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Florida Renewable Energy Producers Association Renewable Energy Federal Grant, Loan and Finance Workshop Renewable E

2. Credibility of revenue streams from the sale of the energy.Consistency and pricing of feedstock.Technology/EPC risk.Counterparty risk relating to off-take agreements, feedstock supply agreements, third parties providing outsourced services (e.g., risk management).Non-recourse borrower credit

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Florida Renewable Energy Producers Association Renewable Energy Federal Grant, Loan and Finance Workshop Renewable E

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    2. 2 Credibility of revenue streams from the sale of the energy. Consistency and pricing of feedstock. Technology/EPC risk. Counterparty risk relating to off-take agreements, feedstock supply agreements, third parties providing outsourced services (e.g., risk management). Non-recourse borrower credit risk.

    3. 3 Bankers continue to create innovative approaches to enhancing the credibility of revenue streams across all segments within the alternative energy space. In the current environment, lenders seek to avoid merchant risk. Hedging techniques which have been used with increasing frequency in the biofuels and renewable power sectors include: Off-take agreements. Tolling Agreements. Energy/Power Hedges. Power Purchase Agreements and Leases. Pre-Payment Agreements.

    4. 4 Feedstock supply is an underappreciated risk in biofuels, biomass, waste to energy and clean coal transactions. No single approach to feedstock agreements is universally applicable due to the variety of types of feedstock and local circumstances. Issues common to all sources: Local supply. Diversity of sources. Ensuring consistency of feedstock. Impact on feedstock as project scales up or expands. Collection, logistics and transportation. Pricing. Cost of energy involved in growing or transporting energy.

    5. 5 Technology risk is the primary risk associated with most projects in emerging segments such as cellulosic, biomass, waste to energy, solar. This is the first risk which lenders assess before looking at credit quality of the transaction. Stages of technology correspond to stages of funding. Pilot or demonstration plant; proof of concept. Consistency in application of technology as project moves to commercial scale; structuring the financing to address scalability issues. Feasibility study and independent engineer report. Technology performance guarantees. EPC wrap. Contingent equity. Third party insurance. Standard approaches to construction risk.

    6. 6 Counterparty risk is receiving more attention as lenders move away from a merchant model to contracted cash flows and margin protection. Financial strength of counterparties. Is an investment grade rating necessary? Guarantors. Sector expertise, operational resources and management track record. Impact of macro-economic and regulatory factors on counterparty performance.

    7. 7 Lenders are increasingly seeking credit enhancement or partial recourse to hedge the risk inherent in non-recourse financing. Government loan guarantees. Corporate loan guarantees. Equity-funded credit enhancement techniques. Stakeholder credit enhancement.

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