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35, boulevard des Capucines 75002 Paris Tél: (33-1) 53 45 40 00 Fax: (33-1) 53 45 40 10

Project Finance Private Equity in the Wind Energy Industry Philippe Raybaud Partner, Corporate Department. 35, boulevard des Capucines 75002 Paris Tél: (33-1) 53 45 40 00 Fax: (33-1) 53 45 40 10 www.cgrlegal.eu. Private Equity in the Wind Energy Industry.

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35, boulevard des Capucines 75002 Paris Tél: (33-1) 53 45 40 00 Fax: (33-1) 53 45 40 10

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  1. Project Finance Private Equity in the Wind Energy Industry Philippe Raybaud Partner, Corporate Department 35, boulevard des Capucines 75002 Paris Tél: (33-1) 53 45 40 00 Fax: (33-1) 53 45 40 10 www.cgrlegal.eu

  2. Private Equity in the Wind Energy Industry • Private equity, in its largest meaning, would be any activity where investors entrust their money to professionals so that they invest it in companies according to certain predefined investment criteria. • This presentation will be focused on the role of investment funds in financing wind farm projects (asset finance).

  3. Private Equity in the Wind Energy Industry In 2007, • US$ 148.4 billion* invested in the clean energy sector worldwide; • 57% of which for new renewable energy capacity (US$ 84.5 billion)*; • Out of these US$ 84.5 billion*, US$39 billion* for new wind farm projects, adding another 21 GW* of new capacity worldwide. * figures taken from UNEP’s Publication on Global Trends in Sustainable Energy Investment 2008

  4. New Investment by Sector * UNEP’s Publication on Global Trends in Sustainable Energy Investment 2008 - Dataset

  5. Private Equity in the Wind Energy Industry • Continuous increase of the overall investment in new generating capacity mainly fuelled by new investment in wind farm projects • Investment in solar projects is quickly picking up

  6. New Investment by Region * UNEP’s Publication on Global Trends in Sustainable Energy Investment 2008 - Dataset

  7. Private Equity in the Wind Energy Industry • Europe attracted the largest investment, but China, Brazil and India are becoming significant players • With the Obama administration, wind turbine manufacturers expect a significant increase of new wind farm projects in the US

  8. Private Equity in the Wind Energy Industry • Infrastructure Investment Funds are very active in the acquisition and/or financing of wind farm projects • Private equity financing for clean energy projects was estimated at approximately US$ 10 billion worldwide in 2007

  9. Main Features of Infrastructure Fund’s investments: • low risk, low return • long term investments • priority on risk diversification (countries, turbines, etc.) • investments are typically made with a high leverage of debt, but some funds make 100% equity investments

  10. Minimizing risk as much as possible is crucial: • Extensive technical, legal, tax and financial due diligence on the project; • No development risk to be taken by the fund: risk allocation under the Share Purchase Agreement and Development Service Agreement; • No construction risk to be taken by the fund: turnkey-type construction agreements with maintenance agreement; • In the current market, funds even refuse to take financing risks.

  11. Examples of infrastructure investment funds

  12. Private Equity in the Wind Energy Industry The current credit crunch has not significantly reduced the deal flow of infrastructure investment funds: • the valuation of wind farm projects has gone down; • more projects are on the market, as developers tend to encounter more difficulties to finance them; • infrastructure investment funds are experts in project finance;

  13. Private Equity in the Wind Energy Industry The current credit crunch has not significantly reduced the deal flow of infrastructure investment funds: • some infrastructure investment funds finance the whole project with equity (Allianz funds); • the increase of margins applied by banks on interest rates (spread) tend to be at least partly set off by the decrease of base rates; • banks continue to show interest in financing energy generating facilities.

  14. Consequences of the current credit situation on infrastructure funds: • The bank financing process is much more difficult and tends to take much longer; • Credit Facility Agreements contain more stringent provisions and in particular market flex clauses; • Infrastructure investment funds will only take very limited risks on wind farm projects; • Some fear that asset financing of wind energy projects may become even more difficult in the future.

  15. Project Finance Private Equity in the Wind Energy Industry Philippe Raybaud Partner, Corporate Department 35, boulevard des Capucines 75002 Paris Tél: (33-1) 53 45 40 00 Fax: (33-1) 53 45 40 10 www.cgrlegal.eu

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