“Update on Solar Energy Financing” Intersolar East New York City April 2018 Michael Eckhart Managing Director Global Head of Environmental Finance Citigroup, Inc. michael.eckhart@citi.com
’s Deep Renewable Energy Expertise Citi has developed industry leading global alternative energy capabilities with a broad range and depth of expertise and execution capability. Citi is the most global bank Global Presence of Solar Banking 220,000 employees 98 countries with Citi offices London Doing business in 160 countries New York San Francisco Hong Kong Mumbai $2 trillion assets $4 trillion / day funds flow Sao Paulo Sydney Renewable Energy: 2017 2017 2016 Corporate banking Ongoing Investment banking $1.6bn sale to $2.6bn sale to Sale of ~33% stake in Business Review 1.7 GW solar portfolio Committee / Capital markets Transformational Plan Joint Advisor to Advisor to BRC sPower and Fir Tree Advisor to SolarCity Sellside Advisor World’s only fully - Operating utility scale Comprehensive Largest Independent integrated sustainable solar portfolio Advisory Role to NRG Solar Developer energy company 2
Global Leadership in Renewable Energy at +/- $25 billion / year Citi is a consistent leader in Alternative Energy transactions across sectors, geographies and products. Ongoing Ongoing Ongoing 2017 2017 2017 2017 2017 2017 US US US Sale of Majority Canada / LatAm / $421mm Private US Stake in Europe US US Placement Completed strategic $1.5bn 4(a)(2) Private Sale of ~33% stake in review and Placement for AES $350mm Senior 1.7 GW solar portfolio Sale of renewable Rattlesnake Wind $1.6bn sale to Sole Ratings Advisor, Sole announced Southland Project Unsecured Notes and Renewables energy developer and Project Structuring Agent, Transformation Plan Business 805 MW portfolio Sole Lead Placement Joint Lead Placement Energy Hedge and Agent, and Sole Lead Joint Advisor to Financial Advisor Agent Joint Bookrunner Sellside Advisor Sellside Advisor Sellside Advisor Hedge Advisor Tax Equity Provider sPower and Fir Tree 2017 2017 2016 2016 2016 2016 2016 2016 2016 UK Europe Indonesia/Philippines US $580mm acquisition of US US US US Sale of 49% stake in $2.6bn acquisition of Sale of geothermal 365 MW solar portfolio $95mm 4(a)(2) Private onshore wind portfolio assets to from Block Island Offshore $103mm Follow-On $270mm Follow-On $350mm Senior Placement for Solar to Wind Project Offering Offering Unsecured Notes Portfolio Sole Financial Advisor Construction Lender / Joint Lead Placement Financial Advisor Advisor to Chevron to TerraForm Power Tax Equity Investor Joint Bookrunner Joint Bookrunner Joint Bookrunner Agent Advisor to EDP to SolarCity 2016 2016 2016 2015 2015 2015 2015 2015 2015 U.K. US US Sale of 50% interest in $246mm Construction $394mm Construction US US Burbo Bank Extension Loan, $210mm Tax US US Loan, $73mm Letter of US US wind project Equity Commitment Credit Facilities for $218mm Senior $159mm Senior and Energy Hedge for $500mm ProjectCo $675mm IPO South Plains II Wind $2.2bn acquisition of Sale to Energy Capital Secured Notes for Secured Notes for Mariah Wind Project Term Loan A Project Vivint Solar Partners Solar Portfolio Solar Portfolio Lead Arranger and Joint Bookrunner, Advisor to Dong Joint Lead Placement Active Bookrunner Sole Bookrunner Sole Advisor to Terra- Joint Lead Placement Mandated Lead Joint Lead Placement Energy Agent and Structuring Agent Joint Financial Advisor Gen Agent Arranger Agent 2015 2015 2015 2015 2015 2015 2015 2015 2015 U.K. France Sale of 49.9% interest € 200mm Sale of 95% US US US US US in Baltic 2 offshore US US stake to windfarm $300mm Senior $420mm IPO $670mm PIPE $1bn Warehouse $200mm IPO $351mm Follow-On $800mm High Yield Unsecured Notes for Facility Offering Senior Notes Invenergy Wind Joint Lead Arranger, Advisor to Portfolio acquisition Active Bookrunner Lead Placement Joint Bookrunner, and Solairedirect Lead Left Bookrunner and Structuring Agent Agent Joint Bookrunner Sole Advisor to EnBW Joint Bookrunner Joint Bookrunner Co-Syndication Agent 3
Pursuing Energy Technology-Driven Markets 1978 - 2018
Cost Reductions and Market Growth The historical solar learning rate is 23%, which means that solar module costs decline by 23% every time cumulative installations double. Lithium ion batteries have so far demonstrated a learning rate of 19%. Solar Cost Declines with Volume $70 100,000 1978 Call for 99% cost reduction 60 Historical Learning 10,000 Rate: 23% 50 1,000 40 MW Installed 30 100 20 10 10 0 1 1975 1980 1985 1990 1995 2000 2005 2010 2015 Crystalline Silicon PV Module Price (2015 $/W (DC)) — LH Scale Volume Installed (MW) — RH Scale Source: Maycock, Bloomberg New Energy Finance. 5
