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PNE WIND AGEWEC 2010 Warsaw

Theme: Finance and economics

Session: Project finance

Presenter: CEO Martin Billhardt

Buchholz wind farm

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Value chain of offshore wind farms: Development of offshore wind farms

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Source: BSH, modified by PNE WIND AG

Approval process of offshore wind farmsGerman Federal Maritime and Hydrographic Agency (BSH)

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• The scope of cooperation with a wind turbine supplier may include:

• First step: help to organise the financing, building up a project organisation, finding sub-suppliers, supply quotes and technical input, assist with an feasibility study, manage risiks and interfaces of the project partner, support with technical details

• Second step: negotiation of a Turbine Supply Agreement (TSA) and Service and Availability Agreement (SAA)

• TSA: liability, warranty, waranty power curve, weather risks, scope of work, bankability issues, timeframe for completion, guarantees of the parties

• SAA: cost for labour, parts and equipment, service fee, availability guarantee, liability

• The scope of cooperation with an offshore project management company may include:

• Project preparation

• Project procurement

• Contracting and contract management

• Project support and organisation

PNE WIND AGOffshore Private Equity Fund: the value of experienced partners

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• Initiation of a Private Equity Fund with the aim to invest in permitted offshore wind farms

• Exit: two years after commissioning sale to a long-term investor based on historical data

• Target IRR: 14-18%

PNE WIND AGOffshore Private Equity Fund: idea

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Framework

• Maturity: 5-6 years

• No. of Offshore wind farms: 6 wind farms

• No. of wind turbines/wind farm: 80 turbines

• Capacity per wind turbine: 5 MW

• Capacity held by the fund: 2.400 MW

PNE WIND AGOffshore Private Equity Fund: scheme and example

Capital

• Required investment: 3,3 Mio. EUR/MW

• Total investment-volume: 7.920 Mio. EUR

• Equity: 40% (3.168 Mio. EUR)

• Debt: 60% (4.752 Mio. EUR)

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PNE WIND AGOffshore Private Equity Fund: „adjustable screws“ -> risks

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• The value consists of wind, feed-in-tariffs, proven technology, experience, knowledge

• During the following phases the wind is examined, the feed-in-tariffs are fixed and proven technology is chosen to manage the fund with an experienced project management team which has an in-depth project and industry knowledge

A good developer differentiates as follows to prepare the asset:

1. Developing the permission

• Get the permission by analysis of different surveys (shipping, environment, public, general technical, geotechnical, health & safety, construction aspects) and considering the project site, wind farm layout, geophysical investigations, wind studies, turbines, foundations and the electrical design

2. Structuring the financing

• Appoint legal, technical and insurance advisors, structring the finance, negotiate commercial contracts, develop financial model and indicative term sheet, prepare an info-memo for banks, building the final bank club, due diligence, contract negotiation, financial close

PNE WIND AGOffshore Private Equity Fund: the value

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3. Managing the construction

• Evaluation of potential partners concentrates on companies with a high level of experience: track record, design capabilities, financial strength, personnel and equipment capability, Health & Safety record

4. Servicing the wind farm technically and commercially

• Technical services will be ensured mainly by a Service and Availability Agreement with the turbine supplier

• Commerical issues will be organised with partners who have a long experience in this field with onshore windfarms, partly with offshore technology

PNE WIND AGOffshore Private Equity Fund: the value