0.595%
10 Year US Treasury 3.59% 2.73%. 3.48%
5 Year Swap Spread 75 bps 87 bps 37.7 bps
High Yield Index (Yield) 10.0% 19.6% 9.91%
Investment Grade CDX Index 107 bps 260 bps 89 bps
Investment Grade Debt Issuance(Monthly)1
$55.0B $19.5B $36.1B
VIX Volatility Index 24.0 68.5 27.0
Dow Jones Industrial Average 12,743 8,149 8,529
S&P Index 1,395 816 927
Crude Oil ($/barrel) $88.96 $49.28 $71.49
Natural Gas $8.75 $6.64 $3.94
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Project Finance Market Update
Bond Market
Investors are selectively open to transactions in defensivesectors, including toll roads and utilities
Market receptivity to private equity-sponsoredtransactions challenging compared to corporates
Given the supply overhang in the investment grade corporatemarket, demand for project paper likely to come more fromthe traditional long-term, buy-and-hold investors, such as thelife insurance companies and pension funds and less frommoney managers and hedge funds
Investors remain risk-averse and prefer plain-vanillatransactions to more highly structured financings
BBB-/Baa3 is being treated with skepticism, withBBB/Baa2 receiving significantly better reception
U.S. Private Placement (USPP) market more receptive toproject deals compared to the public markets
The USPP market has demonstrated resilience in thismarket turmoil
USPP investors comparatively more skilled in analyzingproject structures
As with the loan market, USPP investors have becomemore stringent on covenants and leverage
Given limited capacity, we expect to see more multi-tranchedeals targeting two or more markets simultaneously
General concern on overall environment, focus on high gradecredit quality
Crisis in financial sector has put focus on counterparty risks
The market remains selectively open, but conditions are challenging.
Bank Market
Many project lenders have significantly scaled back lending activitiesor exited the market
Many non-US lenders have suspended North American act ivityand are focusing on home markets
Increased cost-of-funding and return-on-capital hurdles
L+[350] bps area represents current market pricing for middle-of-the-fairway deals (tighter for renewables)
5-6 bps per $1 mm of commitment on long-tenor deals
Shorter tenors, to meet return-on-capital requirements
5-7 years, or shorter (e.g. 1-year construction loans)
Amortization schedule can be on 15 yr + basis
Limited appetite for credit stories
Banks are in a position to be choosy, given supply-demandbalance for capital
Focus on existing client relationships
Limited underwriting appetite
Virtually all sizable deals being executed on a club basis.Minimal retail demand
Transactions greater than ~$350 mm encountering marketcapacity issues
Uncertainty on cost-of-funding index rate LIBOR floors notuncommon
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Targeted Project Finance LendersEven as some major players exit the Project Finance market, there are still several large banks that are stillactive in providing bank debt financing.
French banks remain relatively well-capitalized relative to many of their European counterparts
Broad focus on power & energy, infrastructure, and renewables Top 3 (BNP, Calyon, SocGen) active, but maintain focus on lead arranger roles
Japanese banking sector remains among the strongest in the global financial community
Increased focus on Project Finance from largest Japanese lenders BoTM, Mizuho, and Sumitomo Mitsui
Canadian banks also remain well capitalized and active
Scotia remains an active top-tier lender with a focus on power & renewables with an increased focus on relationships