Cost Reductions and Market Growth The historical solar learning rate is 23%, which means that solar module costs decline by 23% every time cumulative installations double. Lithium ion batteries have so far demonstrated a learning rate of 19%. Solar Cost Declines with Volume $70 100,000 1978 Call for a 99% cost reduction 60 Historical Learning 10,000 Rate: 23% 50 1,000 40 MW Installed 30 100 20 99.3% 10 Cost Reduction 10 In 2016 0 1 1975 1980 1985 1990 1995 2000 2005 2010 2015 Crystalline Silicon PV Module Price (2015 $/W (DC)) — LH Scale Volume Installed (MW) — RH Scale Source: Maycock, Bloomberg New Energy Finance. 5
Cost Reductions for Solar AND Storage The historical solar learning rate is 23%, which means that solar module costs decline by 23% every time cumulative installations double. Lithium ion batteries have so far demonstrated a learning rate of 19%. Solar Cost Declines with Volume Energy Storage Cost Declines with Volume 1,200 400 $70 100,000 1,100 60 1,000 Historical Learning 10,000 Rate: 23% 900 300 50 EV Battery Pack Costs ($/kWh) Global Volumes (GWh) 800 Historical Learning Rate: 19% 1,000 700 40 MW Installed 600 200 30 500 100 400 20 99.3% 300 100 Long-term Cost Range Reduction since 10 200 1978 10 100 0 0 0 1 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 1975 1980 1985 1990 1995 2000 2005 2010 2015 Global EV Li-ion Battery Moderate Scenario: 15% learning rate Crystalline Silicon PV Module Price (2015 $/W (DC)) — LH Scale Production Volume Installed (MW) — RH Scale Observed Values Aggressive Scenario: 22% learning rate Source: Maycock, Bloomberg New Energy Finance. 5
Renewables Development Landscape is Strong Development funding has never been stronger and better. Discussion Select Developers “ Develop and sell” business models are transitioning to IPP models and looking to raise more permanent capital Significant interest in development platforms with influx of new market entrants Renewable Investments Shell investment into Silicon Valley Ranch Continuing strong demand from institutional investors to deploy capital to solar AES and AIMCo acquire sPower Development track record / team are major drivers of developer valuations 27
Utility-Scale Solar Bidding Trends in the US 2008 – 2017 $ / MWH California New York Northwest PJM Southeast Southwest Sources: Compiled by Citi from Bloomberg New Energy Finance, GreenTech Media, CleanTechnica.
Tax Equity is Mature and Competitive – about $10-12 billion/year Major Tax Equity Investors Tax benefits: – Accelerated D epreciation (“MACRS”) – Investment T ax Credits (“ITCs”)(solar) Solar ITC competes with wind power Production Tax Credits (“PTCs”) Tax Equity investors include: Other Tax Equity Investors – Banks (e.g., Citi) – Insurance Companies (e.g., MetLife) – Finance Companies (e.g., GE) – U.S. Corporations (e.g., Google) – Utilities (e.g., Berkshire Hathaway) – Co-investment arrangements ITC and PTC will be ramping down over the next five years 49
Commercial Solar Market is Growing PLUS Corporate Off-Take The U.S. commercial solar market is considerably more fragmented than the utility scale solar industry. 2017 YTD Top Commercial Solar Installers Top Corporate Offtakers of Solar Projects 1 (MW) National Market Share % Apple Inc 494 Tesla US Department of Defense 469 SunPower Amazon 337 REC Solar Kaiser Permanente 220 Switch SuperNAP Borrego Solar Systems 210 Wal-Mart Stores Inc 141 Geronimo Energy Equinix 124 EnterSolar Target Corp 100 Innovative Power University of California 80 Systems Safari Energy US General Services Administration 75 ~1 GW Coldwell Solar Google Inc 72 Massachusetts Institute of Technology,… 71 Vanguard Energy Partners Stanford University 68 SunDurance Energy Corning Inc 59 PFMG Solar Virginia State Corp Commission 56 CalCom Solar George Washington University… 52 Ameresco Ikea Group Corp 50 City of Pasadena CA ; City of Riverside… NRG Solar 47 Ecolab Inc ; Macalester College 40 Other Arizona State University 40 Source: BNEF, GTM Research. 1. Ranking as of August 2017. 34
Residential Solar Industry is Highly Competitive Illustrative Industry Segmentation Installation Financing Resi-Rooftop Financing: • End-user methods – standard docs • PPA • Lease • Loan • Tax equity driven • Securitization of the cash flows Sales 39
Community Solar is Emerging with IPP and Utility Potential Leading Community Solar Developers Source: Company Websites, SEIA, SEPA. 38
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