RE Project Development, Risk Analysis and Financing

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2 RE Project Development, Risk Analysis and Financing LEARNING OBJECTIVES Learn what are the challenges and trend in RE Project Development in the Philippine environment; who are the RE project stakeholders, their power, interest and influence. Understand contract structure and financial risks for different types of renewable projects including biomass, on-shore wind, off-shore wind, solar PV, solar thermal and geothermal. Discover how to create resource analysis and financial models for renewable energy that incorporates resource risk, financing structure, tax treatments, alternative pricing policies and other factors. Learn practical excel-based tools to analyze renewable energy project including resource analysis of biomass, wind, hydro and solar data. Measure and evaluate changes in the risk of projects from development to construction to mature operation stages of the project and how equity returns and value change at different phases of a project's life. EXPERT COURSE TRAINER Dr. EdWARD Bodmer Dr. Ed Bodmer has over 28 years of experience in a variety of modeling topics (project finance, credit analysis and M&A modeling). He has played a key role in restructuring complex financial projects across Asia, Middle East and Europe. His consulting activities include developing complex M&A, project finance, corporate and simulation models, providing expert testimony on financial & economic issues before US regulatory agencies, and advisory services to support merger and acquisition projects. Ed has been involved in formulating significant government policy related to electricity deregulation and has evaluated energy purchasing decisions for many corporations. His clients include Tenaga Nasional Berhad, Malakoff, Asian Development Bank, Temasek Holdings Singapore, PwC, KPMG and many others. Understand and analyze the implications of project finance features in the context of renewable energy (such as sculpting, debt funding, debt size, DSCR, DSRA, debt tenor, re-financing) on the levelised cost of energy and the equity returns from renewable energy. Develop efficient ways to quickly compute the levelized electricity cost of different technologies using carrying charge factors and alternative financial models; and evaluate recent cost trends in capital cost, operating cost and efficiency of renewable resource through studying financial condition of wind and solar suppliers over the past few years. ABOUT THE MERALCO POWER ACADEMY Meralco Power Academy (MPA) is a premier training and energy education provider that leverages on MERALCO s 113 years of industry experience, expertise and network. Its array of technical programs lend industry practitioners a competitive edge through top of the line learning solutions which are delivered in a variety of methods. MPA provides the learning platforms and coalitions for leaders, decision makers, managers and advocates by facilitating technical exchanges on global innovations and technologies on power and energy. EXPERT COURSE TRAINER Engr. Adelino V. Garcia Engr. Adelino V. Garcia is Chairman and President of AVGarcia Power Systems, President of Biyao Hydro Power Corporation and Director of Caraga Renewable Energy Corp. He brings with him 35 years of experience in Energy Systems Engineering and Integration, Project Management, Execution and Implementation, Business Development and Management of various technologies such as Coal Thermal, Combustion Gas Turbine, Heavy/Light Fuel Oil, Biomass and Biogas, Hydroelectric, Solar PV, Wind and Fuel Cell Energy Generation Facilities. He is an expert on Business and Project Development of Conventional and Renewable Energy Generation Technologies, Design and Engineering, Project Execution and Management, Operation and Maintenance of various Power Generation Facilities (PGF) and including Grid Connection.