EDC has the ability to participate in size ($100 mm) for deals with Canadian content. Canadian sponsorship alsosupports ability to participate, though Canadian content is a key driver
German banks have a primary focus on renewables, particularly among landesbanks
HVB, Deka, KfW, NordLB, and LBBW remain relatively well capitalized and expect active PF participation in 09, though
on tighter terms, wider pricing, and with greater scrutiny on credit and relationship returns
Continued activity among largest Spanish lenders BBVA and Santander with increased focus on arranging roles,pricing and credit
ING is relatively well-capitalized relative to Benelux counterparts Very active in 08; expecting to be major PF participant in 09, with greater focus on pricing, credit and relationships
Dexia regaining momentum in the project finance space
In the US, Union Bank of California and Co-Bank remain active in project finance along with Citi
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Recent Comparables
Sponsor/Project Date Facility
Size
($mm) Tenor Spread Tier
Upfront
Fees
In MarketSenior Secured Term
Loan$275.0 5 yrs Not disclosed
A Wind Deal In Market Senior Credit Facilities $230.0 10 yrs300 bps (drawn)
100 bps (undrawn)Joint Lead Arranger (50mm) 300 bps
EMEClosed
6/26/09
Senior Credit Facilities $207.2 8 yrs 387.5 bps
enXcoClosed5/29/09
Senior Credit Facilities $100.0
MidlandCogeneration
Venture
Closed
5/28/09
Senior Credit Facility A
Senior Credit Facility B(non-amortizing)
$275.0
$140.0
7 yrs9 yrs
350 bps (Tranche A)
400 bps (Tranche B)
Tickets of $15, $25, and $50million
150-225bps
NextEraClosed
5/20/09
Senior Credit Facilities $343.0 8 yrs300 bps (drawn)
100 bps (undrawn)
TBD TBD
GennConnClosed4/27/09
Senior Credit Facilities
Equity Bridge Loans
$295.0
$240.0
5 7 yrs2.25 yrs
350 bps (drawn)
75 bps (undrawn)
40mm
25mm
250 bps
200 bps
First WindClosed4/22/09
Senior ConstructionFacility
$376.4 1 yr325 bps (drawn)
75 bps (undrawn)
Joint Lead Arranger (50mm)
Senior Managing Agent(40mm)
Lender (25mm)
300 bps
200 bps
150 bps
Despite the challenging environment in the credit markets, there are several project finance energytransactions that have recently closed or are currently in the market.
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27
23
31
36
56
29
21
11 11
20
27
21
55
59
20
46
22
62
0
15
30
45
60
75
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Amount($bn)
2008 2009
State of the Corporate Bond Market
Issuance Pace remains brisk
Jan - Nov 2008: $201.7 bnJan - Nov 2009: $263.9 bn
*Issue total through June 19, 2009; Source: SDC
Secondary Trading Liquidity Has Began To Normalized
ReflectYear-end
Source: Bloomberg (Primary Dealer Trading Volume); as of June. 17, 2009
10YR A Industrial Cost-of-Funds Have Remained Flat
Source: Citi Syndicate
And Market Access for BBBs is Strong
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Jan-06 Jul-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09
Yield(%)
10-yr UST
A Rated All-in Cost
0
2
4
6
8
10
12
14
16
18
2022
24
26
28
1-Dec 29-Dec 26-Jan 23-Feb 23-M ar 20-Apr 18-M ay 15-Jun
Week Beginning
IGC
orporateVolume($Bn
)
'BBB'-rated
'A'-rated or better
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Jul-01 Jul-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09
Volume($Billions
)
Average Weekly Trading Volume Per Day
Quarterly Moving Average
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Private Placement Market UpdateFollowing the upheaval in the global credit markets experienced in 4Q 2008, the private placement markethas returned to normalcy amid a host of issuers seeking to raise capital to satisfy funding needs and tobolster liquidity.
