Mainstream Renewable PowerProject Finance ConferenceA Developer’s Perspective: Funding Project Equity

London, February 2016

Developer’s Perspective: Funding Project Equity

● Introduction

● Mainstream Overview

● Active Markets

● Funding Options to Maximise Value

● Build or Sell ?

● Hold Co vs Project Level Fundraising

● Vendor or Mezzanine Finance

● Market Themes

● Auctions vs Feed In Tariff

● South Africa Case Study

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Mainstream Overview

● Mainstream is a developer, constructer and operator of large scale, wind and solar projects

● Sole growth focus on emerging markets

● Withdrawal from offshore / North America

● Founded in 2008 by Eddie O’Connor, previously the founder and CEO of Airtricity (sold to Scottish & Southern Energy and E.On in 2008 for c.€1.8 billion at an IRR of 54%)

● Business model based on “Build & Sell” approach with regional partners allowing for recycling of capital through disposals of regional platforms or commissioned assets

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Mainstream Overview

Active Markets: Pipeline of 7.7GW

51 Projects MW description refer to gross nameplate capacity. For projects in construction / operation Mainstream net ownership of assets is c.100MWs

• Pan-african renewable energy generation company.

• Established in 2015

• Targets to deliver over 1,000MWs by 2020

• Projects in Construction: 360MWs

• Projects pre-Construction with PPA*: 750MWs

• Local management team in place

• Projects developed by Mainstream (or acquired from 3rd Parties) transferred to the JV at or before Financial Close

Mainstream’s Joint Ventures60:40 with leading emerging markets investor Actis

• Chilean renewable energy generation company

• Established in 2013

• Projects in Operation: 33MWs Cuel wind farm

• Projects pre-Construction with PPAs: 265MWs

• Local management team in place

• Projects developed by Mainstream transferred to the JV at or before Financial CloseCuel wind farm, Chile

(33MW) in operation

Noupoort wind farm,

South Africa (80MW) in

construction

*Includes Ghana, Egypt where PPA commercial terms agreed

Choice of Funding

Greenfield

Developer vs IPP Business Model

Corporate Equity & Debt

Greenfield or

AcquisitionDevelopment Construction

MAINSTREAM GROUP

Sale to Utilities &

Infrastructure

Asset Investors

Cash recycled

Construction

PPA in place or

pre-sale confirmed

“Ready to Build”

● Sale of projects / platforms is primary means of funding the business

● Holding operating projects would generate recurring income but requires large pools of capital

Construction /

Operating Services

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70% -

60% -

50% -

40% -

30% -

20% -

10% -

Consentsreceived

Gridsecured Commissioning

Financialclose

Turbine deposits

DEVELOPMENT OPERATION

Target IRR Range for Operational Phase

Target IIR Range for Development Phase

Value Creation

Greenfield

Required Return

Value Creation

CONSTRUCTION

● All routes leading to lowest cost capital driven by competition?

● Returns for development phase significantly higher than operating

9

15% -

14% -

13% -

12% -

11% -

10% -

9% -

8% -

Consentsreceived Commissioning

Financialclose

DEVELOPMENT OPERATION

Greenfield

Project Rate of Return

Yield Compression

CONSTRUCTION

Commissioning +1 Year

“Yield Compression” Creates Development Profit

• Required rate of return drops as risk drops –

• Difference is developer profit

IRR – Build and Hold From Greenfield

IRR – Build and Hold From Consent

IRR – Build and Hold From FC

IRR – Build and Hold From COD

IRR – Build and Hold From COD +1

Funding Options

“Revolver” or Mezz/ Project Finance

HoldCo

Development

Corporate Equity & Debt

Joint Venture Co-Investors

Construction Operational

Infrastructure Asset Investors / Owners

Letters of Credit

Developer Sources of Funding:Cost, Control, Availability

Corporate Level Project Level

Cost, Control, Availability Cost, Control, Availability

StageHold Co Equity

Corp. Debt

Trade Finance

JVs / 3rd

Party Project Finance

Mezz / Vendor Finance

Development

Construction

Operation

Sources Sources

Development PE, Funds, Family O./ HNW, Sovereign

Banks, Funds , Family O./ HWM

Banks (Retail)

PE, Funds, OEM, Developer Multilateral

Banks / Multilateral

OEMPEFunds

Construction

Operation

● Key Considerations of Cost, Control and Availability

Market Themes

Market Themes

● Yield Co

● Welcome liquidity or unwanted volatility

● Feed in Tariffs vs Competitive Auctions

● Chile, South Africa, Mexico , Scotland (Offshore)

● Cheaper than Fossil Competition

● Auctions vs Feed In Tariff

● How to build a “sustainable” development business ?

