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Financing RenewablesThe PPA MarketFiT, ROC & CfD
Iain Robertson, Generation Sales ManagerScottish Renewables Annual Conference25th March 2015
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SmartestEnergy
The UK’s leading PPA provider to the independent embedded generation sector
Established 2001
Portfolio:2.4GW aggregate capacity600+ GB generatorsIncludes all commercial renewable technologies
Wholly-owned subsidiary of Marubeni Corporation
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Feed-in Tariff PPA
Projects modelled on Generation + Export Tariffs An effective floorBankable
PPA traditionally provides export upsidePower + LECs + REGOs + Embedded BenefitsMonthly cashflow
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Forward Seasonal Wholesale Power Prices
Export tariff 2015-16
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Feed-in Tariff PPA
Export Tariff currently not levelisedUnrecoverable losses/ risks for suppliers
Other PPA issues:Shared grid connections
Multiple FiTFiT and ROC
Extensions
Comprehensive FiT Review due during 2015
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ROC PPA
Power + ROCs + LECs + REGOs + Embedded Benefits
Monthly cashflow
Short-term market remains competitive
Long-term market typically 10-15 year dealsFewer PPA providersFloor price essential for some projects/ some fundersBottleneck ahead before closure of RO?
Power and ROC price volatility
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Day-Ahead Wholesale Power Price
ROC Values
ROC history
Buy-Out Recycle Total
CP1 2002-03 £30.00 £16.52 £46.52
CP2 2003-04 £30.51 £22.99 £53.50
CP3 2004-05 £31.39 £14.17 £45.56
CP4 2005-06 £32.33 £10.19 £42.52
CP5 2006-07 £33.24 £16.04 £49.28
CP6 2007-08 £34.30 £18.65 £52.95
CP7 2008-09 £35.76 £18.61 £54.37
CP8 2009-10 £37.19 £15.15 £52.34
CP9 2010-11 £36.99 £14.35 £51.34
CP10 2011-12 £38.69 £3.58 £42.27
CP11 2012-13 £40.71 £3.59 £44.30
CP12 2013-14 £42.02 £0.70 £42.72
CP13 2014-15 £43.30 ?
CP14 2015-16 £44.33 ?
CP1 CP2 CP3 CP4 CP5 CP6 CP7 CP8 CP9 CP10 CP11 CP12 CP13 CP14
0%
5%
10%
15%
20%
25%
Original RO target ROC submissions
Targets
Values
ROC to become fixed price in 2027
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CfD PPA
Greater certainty?
15-year CfD with LCCC guarantees strike price top-up
PPA includes basis risk discounts by purchaser:Holding risk, Imbalance riskExpressed as % or £/MWh discount LECs, REGOs, Embedded Benefits, New Benefits
Offtaker of Last Resort provides the “floor”
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ROC v CfD
ROC PPA covers all elements
CfD above the line
PPA below the line
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CfD PPA v ROC PPA
PPA Requirement Impact under the CfD scheme
Impact on realised value
Floor Not required Increased generator share
Holding/ Imbalance Risk Managed in PPA Neutral
Payment Guarantees Less required? Increased generator share
LECs/REGOs/Benefits None Neutral
Contractual arrangements Negative pricingCurtailment
Possible reduction
Reporting/ Settlement Increased reporting (daily) Increased operational costsAdded value service
OLR Backstop PPA process More choice?
Term More flexible? Lender view?
Risk & rewardDebt sizing
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Impact of increasing intermittent mix
More intermittent generation in the market means increased basis risk
Current Early 2020s Late 2020s0
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Negative pricesHoldingImbalance
Cost
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Revenue Flows under CfD
Billing period = daily, 00:00 until following 00:00
CfD
Pro
cess
PPA
Pro
cess Supplier
produces statement within 5 BDs
Generator submits invoice
LCCC produces Billing Statement within 7BDs
LCCC pays generator within 28 BDs
Generator pays within 10 BDs
Supplier pays invoice within 10 BDs
*2
*If the Net Payable amount in the Billing Statement is negative then *1 occurs, if positive then *2
End
of
cale
nd
ar
month
Supplier sells power in appropriate market
May June
*1
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CfD PPA Activity
CfDs signed by 27 March
Engagement with developers and lendersShortlisting processDetailed negotiations
Financial close during 2015 on some projects
15-year PPA likely to be the initial standard
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Selecting a PPA Provider
Engage early with offtakers (and funders)
Criteria:GB industry experience and expertiseStrong balance sheet and availability of collateralService levels and account managementDiscounts and structuresTerms and conditionsOperational interfaces e.g. registration, billing & settlementFlexibilityValue add e.g. process, payment management
Relationship