Source: Private Placement Monitor & Citi. Data as of June 22, 2009
Q2 2009 Q1 2009 Q4 2008 Q3 2008 Q2 2008 Q1 2008 FY 2008
New Issue Volume $4,680 $5,467 $1,113 $9,692 $10,858 $4,909 $26,572
US Volume (%) 36% 54% 87% 69% 59% 72% 66%
International Volume (%) 64% 46% 13% 31% 41% 28% 34%
Number of Issues 31 29 17 39 53 31 140
Unrated Issues (%) 55% 62% 53% 68% 65% 70% 66%
Average Deal Size $151 $189 $65 $249 $205 $158 $190
Current Private Placement Market Developments & Analysis
CurrentConditions in2009
Following the temporary pull-back experienced by the majority of the investors in late 2008, the market is presentlyopen with approximately 80% of institutions actively pursuing new investment opportunities
Most institutions have cash available and have returned to the traditional areas of focus, namely credit quality,covenant structure and pricing, as the major drivers of investment decision-making
A normal transaction flow has re-emerged, with attention focused on solid credits
With the renewed demand from the bulk of the market, a favorable imbalance has surfaced whereby the considerablebut modest transaction flow thus far in 2009 is contributing to an undersupply of issuance
Outlookfor 2009
Investor activity is expected to remain meaningful but nonetheless somewhat tempered from historical levels
Private placement investment programs are, on average, expected to remain flat to the previous year
Following the trend in the public market, credit spreads have rallied materially f rom the peak experienced earlier in theyear, although remain relatively wide when compared with historical levels
Notwithstanding the improving tone, issuers are encouraged to tap the market when access is available, due to thelooming supply awaiting to approach the public and private markets
2008
2009 YTD Volume Breakdown($ in billions)Traditional Private Placement Issuance($ in millions)
0.4
3.2
2.7
1.3
0.5
3.1
2.5
4.2 4.2
2.3
4.2
0.4 0.40.3
1.9
1.1
3.2
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2009 2008
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DOE Loan Guarantee Program
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Original DOE Loan Guarantee Program
The focus of the original program was and continues to be providing government-backed financing for energy projects thatavoid, reduce or sequester air pollutants and employ new or significantly improved technologies such as Coal
Gasification, Carbon Sequestration, and Nuclear Enrichment
The emphasis on innovative technologies significantly limited the universe of applicants
The Final Rule regarding the policies, procedures and requirements for this program were not officially published until 2007
The decision to process applications via target date solicitations, as opposed to processing applications as received is
recognized as one of the inefficiencies in the original program
A Credit Subsidy Cost, calculated as the NPV of the DOEs estimated losses on the loan minus the fees it receives is paid
by the Project before receiving the loan(1)
Projects whose applications are accepted are offered government guaranteed financing from the Federal Financing Bank(FFB) at a rate of approximately T+[25-50] bps
To date, only one major project has received a loan guarantee under the original guidelines
Solyndra Inc. solar panel manufacturing facility $535MM loan guarantee March 20, 2009
Original DOE Loan Guarantee Program
The original DOE Loan Guarantee Program (Section 1703) was created by the Energy Policy Act of 2005
and authorized the Secretary of Energy to issue guarantees for certain qualifying projects.
(1) In February, the Secretary of Energy announced plans to restructure this fee so that it is payable over the life of the guarantee.10
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DOE Loan Guarantee Program as AmendedThe American Recovery and Reinvestment Act of 2009 (ARRA) greatly expands the DOE Loan Guarantee
Program through the addition of Section 1705 to help finance upcoming alternative energy projects.
Updated DOE Loan Guarantee Program(EPAct Section 1705)
Original DOE Loan Guarantee Program(EPAct Section 1703)
Eligible Projects
Both commercial and advanced renewable energysystems including, Wind, Solar, Geothermal, andIncremental Hydroelectric
Electric power transmission projects
Advanced biofuels technologies (cellulosic ethanol, etc.)