3 Course Outline DAY 1 PART 1: RENEWABLE ENERGY PROJECT DEVELOPMENT IN THE PHILIPPINES Statutory Framework Philippines RE Law Portfolio Standard Investment Incentives Capacity Allocation and FIT Rates Viable Technologies Project Development Process flow, cycles and major milestones Permits and regulatory compliance Project risk, challenges and hurdles along the way (case samples) RE Opportunities PART 2: DEFINITION OF PROJECT FINANCING TERMS Overview of Terms in Project Finance Terms in the Context of Renewable Energy Key Renewable Energy Terms Overview of Economic Issues Associated with Renewable Energy - Alternative Contract Structures Relative to Conventional Plants and Resource Analysis - Grid Parity and LCOE Solar Example - Cost of Capital and Carrying Charge Factor - Alternative Feed-in Tariff Policy Renewable Energy Pricing and Risk Analysis for Non-Dispatchable Renewable Energy versus Multi-part Tariffs in Conventional Energy Profitability of Alternative RE Technologies Relative to WESM Pricing Drivers of Value in Renewable Energy Projects Resource Assessment and Capacity Factor Development Cost and Timing of Various Different Costs (Geothermal Example) Electricity Pricing with Single Part Tariffs Capital Costs and Benchmarks Operating and Maintenance Costs Capital Recovery Factor, Taxes, Financing Operating Costs, Maintenance Costs and Availability Capital Intensity and Levelized Cost of Alternative Technologies Definition of Capital Intensity and Cost of Capital Four Factors that Drive LCOE of Non-Dispatchable Projects - Capital Cost of Project - Capacity Factor of Project - Operation and Maintenance Expenses - Carrying Charge Rates and Required Profit DAY 2 PART 3: OVERVIEW OF PROJECT FINANCE, COST OF CAPITAL AND PRICING CONTRACTS FOR RENEWABLE ENERGY Economic and Financial Theory of Project Finance General Discussion of Risks for Renewable Projects - Capacity Factor Risk (Solar, On-Shore Wind, Off-Shore Wind, Hydro) - Construction Risk (Off-Shore Wind and Hydro versus Solar) - Operation and Maintenance Risk - Contract Risk Measurement of Value and Risk using Project Finance - Debt Capacity and Credit Analysis of Different Transactions - Use of Equity IRR versus Project IRR - Relying on External Cash Infusions Rather than Internal Analysis - Financing for Different Types of Projects Debt Capacity and Project Finance Terms - Effects of Debt Service Coverage Constraint versus Debt to Capital Constraint - Debt Service Coverage Ratio Definition and Targets - Debt Tenor, Alternative Repayment Structure, Average Life - Credit Spreads and Target Credit Ratings in Project Finance - Debt Service Reserve and Maintenance Reserve - Covenants, Cash Flow Sweeps and Subordinated Debt Project Finance Valuation for Renewable Energy Project IRR to Screen Projects Equity IRR to Structure Projects and Minimum Required Equity IRR for Different Renewable Projects Equity IRR Complexities from Re-Financing and Development Fees Project Valuation Relative to WESM Prices PART 4: REVIEW OF COSTS, CAPACITY FACTORS, AND PRICING STRUCTURES FOR ALTERNATIVE RENEWABLE TECHNOLOGIES AND BUILD-UP OF PROJECT FINANCE ANALYSIS Discussion of Wind and Solar Technologies - Solar PV º General Discussion of Technology º Demand and Supply and Changes in German Feed-in Tariffs º Review of Solar Companies and Financial Issues º Financial Performance of Manufacturers º Balance of System Costs and Inverter Costs º Performance Guarantees and Other Contract Terms º First Solar Case Study - On-Shore Wind º Historic and Current Trends in Capital Cost º Review of Financial Data for Suppliers º Fixed and Variable O&M Cost º Capacity Factors and General Discussion of One-year versus Longterm P90, P75 etc. º Case Study of Pricing Contracts - Biomass º Capital Cost and Efficiency relative to Thermal Plants º Fixed and Variable O&M Cost for different Biomass Projects º Analysis of Supply Costs and Contracts for Supply º Problems with Supplier Contracts and Feedstock Availability º Costs Relative to Other RE Technologies and WESM Prices DAY 3 PART 5: RESOURCE ASSESSMENT Overview of Resource Assessment in Renewable Projects Resource Assessment of Wind working with hourly wind speeds, Wiebull Distributions and Statistical Analysis (P90, P50 etc.) Resource Assessment of Solar Direct and Diffuse Radiation, Sunlight Angles and RetScreen.) Resource Assessment of Hydro Probability Distributions of Resources Case Study on Resource Analysis in Loans

