Ownership of Small Hydro

1

• Ownership of Small Hydro

2

• General Perception
• Easy
• Long-term gold mine

3

• Reality
• Tough business
• Many on-going challenges

4

• Project Development
• Company structure and agreements
• Permits
• Financing
• Legal and accounting
• Project Management
• Sweat Equity

5

• Financing
• Banks unfamiliar with technologyand associated
  risks
• Loans for small projects typically personally
  guaranteed
• Traditional financing is short-term
• Cash-flow becomes the key issue
• Farming of water

6

• Operation and Maintenance
• Expenses Categories
• Part-time Operator
• Insurance
• Taxes (water, municipal, provincial, federal)
• Spare parts
• Periodic maintenance

7

• Operation and Maintenance
• Tasks
• Cleaning trash
• Handling ice
• Dewatering for turbine maintenance
• Pro-active maintenance

8

• On-going Management Issues
• Annual financial reporting
• Shareholder/partner issues

9

• Annual Costs - Example 300 kW Plant

10

• Issues
• Routine maintenance, downtime and expense
• Breakdowns, downtime and repair expense
• Lost revenue and increased expense
• Effect on cash flow and bottom line
• Margins can be very small

11

• Key Factors for Success
• Realistic assessment of project costs and
  benefits (good assessment methodologies are
  available)
• Solid partnership with good management skills
• Experience within partnership
• Personal and corporate financial strength
• Knowledgeable financial institution
  (documentation available for reference that
  addresses risk assessment)
• Design with special attention to operation and
  maintenance requirements
• Pro-active maintenance plan to minimise expense
  and downtime