Multiple solicitations for various innovative technologiesthat employ new or significantly improved technologies
including carbon sequestration, nuclear enrichment, andadvanced transmission technologies
Requirement that the technology is not a Commercial
Technology
Credit Subsidy Cost $6 Billion allocated under the ARRA to cover the Credit
Subsidy Cost for qualifying projects Credit Subsidy Cost to be paid by Borrower prior to loan
issuance(1)
Timing Loans to be reviewed and guarantees to be issued on a
rolling basis once program regulations are f inalized and
approved by the OMB (anticipated to occur in mid July)
Various application deadlines depending on solicitationand project type
Generally, length of application process has beengreater than one year
Program Size
Credit Subsidy Cost reflects expected losses to the DOE,so if the DOE assumes a 10% loss (which may be a highassumption for commercially viable projects), $60 billion -$100 billion of guaranteed loans can be issued
Approximately $42.5 billion in funds authorized throughfive solicitations
Guarantee Process
For commercial renewable energy projects and small
transmission projects, the DOE intends on using aDelegated Lender approach in order to expedite the
implementation of the program (outlined on the followingpage)
For advanced renewable, large scale transmission, andadvanced biofuel projects, the DOE intends to review theprojects themselves and issue guaranteed loans throughthe Federal Financing Bank
Applicants complete Part I and Part II applications andDOE reviews applicants, conducts due diligence, andissues guaranteed loans through the Federal FinancingBank
(1) In February, the Secretary of Energy announced plans to restructure this fee so that it is payable over the life of the guarantee.11
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Backbone Transmission Solicitation
Backbone Transmission (end of June 2009) 1705 Program (Stimulus Act)
DOE intends to launch a solicitation under the new 1705 Program to target backbone transmission (backbonetransmission to be defined in the solicitation)
Projects do not have to be innovative, but must be able to start construction by September 30, 2011
While this solicitation is under the 1705 Program, the backbone transmission projects will have access to 100% loanguarantees using the Federal Financing Bank (FFB) similar to the current 1703 loan guarantee program, but CreditSubsidy Cost (CSC) will be covered by DOE
Similar to the current 1703 program, applications will need to be submitted by the sponsor to DOE as will be specified inthe solicitation
Solicitation will be open ended with new application filing periods staggered every 45 days DOE intends to create some semblance of competition with set filing periods, but maintain overall rolling
application process
Applications are intended to be more summary in nature, but final applications will still require:
Letter rating from one rating agency
IE report
Financial model
Other reports and documentation as specified in solicitation While open ended, DOE believes there is a practical deadline of December 31, 2009
Under the 1705 program projects must begin construction by Sept. 30, 2011
DOE believes that backbone transmission applicants will need to conduct an Environmental Impact Statement (EIS)as part of the NEPA process, which may take up to 18 months to complete
Backbone transmission projects will need to begin the EIS process by end of 2009 to complete the process in timeto meet the construction deadline in 2011
As a part of the EPAct 1703 and 1705 Programs, the DOE plans on issuing three new solicitations in thecoming weeks. The first of these solicitations is expected to target backbone transmission projects.
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Re-Issue of Innovative Renewables/Transmission Solicitation
Re-Issue of Innovative Renewables/Transmission Solicitation (mid-July 2009) 1703 Program
DOE intends to re-issue the current 1703 Renewable/Transmission solicitation to allow applicants to take advantageof the Stimulus Act loan guarantee benefits, specifically DOE coverage of the CSC
DOE is increasing the size of the program per Congressional mandate from $10B to $18.5B
Congressional increase to make renewables program equal in size to nuclear reactor program
Increased funding available for all current and new solicitation applicants
As a 1703 program:
Projects must include innovative technologies
Can be renewable power generation, industrial facilities, or transmission
100% loan guarantees available if funding through the FFB
Application requirements similar to current Innovative Renewables/Transmission Solicitation:
Letter rating from one rating agency
IE report
Financial model
Other reports and documentation as specified in solicitation
Similar to the backbone transmission solicitation, the re-issued innovative renewable/transmission solicitation will be
open ended with new application filing periods staggered every 45 days
NEPA review requirements: DOE believes that an Environmental Assessment may be sufficient for most projects ratherthan the more extensive EIS.
Unlike the 1705 programs, there is no construction start deadline, meaning that the solicitation will be open until closedby DOE
DOE also expects to work with State and Local Development Agencies to co-lend to smaller renewable and industrialprojects under this solicitation and will begin a separate process to identify those agencies and their capabilities/pipelines
The DOE is expected to expand its Innovative Renewables/Transmission Solicitation under the 1703Program.
