Prospects for the Biomass Power Industry. New Energy Capital

Transcription

1 Prospects for the Biomass Power Industry Northern Forests Biomass Energy Initiative November 2, New Energy Capital Corp., 2005, All Rights Reserved. New Energy Capital Pure play clean energy asset investment and management company building a portfolio of renewable energy and distributed generation assets Late stage developments Early stage development investments on case-by-case basis Operating assets Multiple channels of return Cash on cash returns Long term portfolio appreciation potential Tax benefits Multiple exit opportunities Refinancing and/or sale at the project level Securitization and sale of portfolio of assets Selldown and/or exit through company trade sale or public offering Strong investment partners VantagePoint Venture Partners California State Teachers Retirement System 1 1 New Energy Capital Corp., 2005, All Rights Reserved. 1

2 Experienced Management Team Scott Brown, CEO Former CEO of Glasstech Solar, Inc., founding VP at First Solar, Inc., Advisory Board of National Renewable Energy Laboratory Dan Reicher, President Former U.S. Assistant Secretary of Energy for Energy Efficiency and Renewable Energy and EVP, Northern Power Systems Everett Smith, CFO Former Executive Vice President, GE Structured Finance, 15 years leading over $20 billion of project finance in energy and infrastructure projects with GE 2 2 New Energy Capital Corp., 2005, All Rights Reserved. Five Forces Creating Attractive Opportunities Competitive Clean Technologies Higher Oil & Gas Prices and Volatility Environmental and Consumer Imperatives Attractive Project Opportunities Energy Security and Reliability Concerns State and Federal Mandates and Incentives 3 3 New Energy Capital Corp., 2005, All Rights Reserved. 2

3 NEC Deal Flow Deal Flow Number of Investments Cogenera tion Biodiesel 12% Other 7% Ethanol 19% Biomass- Wood Digesters 7% Landfill Methane 8% Solar 8% Wind 5% B-mass Co-Gen B-diesel Ethanol 49% 4 4 New Energy Capital Corp., 2005, All Rights Reserved. Current Investments PROJECT SECTOR NAMEPLATE CAPACITY LOCATION IROQUOIS BIO- ENERGY COMPANY 40 MM Gal/yr Indiana NEC-EPS HOLDING DEAN FOODS COGENERATION COGENERATION 6 MW (three projects) CA and MA GREENVILLE STEAM CO. MID-ATLANTIC BIODIESEL BIOMASS (WOOD) BIODIESEL 16 MW 5 MM Gal/yr Maine Delaware ALBION 55 MM Gal/yr Michigan CLYMERS 110 MM Gal/yr Indiana 5 5 New Energy Capital Corp., 2005, All Rights Reserved. 3

4 Greenville Steam Company Description 16 MW operating wood-fired electricity generating plant in Greenville, Maine NEC purchased 71% interest in plant from Hafslund USA; 29% held by passive investment group Project will be refurbished to qualify for MA Renewable Energy Credits (RECs) Competitive Advantages Reliable operating asset adding near-term cash flow to NEC portfolio Average availability of >97% since 1987 (excluding maintenance outages) High regional fuel availability Skilled existing workforce Summary Financials Total capital cost: $10.5 million (acquisition and re-tooling) Leverage: 65% NEC: $1.7 million equity and $1.8 million subordinated debt NEC will own 71% interest (General Partner role) $7 mn senior bank construction/term loan being arranged Financial close: Q New Energy Capital Corp., 2005, All Rights Reserved. Greenville Steam Company 7 7 New Energy Capital Corp., 2005, All Rights Reserved. 4

5 Renewable Project Finance Attractive Features of Renewable Project Finance Low fuel costs Long-term contracts Offer a hedge against fossil fuel prices Additional revenue from REC sales Additional tax benefits from ITC and PTC BUT, biomass projects have their own challenges Fuel costs are significant and volatile Utilities are reluctant to offer long term contracts unless severely backwardated REC revenues are available, but low threshold emissions requirements severely impact economics Tax benefits for biomass are lower than for solar or wind 8 8 New Energy Capital Corp., 2005, All Rights Reserved. Greenville Steam Company Challenges Rising prices for wood feedstock, driven by Diesel prices Paper mill demand Competing biomass energy plants Offshore wood waste demand Pressure on wood supply as sawmill and paper industries weaken No long-term contracts available for wood at fixed prices Long-term contracts for power demanded by debt holders Demands placed by Massachusetts for REC qualification New technology (BFB) Low emissions (<0.1 ppm NOX) Regulatory/REC market Connecticut experience Uncertain capacity coming on line Construction/performance risk Complicated re-tooling No EPC wrap 9 9 New Energy Capital Corp., 2005, All Rights Reserved. 5

6 Greenville Steam Company Management Responses Rising prices for wood feedstock Multiple vendors/vendor relationships Tight management Efficiency improvements On-site processing Long-term contracts for power demanded by debt holders Negotiate long-term on RECs and extend as far as possible on energy Demands placed by Massachusetts for REC qualification Early qualification Thorough engineering design Regulatory market CT experience Market intelligence Massachusetts REC price support program Construction/performance risk Strong site manager Linked contracts with linked performance guarantees New Energy Capital Corp., 2005, All Rights Reserved. Greenville Steam Company Policy Implications Long-term REC price stability Facilitate longer term, fixed price power contracts 20 years More coordination between emissions policies and renewable policies Long-term PTC certainty CDM/greenhouse gas credits Government loan guarantees to support commodity nature of market National REC market now restricted to Northeast or CA New Energy Capital Corp., 2005, All Rights Reserved. 6