4 Course Outline Modelling Resource Distributions of Solar Power Data sources for Solar Irradiation Computation of Production from Efficiency with Adjustments for Performance Statistical and Seasonal Distribution of Production Data in Different Locations Use of RetScreen for Simple Analysis Computation of P95, P90, P75 and P50 Statistics Modelling Resources for Hydro Power Fundamental Hydro Power Equation Sizing of Hydro Plants and Exceedence Curves Variance in Rainfall and River Flow Computation of P95, P90, P75 and P50 Statistics for Hydro Capacity Factor Modelling Resource Distributions of Wind Overview of Wind Data Wiebull Distribution and Wind Data Power Curve for Wind Turbines Distribution of Wind Resources and Wind Studies Simulation of Power Distribution Computation of P95, P90, P75 and P50 Statistics Interpretation of Resource Assessment for Risk Analysis Mean Reversion of Resources Aspects of Probability Distribution other than Resources Use of Probabilities in Financial Analysis Contrast Among Different Risks PART 6: VALUATION AND PROJECT FINANCE MODELLING FOR RENEWABLE PROJECTS General Discussion of Project Finance Models General Objectives of Financial Models and Financial Forecasts Objectives of Project Finance Models Flexibility, Structure, Accuracy and Transparency of Project Finance Models Examples of the Structure of Actual Project Finance Models Creation of Project Finance Model Structure Financial Statement Analysis in Renewable Project Finance Risks in various Stages of the Project Source and Use of Funds Statement before Commercial Operation Focus on Cash Flow and EBITDA Interpretation of Cash Flow Statement Reserve Accounts for Debt Service, Maintenance and Other Factors Computation of Equity Cash Flow and Free Cash Flow and IRR versus Return on Investment Mechanical Issues in Creating and Interpreting Project Finance Models Phases in Project Financing for Renewable Projects Sources and Uses Analysis in Models Importance of Debt Sizing, Debt Funding and Debt Repayment Fixed Asset Analysis Profit and Loss Statement and Tax Analysis Cash Flow Waterfall Tax Flip Structures Resolving Circular References without Copy and Paste Macros arising from Funding and Sculpting DAY 4 PART 7: RISK ANALYSIS OF RENEWABLE ENERGY AND EVALUATION General Discussion of Risk in Renewable Energy Projects Discussion of Differences in the Nature of Risks for On-Shore Wind (Wind Resource), Off-Shore Wind (Maintenance and Life Expectation), Solar (Small Risks become Big with High Leverage), Hydro (Capacity Factor and Merchant Price Risk), Biomass (Supply Cost), Geothermal (Development Probability). Risk Matrix, Risk Classification and Risk Mitigation Risk Evaluation Using Break-Even and Sensitivity Analysis Risk Evaluation Using Scenario Analysis with Focus on the Manner in which Bankers Apply Downside Analysis Measurement of Risk Using Structured Master Scenario Page in Excel Model with Options for Adding Sensitivity Analysis to Defined Scenarios Risk Analysis Using Spider and Tornado Diagrams Credit Analysis in Renewable Project Finance Background on Credit Analysis, Credit Scoring, Probability of Default and Loss Given Default Definition and Calculation of DSCR Use of DSCR in Base (P50 Cases) and Downside (P90, P95 Cases) in Determining Debt Capacity Application of LLCR and PLCR Contract Structuring in Renewable Project Finance Importance of EPC Contract in Different Projects (Off-Shore Wind and Hydro) Performance Contracts in Solar Projects Power Curve and Availability Guarantees in Solar and Wind Projects O&M Contracts and Warranties Insurance Counterparty Risk in Different Projects Other resources to be given to the participants All seminar participants will receive comprehensive suite of financial models/tools and research materials in USB disk. These resources include featured financial models, databases, excel tools and many other analytical programs as well as energy industry data, articles and books. The materials are designed to be helpful for energy and financial analysis long after the course is finished.

5 seminar rates Includes course materials, meals and program certificate REGULAR Per Participant PhP 35,000 net Yes! I am interested in attending Meralco Power Academy's Course! I am sorry but I won't be able to attend. You may send me materials on your upcoming events. PAYMENT METHODS and terms 1. Payments may be deposited to: Account Name: Meralco Power Foundation Inc. BDO Savings Account No (Meralco Branch) Please a copy of your deposit slip to astibayan@meralco.com.ph or power.academy@meralco.com.ph 2. We shall send you a confirmation of your enrollment upon receipt of the accomplished registration form. 3. Cancellations made 7 days before the program shall be non-refundable. 4. For any concerns, please contact Angie Tibayan at , mobile: , astibayan@meralco.com.ph REGISTRATION FORM company details Company Name Company's TIN Number Office Address (Billing Address) Contact Person Address Contact Number participant's details Name Nickname (for the name tag) Designation Address Contact Number Dietary Restrictions