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Conventional Renewables Solicitation
Conventional Renewables solicitation (mid-July 2009) 1705 Program (Stimulus Act)
DOE intends to launch a solicitation under the new 1705 Program to target conventional renewables and non-
backbone transmission projects (to be defined in the solicitation) Projects do not have to be innovative, but must be able to start construction by September 30, 2011
Under the 1705 Program, the DOE intends to utilize the private capital markets and the existing banking infrastructureto streamline the application process and tap into the guaranteed (and unguaranteed) debt markets to financeconventional renewable and non-backbone transmission projects
Credit Subsidy Cost (CSC) will be covered by DOE
100% loan guarantees using the Federal Financing Bank (FFB) will not be available to conventional projects, loanguarantees expected to be limited to 80% of eligible project debt (with maximum debt to cap of 80%)
Eligible Lenders (to be defined) will be responsible for originating projects with sponsors, structuring the
transactions to market, and applying to DOE for a loan guarantee on behalf of the sponsor prior to financial close
Citi fully expects to be an eligible lender
A Program Manager at DOE will be assigned to each transaction to log the deal and interface with the lenderand sponsor as the process moves forward
DOE is relying on the lender for the majority of the necessary diligence and credit approval work prior tosubmitting the loan guarantee application to the DOE Credit Review Board (CRB) for a loan guaranteecommitment
Applications will be accepted on a rolling basis (no 45 day periods as in other solicitations), however, the CRB onlymeets monthly to make loan guarantee decisions
Once a transactions is ready for DOE review and CRB submission the process to receive a committed loanguarantee is expected to take 45-60 days to complete
The DOE is expected to issue a Conventional Renewables solicitation under the 1705 Program in mid July.
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Delegated Lender ApproachIn order to quickly and efficiently implement the new Loan Guarantee Program, the DOE has expressed itsintent to use a delegated lender approach for the projects seeking guarantees that implement commercial
renewable energy technologies.
Under a delegated lender approach, the DOE would leverage bank experience and due diligence capabilities in theproject finance space ultimately creating a public/private risk sharing arrangement
Qualifying projects would work with Eligible Lenders, which have been pre-approved by the DOE, to apply for a guarantee
The sponsoring financial institution would analyze the projects credit, structure the financing, conduct required due
diligence, and apply for a loan guarantee on behalf of the project and sponsor
If the DOE chooses to accept an application, it would guarantee a portion (Covered portion) of the total project debt
leaving a non-guaranteed portion (Uncovered portion) to be held by the financial institution to ensure and alignment ofinterests and that the credit analysis is conducted thoroughly
The amount of the Covered debt relative to the total project debt is still under consideration but is expected to be
approximately [80]%
Project Capital Structure
Sponsor Equityand Tax Equity
Project Level
Debt
Project Debt
DOE GuaranteedPortion
(Covered)Up to [80]%
Non-GuaranteedPortion
(Uncovered)
Uncovered portion expected to be held by sponsoring financialinstitution on market terms
Covered portion expected to be held by sponsoring financialinstitution or sold to investors in the private market (bank orbond) on market project financing terms and rates similar toother government guaranteed debt
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efficiency, renewable energy & mitigation
In January 2007, Citi released a Climate Change Position Statement, the first US financial institution to do so. As a sustainability leader in the financial sector, Citi has taken concrete steps to address this importantissue of climate change by: (a) targeting $50 billion over 10 years to address global climate change: includes significant increases in investment and financing of alternative energy, clean technology, and other carbon-emission reduction activities; (b) committing to reduce GHG emissions of all Citi owned and leased properties around the world by 10% by 2011; (c) purchasing more than 52,000 MWh of green (carbon neutral) powerfor our operations in 2006; (d) creating Sustainable Development Investments (SDI) that makes private equity investments in renewable energy and clean technologies; (e) providing lending and investing services toclients for renewable energy development and projects; (f) producing equity research related to climate issues that helps to inform investors on risks and opportunities associated with the issue; and (g) engaging witha broad range of stakeholders on the issue of climate change to help advance understanding and solutions.
Citi works with its clients in greenhouse gas intensive industries to evaluate emerging risks from climate change and, where appropriate, to mitigate those risks.
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