PreSummit Seminar: Wind

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Pre-Summit Seminar Wind

• London
• 4 March 2009

William Young
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DISCLAIMER
THE INFORMATION IN THIS DOCUMENT IS DERIVED FROM
PUBLIC SOURCES. INFORMATION USED IS BELIEVED TO
BE RELIABLE BUT HAS NOT BEEN INDEPENDENTLY
VERIFIED BY NEW ENERGY FINANCE. NEW ENERGY
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Agenda
Source New Energy Finance
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New build asset finance investment by sector Q1
2004 Q4 2008 bn
The credit crunch has hit renewable energy asset
financing but wind has held up relatively well
(and much better than fossil fuel investment
levels)
Source New Energy Finance (24v9.01)
Note Others includes geothermal, mini-hydro, and
marine
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NEX vs. Wind Sector Utilities 2007 YTD
Equity valuations have collapsed from historic
highs
Notes Index Values as of 26 January 2009
Source Bloomberg, New Energy Finance
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US Wind Short Term Market Forecast, 2009-2010
Major near term uncertainty in US demand, market
could be down 10-40 in 2009
New Tax Equity
Small Medium Developers
Regional Lenders
DOE Loan Guarantees
Human Capital Can new government programs get
started quickly and efficiently?
Balance Sheet and Corporate Bonds
Established Large Developers
Major Project Finance Lenders
Existing Tax Equity
Note Based on a project financing risk model
using New Energy Finance project database.
Source New Energy Finance
6
v9.02
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New turbine orders and manufacturer order backlogs
New turbine orders are now below manufacturers
delivery volumes order backlogs are falling
Change in order backlog Q3 2006 Q4 2008 of GW
Announced new turbine orders in Europe Q1 2008
Q1 2009 TD GW
Notes Announced new turbine orders estimated
75 of market. 75 of Vestas, 90 Nordex and
REpower, est. 70 of Gamesa.
Source Companies, New Energy Finance
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Order backlogs and inventories of major
manufacturers
If orders remain low manufacturers will need to
cut production to maintain order pipelines
inventories are at historic highs
Inventories of major manufacturers 1999-2008 EURm
Order backlog as a of annual capacity Q1 2006
Q4 2008
Notes Nordex reports firm and contingent/conditio
nal orders. Repower and Vestas report firm
orders. Gamesa reports firm orders, including
major framework agreements
Source New Energy Finance
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Supply chain has begun to respond to tighter
conditions
Announced job losses December 2008 YTD 2009

• The USA and high volume large scale component
  suppliers (LM Glasfibre, DMI Industries) have
  been worst affected

We feel more certain other markets will do their
partwhere in the U.S. the jury is still out, If
the wind market doesnt recover from the
near-total collapse in the fourth quarter,
Vestas said, the company will rethink its planned
1.2 billion euros in capital spending this year,
including expanding three US factories. If orders
dont pick up globally, Vestas warned it would
have to seriously consider layoffs. Ditlev
Engel, Vestas CEO paraphrased in the Wall Street
Journall 12 February 2009
Notes
Source Companies, Dow Jones Newswires,/Wall
Street JournalNew Energy Finance
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Agenda
Source New Energy Finance
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The financial crisis has placed a series of
limitations on lenders
Reduction in 10 year debt availability 2008-2009
Increase in RE lending
Shift to short Tenor lending
Reversion to local markets
Merged/ Acquired
2009
2008
Total impact -23 to 40
Impact

• Royal Bank of Scotland
• HSH Nordbank
• Millenium BCP

• HSH Nordbank
• Dexia
• Allied Irish Bank
• Bank of Ireland

• Banesto
• BNP Paribas
• And 28 others

• Dexia (Calyon)
• Fortis Bank (BNP)
• HBOS UK (LloydsTSB)

Affected
Source Companies, industry interviews, New
Energy Finance
Notes. adjustments derived by calculating each
lenders nominal share of 2008 lead arranging on a
EURn basis. For those companies partially or
completely subject to the filter criteria are
then removed from total volume. Increase in
lending derived by increasing key lenders
activities by 30.
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Project developers and utilities dominate capital
spending smaller sponsors depend more on project
financing
EU 27 new build wind asset finance 2007-2008 by
type of sponsor and sponsors use of project
finance EURm and
2008
Percentage of deals financed with project level
debt 2007-8
2007
Trends
EUR 11,347m
EUR 11,585m
Infrastructure funds keen interest, new funds
being raised
Project debt Severely undermined banks choosing
key relationships
Private equity Actively investigating
opportunities in equity and junior debt
Equity capital markets Closed to pure play wind
companies
Project debt Severely undermined very selective
lending
Equity capital markets Open to secondary
offerings/rights issues
Debt capital markets Open to large players,
strong appetite for utility bonds
Project debt Severely undermined, looking to
build on key relationships with cross sell
opportunities
Notes Rebased to July 2004. Wind asset price
index benchmarks public acquisition prices
(enterprise value) of commissioned wind asset
globally.
Source New Energy Finance
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Active Players in the US Tax Equity Market
The number of tax equity investors in the US
shrank dramatically in 2008
2007
Fall 2008
Source New Energy Finance,
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US Project Finance Decision Analysis
US project finance structures are diversifying,
accessing new sources of capital
PTC
ITC
Decision Analysis
Treasury Grant
Tax Credit
MACRS Depreciation
20 - Year Depreciation
MACRS Depreciation
Sale-Leaseback
Sale-Leaseback
Project Finance Debt/Equity
Partnership Flip
Partnership Flip
Depreciate on Balance Sheet Project Debt
Equity/Tax Equity Partner
Capital Availability
Medium
Low
Medium
Low
High (relatively)
Low
Low
Type of Investor
US Investment Banks
US Investment Banks
US Investment Banks
US Investment Banks
US Investment Banks
International Project Finance Banks
Corporate debt/equity
US Regional Banks
US Regional Banks
US Insurers
US Insurers
US Insurers
Notes Based on New Energy Finance Analysis
Source New Energy Finance
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New infrastructure funds and PE buy-out
investments
Established infrastructure and private equity
investors are raising new funds for investment,
the sector is regaining its attraction
Typical French wind project returns built in
2008 EUR/MWh
Global PE expansion and buy-out investments Q1
2004 Q4 2008 m
2004
2005
2006
2007
2008
Notes Project size 20MW Base Turbine Price
(EUR/MW) 1.3m Balance of Plant Cost (EUR/MW)
0.2m Developement Cost (EUR/MW/Year) 10,000
Capacity Factor 27.5 Average Tariff
EUR73.5/MWh OM Costs EUR7.5/MWh Equity
Discount Rate 6.0 Gearing (construction and
term financing) 75
Source New Energy Finance
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Agenda
Source New Energy Finance
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US National Renewable Portfolio Standard
Projections, 2009-2025
US long term growth is emerging on sounder
foundations
Note National RPS model uses draft legislation
from Rep. Markey and extrapolates historical
changes in renewable technology mix forward.
Obama project is straight-line extension of
growth of stated plan of doubling renewable
energy in three years. All current state RPS
demand projected using EIA estimates of state
electricity growth and include all technologies
based on net average capacity factor of 35.
Source New Energy Finance
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v9.02
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Chinese Wind Demand to 2020
At least 100GW will be installed in China by
2020 guaranteeing strong annual demand for the
next 11 years. Most of these installations will
take place at six wind megabases, which tend to
favour large utilities and domestic OEMs.
Source New Energy Finance
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Thank you

• William Young
• Manager Wind Insight
• william.young_at_newenergyfinance.com
• 44 20 7096 8856