Wind Economics, Finance & Policy David Lipschitz at Retech 2009

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Wind Economics, Finance & Policy David Lipschitz at Retech 2009 by Mind Map: Wind Economics, Finance & Policy David Lipschitz at Retech 2009

1. Speakers

1.1. Matt Ferguson

1.1.1. Reznick Group

1.1.2. An accounting / consultancy

1.1.3. Energy Production Model

1.1.4. Management Consultant

1.1.5. Clients want more detailed due diligence

1.2. Rich Krauze

1.2.1. 3Tier Company

1.2.2. Forecasting

1.2.2.1. much more analysis is being done before PPA's are signed

1.2.2.2. spacial ability

1.2.2.3. net energy output

1.2.2.4. what is the ROI; how long will it take

1.2.3. Fuel (for projects)

1.2.3.1. Wind

1.2.3.2. Solar

1.2.3.3. Hydro

1.3. Ed Feo

1.3.1. Milbank, Tweed, Hadley & McCloy law firm

1.3.2. do you see any new entrants to the debt market?

1.3.2.1. mostly German banks involved in this

1.3.2.2. German banks getting funding from govts means that they are being forced to invest in their own markets and in their own companies

1.4. John Eberg

1.4.1. Managing Director, JP Morgan

1.4.2. "P50" production

1.4.3. Consider the credibility of the industry

1.4.4. tax equity is going to shift to debt financing!

2. Finance

2.1. Fed govt pays 2/3rd of capital cost of wind projects

2.2. Cos need some capital of their own

2.3. getting expertise for capital

2.4. cost of capital is up

2.5. cost of equipment and construction is down

2.6. although cost of some turbines is up and others is down

2.7. debt?

2.8. different kinds of financing

2.9. construction financing

2.9.1. 300 basis points or better

2.9.2. 150 basis points 15 months ago

2.10. cost of tax equity has gone up

2.11. is there a VC market

2.11.1. what about the residual value buyout

2.11.1.1. JPM keeps a 5% interest

2.11.2. under a lease, one has to buy back the entire asset

2.12. JPM: 100MW wind farm is $200 million

2.13. risk has changed

2.14. are there loan guarantees?

2.15. is underwriting available?

2.16. [it seems like the red tape is much more and that financiers don't want to take any risk! ie the split between business risk and financial risk has changed]

3. Policy

3.1. effect of the stimulus bill

3.2. grants

3.3. risks

3.3.1. of deals ito the grant compared with former deals

3.3.2. pricing effects

3.3.2.1. tax equity effect

3.3.2.2. PTCs

3.3.2.3. Depreciation

3.4. number of people who can participate should increase

3.5. PPA's, ITC's

3.6. How do munipalities get financing?

3.7. consider the legal environment

4. Economics

4.1. consider the fuel, ie wind, sun, water, etc, for these projects

4.2. need to have a great project

4.3. need experience, eg in project management and implemented projects

4.4. are there strategic relationships and partnerships you can take advantage off

4.5. there is a flight to quality

4.6. high scoring

4.6.1. location

4.6.2. resource

4.6.3. equipment

4.6.4. eg GE and Vestas machines get finances

4.6.5. the more bullet proof the project is, the more seriously you will be taken by financing bodies

4.6.6. how can you get to fair market value?

4.6.6.1. do you need a PPA?

4.6.6.2. should it be long term?

4.6.6.3. should it be fixed?

4.6.7. it must be a bullet proof project

4.6.8. or you must have a strong balance sheet that can absorb the risks

4.6.9. there are much more questions than their used to be and people aren't making assumptions any more

4.7. consider the underlying project economics

4.7.1. a good wind isn't enough

4.7.1.1. consider the wind availability

4.7.1.2. consider the long term wind speed average

4.7.1.3. consider the standard deviation, eg this year might have great wind, but what about the average

4.7.2. you need to consider the project economics

4.7.2.1. need 17% IRR

4.7.3. buy the equipment at the right price

4.7.4. what is the real, final, ultimate return?