Bankability of PV Power Plants Shanghai, 19 th March Jason Sun ( 孙嵩劼 ), PV Power Plants & Systems

Transcription

1 Bankability of PV Power Plants Shanghai, 19 th March 2015 Jason Sun ( 孙嵩劼 ), PV Power Plants & Systems

2 Contents 1. Definition Bankability 2. Project stakeholders 3. PV project financing 4. PV project insurances 5. How to get a project bankability? 6. Summary & Outlook 2

3 1. Definition Bankability Bankability is an indicator (performance benchmark) for the project quality and also for financial feasibility Bankability is an expression of trust in a stable cash flow Bankability Bankability is a decision criterion and a decision basis for financial feasibility Bankability is the key to project financing There is no a standard or a common understanding for this term. 3

4 Bankability 1. Definition Bankability Due diligence process Financially feasible? If the result of the due diligence is positive, then the project is financially feasible (bankable). The Process Design. the bank is convinced that the loan will be repaid. the PV project is bankable. It is financially feasible by a bank.. the bank has a high future expectation for the PV project. Bankability means,... the bank is convinced that the project cash flow is stable for a long time. 4

5 Contents 1. Definition Bankability 2. Project stakeholders 3. PV project financing 4. PV project insurances 5. How to get a project bankability? 6. Summary & Outlook 5

6 2. PV project stakeholders 2.1 PV Power Plant, stakeholders and structure All risks + interruption of operation Equity Investor Project Developer Insurance Company Liability SPV (credit user) Loan contract Bank EPC contract 6 Construction Design Institute Module Manufacturer Inverter Manufacturer Others Supplier contract Supplier contract Supplier contract EPC Company O & M Company Energy sales contract O&M contract Lease contract Utility Grid Operator Land / Roof Owner SPV = Special Purpose Vehicle

7 Contents 1. Definition Bankability 2. Project stakeholders 3. PV project financing 4. PV project insurances 5. How to get a project bankability? 6. Summary & Outlook 7

8 3. PV project financing 3.1 What is project financing? Project finance was developed to finance infrastructure projects that might be too large for an individual investor s corporate balance sheet. In the context of a project financing, only the PV power plant itself is the asset and the security for the banks. There is no recourse to a corporate creditor. Typically, the finance will be 70 80% loan and 30 20% equity. Financing of a project is solely based on its risks and its future cash flow. 8

9 3. PV project financing 3.2 Basis structure of a project financing Insurance company All risks + interruption of operation Liability Equity 20 30% Equity Investor SPV (Equity + Loan) Rate of return Loan 70 80% Debt service Bank O & M company O & M Contract Energy sales Cash flow Bankable securities EPC company Guarantees EPC Contract Utility, Grid Operator 9 SPV = Special Purpose Vehicle

10 3. PV project financing 3.3 Information in order to examine a PV project 1. Project description project presentation (location, stakeholders, etc.) pictures of the plot and the area around the plot official number of the plot and its address ownership of the plot 2. Project documentation module design single line diagram security system transformer station permission of the grid operator energy yield prediction and analysis confirmation of the insurance company 10

11 3. PV project financing 3.3 Information in order to examine a PV project 3. EPC, General contractor turn key contract incl. attachments turn key offer (price, time schedule) 4. O & M Company O & M contract incl. attachments 5. Supplier contracts for the main components solar modules inverters 11

12 3. PV project financing 3.3 Information in order to examine a PV project 6. Technical documentation solar module data sheet solar module warranty sheet solar module certificates inverter data sheet inverter warranty sheet inverter service contract solar monitoring system rack / structure system 12

13 3. PV project financing 3.3 Information in order to examine a PV project 7. Economical topics investment plan P & L calculation 8. Building approvals approvals given by the local municipal e.g. building and construction approval 9. SPV documentation company agreement opening balance sheet certificate of registration Tax relevant documentation. 13

14 Contents 1. Definition Bankability 2. Project stakeholders 3. PV project financing 4. PV project insurances 5. How to get a project bankability? 6. Summary & Outlook 14

15 4. PV project insurances 4.1 Requirements for project financing Insurances for PV power plants Construction insurance Liability insurance All risks + interruption of operation insurance Required insurances in order to minimize the investment risks and to become bankable. 15

16 Contents 1. Definition Bankability 2. Project stakeholders 3. PV project financing 4. PV project insurances 5. How to get a project bankability? 6. Summary & Outlook 16

17 Bankability 5. How to get a project bankability? Who is interested in the bankability of a PV plants and why? Developers and EPCs Their PV projects become bankable and to get a high reputation. Manufactures Insurances Vendors Investors and Buyers Banks Offer bankable products to the PV market and promote the brand. Need to know about quality and technical risks of the project and quality control of the suppliers to calculate an insurance rate. The biggest advantage of vendor due diligence is that speeds up the sale process and saves costs. It eliminates the duplication of due diligence work by multiple buyers. Lowering of the risks of the PV investment in order to secure a stable cash flow, increasing of fungibility of PV projects tend to focus on the return on investment. Lowering of the risks on financed or to be financed PV plants. The banks are interested on a stable cash flow for a long time. 17

18 5. How to get a project bankability? 5.1 A PV project has to take three hurdles A bankable PV project requires diligence in technical, economical, legal and Tax matters. 18