● South Africa Case Study

● Impact of Competition

● Funding Options to Maximise Value

● Build or Sell ?

● Hold Co vs Project Level Fundraising

● Vendor or Mezzanine Finance

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Emerging Markets: Competition with Fossil

● In many markets solar PV and wind are now cheaper sources of power generation than fossil fuels

● South Africa REIPPP

● Wind / Solar PV cheaper than projected cost of new coal power (R0.97KWh)**

● Chile CNE Tender Oct’ 2015

● 1,200GWh/year of electricity (c. 500MW capacity). Price based for “blocks”, open to all types (incl. coal and gas)

● All five winning bidders were wind or solar projects.

● Tariffs for solar ranged from $64-$68/MWh and $79/ MWh for wind

● Coal bid: $85/MWh , CSP plus storage bid $97/MWh.

● Weighted average was 26% lower than the last auction of $107.6/MWh.

● Mainstream JV (Aela Energia) won c.265MW, (65% of the tender)

Sola

r

Solar*

Win

d

Wind* Gas Gas C

oal Coal Oil

Oil

Nu

clea

r

Nuclear

*Resource dependent** Project Cost of Medupi and Kusile coal plants Mergence Investment Managers

Development: A sustainable business ?Case Study: South Africa REIPPP Average Wind & Solar PV Tariffs

3.44

2.05

1.10.82

1.421.12 0.82 0.65

627MWs

417MWs

435MWs 415MWs

649MWs 559MWs 787MWs 676MWs0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Round 1Nov 2011

Round 2Mar 2012

Round 3Aug 2013

Round 4Aug 2014

R/K

Wh

Solar PV

Wind

● Total of 4.5GW Wind and Solar PV awarded to date● Tariffs have reduced by 54% / 76% since Round 1, c.20% reduction from

Round 3 to Round 4 ● Mainstream awarded c.850MWs (18.5% of total)

● Impact of Competition:● Route to Market, Returns, Scale, Profit Sources

Impact of Competition

● Few Feed-in Tariffs remaining

● Notable: Egypt, Uganda, Kenya, Malawi – only for sub-10MW projects, Algeria, Ghana (small scale), Nigeria

● FiT may be superior means of “kick-starting” the industry

● Auctions becoming the norm for established and growth markets:

● Notable: South Africa ,Chile, Mexico

● Others: Morocco, Zambia, Senegal, Botswana, Egypt

● Ability for Developer’s to take large premiums at Financial Close under pressure

● Reaction:

● Ensure management of costs

● Stay in longer: beyond FC

● Seek value by other services: Construction, Operation

● Seek value on future sell down

Summary

●Questions?

Contact Details:

Paul Corrigan

Head of Corporate Finance

Mainstream Renewable Power

Sandyford, Dublin 18

Ireland

Notice:

This Presentation does not constitute, or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase, any Securities, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore.

This Presentation and the contents thereof are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. No reliance may be placed for any purpose whatsoever on the completeness, accuracy or fairness of the information or opinions contained in this document.

No representation or warranty, expressed or implied, is made or given by or on behalf of the Company or any of the Company’s respective subsidiary undertakings, or any of the Company’s directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this Presentation and no responsibility or liability is assumed by any such persons for any such information or opinions. This Presentation does not constitute an offer of, or the solicitation of an offer to subscribe for or buy, any Securities to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful and therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions.

UNITED STATES

In making an investment decision investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. The Securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Presentation or related Information memorandum. Any representation to the contrary is a criminal offense. The Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state or other securities laws nor is such registration contemplated. The Securities will be offered and sold only to qualifying recipients of the Information Memorandum pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof and any applicable regulations promulgated thereunder and in compliance with the applicable securities laws of the states and other jurisdictions where the offering will be made.

The information contained in this Memorandum (including market and industry data) has not been independently verified. No reliance may be placed for any purposes whatsoever on the information contained in this Memorandum or on its completeness. No representation or warranty, express or implied, is given by or on behalf of the Company or any of the Company’s respective affiliates or their respective directors, officers or employees, or any other person, as to the accuracy, fairness, correctness, completeness or verification of the information or the opinions or the beliefs contained in this Memorandum and no responsibility or liability for any loss howsoever arising from any use of this Memorandum or its contents or otherwise arising in connection with this Memorandum is or will be accepted for any such information, opinions or beliefs.

There are matters discussed in this Memorandum that are forward looking. All such forward looking statements are based on management assumptions and beliefs based on information available to them at this time. These forward looking statements speak only as at the date on which they were made and are, by their nature, subject to significant risks and uncertainties and actual results, performance or achievements may be materially different from those expressed in such statements. The Company and their advisors are under no obligation to update or keep current the information contained in this Memorandum. No statement in this document is intended to be nor may be construed as a profit forecast.

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