Cat Power Finance Biogas Projects – A Lender’s Perspective Cat Power Finance 1
Agenda: 1. Krabi Waste to Energy 2. Typical biogas commercial structures 3. Key financing questions 4. Bank due diligence – Process and Requirements Cat Power Finance 2
Krabi Waste to Energy – CPF’s 1 st project financed biogas project Cat Power Finance 3
Case Study – Krabi Waste to Energy CPF signed loan documents with project company May 2014 Palm oil mill that generates 500 cbm/day of POME wastewater In-ground biodigester reactor 2.4MW gross of Cat engines Total capital cost: About US$5MM / 150 MTHB Financing Terms: 56% project financed loan facility US$2.8M / 84 MTHB 8 year term, Thai fixed rate First priority security position in all project assets and pledge of shares Assignment of contracts to lender No corporate guarantee from shareholders Cat Power Finance 4
Case Study – Krabi Waste to Energy Project took 3.5 years to reach financial close CPF was in the deal throughout; providing financial advisory and supporting developer in stakeholder discussions Review of key project agreements for project financeability Review of financial model; finalizing bank base case Drafting of project finance loan agreements, assignment agreements, pledge of shares – CPF now has a reference list of documents Cat Power Finance 5
Case Study – Krabi Waste to Energy Project Financing Terms Explanation 56% project financed loan facility Lender financed 56% of the total project cost, including soft costs, US$2.8M / 84MTHB civil works, Cat engines, biodigester and scrubber 8 year term, Thai fixed rate Lender offered Thai Baht fixed rate loan over 8 years First priority security position in all Lenders loan is senior debt; If required, CPF can exercise the project assets and pledge of shares pledge of shares to sell the shares of the project company to realize value, or to take over shareholder responsibilities Assignment of contracts to lender CPF can “step - into” any of the key project agreements to become the counterparty in that specific agreement No corporate guarantee from The shareholders are not required to put up corporate guarantees shareholders during the term of the loan; the loan will be paid purely from the cashflows of the project Cat Power Finance 6
Typical biogas commercial structures Cat Power Finance 7
COMMON KEY CONTRACTUAL RELATIONSHIPS: TYPE 1 Government Utility Project Company Power Purchase Agreement Power Govt approvals, Plant environmental permits O&M Co EPC Assets: Biogas Digester, Mill Assets and EPC Contractor Contract Power Plant Power Plant O&M Agreement Cat Power Finance 8
COMMON KEY CONTRACTUAL RELATIONSHIPS: TYPE 2 Government Utility Project Company Palm Oil Mill Power Purchase Agreement Host Power Govt approvals, Agreement Plant environmental permits O&M Co EPC Assets: Biogas Digester and Power Plant EPC Contractor Contract Power Plant O&M Agreement Cat Power Finance 9
COMMON KEY CONTRACTUAL RELATIONSHIPS: TYPE 3 Government Utility Project Company Palm Oil Mill Power Purchase Agreement Host Power Govt approvals, Agreement Plant environmental permits O&M Co EPC WasteCo PowerCo EPC Contractor Contract Biogas Power Plant Supply O&M Assets: Assets: Agreement Agreement Biogas Digester *Power Plant *Power plant will include any significant grid interconnect Cat Power Finance 10
Key Financing Questions Cat Power Finance 11
Key Financing Questions Host / Electricity Biodigester Generator EPC Contractor Shareholders Operators Feedstock Tariff Technology supplier Economic High enough Operating and Reliability Full "Wrap" (Full Strong balance Able to incentive to return to financing performance sheet mobilize supplier incentivize precedents guarantee based (Development local labor investors? on plant output) spend & equity) Alternate Known Feedstock Type of Installation / Technical / Technical / sources of history of matching maintenace Integration Operating Operating supply for tariff technology? contract experience Experience Experience project signed Seasonal Offtaker Safety record? Operating Strong balance Development Able to variability of motivation / precedents sheet (managing experience access feedstock alternatives with biogas sub-contractors / (Financial, parts and posting bonds) regulatory etc) equipment Availability Known Willing to put up Relationships performance performance with other parameters of guarantees on parts of project technology? entire plant Cat Power Finance 12
Bank Due Diligence – Biogas Projects Cat Power Finance 13
Documents Required & Why Document Reason Information Memorandum Summary document for project commercial and economic concept Financial Model Provides cashflow forecast of project; key in understanding financeability of project for lender Shareholder Structure Allows lenders to understand shareholder composition of project Project Technical Concept Sets out technical parameters of biodigester Report Reference List of projects Builds out developer and EPC contractor experience with technologies Key Project Agreements Especially required in Project Finance; lenders need to review key project agreements before execution to ensure project is financeable Project Closing List Agreement between lender and developer of all documents to be delivered before first draw; Helps set expectations on timeline and deliverables Loan Agreement and Form and content to be agreed between lender and developer Assignment Docs Cat Power Finance 14
Documentation – What’s needed at which point A B C Loan Agmt Project Info Memo Finalized Financial Assignment Financial Model Model Agmt Project Structure Updates from A Bonds Shareholder Structure 90% finalized Docs Shareholder Docs Closing List Closing List Resolutions Project Schedule Project Agreements Credit First Draw on Screening Development Approval loan facility begins Equity Invested Indicative offer Commitment Letter Cat Power Finance 15
Sample Closing List Item Ok? Expected Completion Key Project Agreements EPC Contract √ Power Purchase Agreement 31-Dec-14 Insurance Policies √ Wastewater characterization √ BOOT Agreement √ Permits and Environmental Clearances Generation Licence √ Factory Licence √ Public Hearing 30-Sep-14 Construction Permit 15-Aug-14 Cat Power Finance 16
Sample Closing List Item Ok? Expected Completion Land Use Secured Rights of Way √ Land Title √ Corporate Documents Shareholder resolutions √ SPV resolutions 30-Jun-14 Deed of subordination for shareholder √ loans SPV articles of association √ Financing Documents Loan Agreement √ Pledge of Shares √ Assignment of various crts √ Cat Power Finance 17
Any Questions? Cat Power Finance 18
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