19 5. How to get a project bankability? 5.2 Technical Due Diligence Factory & Production audit Product quality check (modules, inverters) PV plant design check PV power plant approval Safety relevant PV plant inspection Provisional acceptance test Final acceptance test Review the contracts, focused on the technical part TDD Report 19

20 5. How to get a project bankability? 5.3 Financial Due Diligence Energy yield prediction Performance ratio calculation Cash flow calculation P & L calculation* DSCR calculation*... * Profit and Loss calculation * Debt-Service coverage ratio 20

21 5. How to get a project bankability? 5.4 Legal Due Diligence EPC contract O & M contract Insurance contracts Lease contract Grid connection Share holder contract Tax issues... 21

22 5. How to get a project bankability? 5.5 Bankability is among others based on warranties Module product warranty Module power warranty A B C Inverter product warranty Inverter availability warranty EPC system warranty A B C Warranty bond Security deposit Performance bond Performance warranty Performance ratio warranty Liquidated damages, penalties System guarantee, based on the law 22

23 5. How to get a project bankability? 5.6 Guarantee and warranties Solar module power warranty Product warranties (modules, inverters, structure, etc.) Performance ratio warranty System guarantee period Grid connection PV project life time [ t ] 23

24 5. How to get a project bankability? 5.7 Milestones with influence on Bankability The project risks are mitigated through contracts, warranties, TÜV Rheinland certified products and manufacturers. Nevertheless, risks minimization is important for all of the project phases. It is ranging from engineering & designing through procurement and construction, acceptance tests and operation & maintenance. Engineering Procurement Construction Testing & Acceptance Operation & Maintenance 24

25 5. How to get a project bankability? B A N K Bankability 3 Hurdles Technical, economical and legal issues Engineering Procurement Construction Testing & Acceptance Operation & Maintenance Follow up by TÜV Rheinland in order to secure the highest rating of Bankability 25

26 5. How to get a project bankability? 5.8 Service provider in order to secure the Bankability Insurance Company Equity Investor Service contract 3 rd party service provider SPV Bank Design Institute EPC Company Utility Grid Operator Module Manufacturer Inverter Manufacturer O & M Company Land / Roof Owner 26 Others SPV = Special Purpose Vehicle

27 5. How to get a project bankability? 5.9 Service provider in order to secure the Bankability Insurance Company Equity Investor SPV 3 rd party service provider Bank Service contract Design Institute Module Manufacturer Inverter Manufacturer EPC Company O & M Company Utility Grid Operator Land / Roof Owner 27 Others SPV = Special Purpose Vehicle

28 5. How to get a project bankability? 5.10 Service provider in order to secure the Bankability Equity Investor Service contract 3 rd party service provider Insurance Company SPV Bank Design Institute Module Manufacturer Inverter Manufacturer EPC Company O & M Company Utility Grid Operator Land / Roof Owner 28 Others SPV = Special Purpose Vehicle

29 5. How to get a project bankability? 5.11 When should a 3 rd party service provider be assigned? Report Engineering phase Report Construction phase Report Final assessment regarding system warranty System guarantee period [ t ] Procurement phase Report Provisional acceptance test Report Operation phase Regular reports Follow up by TÜV Rheinland in order to secure the highest rating of Bankability 29

30 References, samples No. Project location Client Client Type Size [MWp] Main Services 1 Fujian TIEN New Energy Group Limited Investor 5 New Mark Certification 2 Guangdong Foshan TIEN New Energy Group Limited Investor 10 New Mark Certification 3 Inner Mongolia China Financial Leasing Bank 50 Visual inspection, IV test, IR test, EL test, Inverter efficiency test, PR test for the whole PV plant. 4 Inner Mongolia China Power Investment Co. Ltd. INV 50 On-site testing: packaging and document check, modules visual inspection, I-V test, EL test. 30

31 References, samples 20 MWp, Qinghai 10 MWp, Guangdong 40 MWp, Hebei Zhong Tien - Foshan 10 MWp, Ningxia 9 MWp, Inner Mongolia YangYuan Dongrun New Energy Development Co., Ltd. 50 MWp, Inner Mongolia GCL Three Gorges China Power Investment Co. Ltd. 31

32 Contents 1. Definition Bankability 2. Project stakeholders 3. PV project financing 4. PV project insurances 5. How to get a project bankability? 6. Summary & Outlook 32

33 6. Summary & Outlook The level of Bankability is an indicator for financing issues like loan contract conditions. A high level of Bankability is achievable when Bankability will actively be managed. Active management ranging from the engineering phase through energy production verification of the grid connected PV power plant. The interests of investors (high IRR) and banks (loan repayment) can be more secured by projects with a high level of Bankability. 33

34 6. Summary & Outlook Banks TÜV Rheinland Investors Insurances 34

35 Thank you very much for your attention! Jason Sun ( 孙嵩劼 ) Sales excutive PV Power Plants & Systems Solar / Fuelcell Technology Phone: Mobil: Mail: jason.sun@tuv.com TUV Rheinland (Shanghai) Co., Ltd. TUV Building III, No.177, Lane 777 West Guangzhong Road Zhabei District Shanghai China