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RE Sector and project finance – outline of
training available for commercial banks
Balkan
Renewable
Energy
Program
In partnership with:
With technical support provided by: &
2
Agenda
1) SHPP Potential in Serbia
2) Balkan Renewable Energy Program (BREP):
• Program objectives
• Training curriculum and materials
3) Main topics of the training program
4) Discussion
3 3
SHPP Potential in Serbia
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Serbia’s significant hydro potential is still not sufficiently
exploited (estimated to about 950 sites with a total capacity of about
500 MW)
Modest investment activity in SHPPs up to date (only about 20
plants have been put into operation in the past years)
Plan for intensive investment activities in SHPP sector in
forthcoming period
SHPP Potential in Serbia
4 6537A07/FICHT-10198764-v4
5
Public Notice issued by Ministry of Energy, Development and
Environmental Protection for Investment in Small Hydro Power
Plants in February 2013 for:
• over 300 SHPP sites (97 MW, 330 GWh/year) in urban planning
documents of local self-government units, based on available water
resources
• production of the electricity from water resources that meets
eligibility for incentives (FiT and other) of total output due to
contribution to the national overall RES target for Serbia
SHPP Potential in Serbia
6
Public Notice for interested domestic and international
legal and physical persons encompasses following:
• Available sites designated for SHPPs based on available water
resources
• Legally prescribed criteria and procedure for obtaining either:
• energy facility construction approvals for energy generation
facilities with capacity of less than 1 MW or
• energy licenses for energy generation facilities with capacity of
1 MW and more
SHPP Potential in Serbia
7 7
BREP – Objectives,
Training curriculum and training material
7
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The Objectives of the Advisory Services financed by IFC are:
• Increase banks’ general knowledge about Renewable Energies (RE), Climate
Change (CC)
• Improve banks internal capacities and knowledge on SHPP and Project
Finance
• Provide support to banks in of SHPP financing product development and
marketing of the new product
• Reduce the risk associated with SHPP finance
• Increase the overall efficiency of the bank in the SHPP assessment process
Objectives of BREP
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Manuals
Training
SHPP cash flow tool
Support in SHPP project assessment
Elements of the training
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Technical Manual, consisting of:
Engineering Manual: Providing the basic technical aspects of SHPP (SHPP
schemes, typical layout, hydrology and power generation, etc.)
Budgeting Manual: Cost component and benchmarks for CAPEX and OPEX
Risk Manual: Potential risk associated with SHPP development, guidelines how to
manage the risk (identification, assessment, mitigation)
Legal Manual: Regulatory Framework for SHPP development in Serbia,
information about the procedure/steps to be followed by the project developers, etc.
Finance Manual: Guideline and tool for bankers financing SHPP
projects under project finance scheme
Explaining the basics about (SHPP) project finance
Typical SHPP project financing process
Loan portfolio management
Organizational aspects relevant for bank project team
Elements of the training - Manuals
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As part of the BREP, a three days training is provided to the
participating banks
Elements of the training - Training
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Technical Sessions
• Technical basics of SHPP
• Cost/budgeting aspects
• Power generation
• Typical technical risks
and risk management
• Presentation of case
studies
Finance/Legal Sessions
• SHPP Project Finance
• SHPP Financing process
• Risk pricing
• Financial indicators
• Loan agreements
•Organisational aspects
• Legal and regulatory
framework
Financial Model
• Basics of financial
modelling
• Presentation of financial
model for SHPP project
finance
• Calculation of case
studies
• Sensitivity analyses
12 12
Main topics of the training program
12
Elements of the training – Technical aspects
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Overview of technical aspects covered in the training
Technical issues:
– Basics of Hydropower
– Classification and types of hydropower schemes
– Small Hydropower design and principal layouts
– Optimization of SHPP Projects
– Power generation
– Small Hydropower operation and maintenance
Budgeting issues
– Investment items, cost benchmarks
– Operation & Maintenance costs items, benchmarks
Risk issues
– Typical risk associated with SHPP development (construction and operation)
– Risk management – procedures to identify, evaluate and mitigate risks
Elements of the training – Technical aspects
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Depending on site topography, different concepts can be applied to harvest
hydropower.
Usually canal-penstock layout or a variation of it.
Scheme with a diversion canal.
– Additional head by abbreviating a meandering
river.
– Dry building pit during the erection of diversion
canal and the powerhouse.
Erection of a barrage.
– Compensation of lower flow conditions.
– Additional head.
Source: ESHA, Guide on How to Develop a SHPP
Source: ESHA, Guide on How to Develop a SHPP
Elements of the training – Technical aspects
15
0
0,2
0,4
0,6
0,8
1
1,2
1,4
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Mea
n m
onth
ly d
isch
arge
[m
³/s]
Month
Mean monthly discharges
Available discharge at water intake Selca I
Hydrology: Estimation of discharge at water intake location as the basis for the
estimation of the average annual power generation
Elements of the training – Technical aspects
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Turbines can be roughly classified as high-head, medium-head, or low-head
machines. Furthermore, turbines are being classified by their principle of
operation
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Corporate Finance vs. Project Finance
Elements of the training – Finance aspects
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Control over Collateral
Very Close Not so tight
Collateral
SHPP it self Other non-project related
Control & Monitoring of Cash Flow
Very Close Can be performed if needed
Cash Flow Projection
Is known before disbursement
Less relevant
SHPP Financing Project Finance Corporate Finance
Start-up Financing
YES NO
Credit Risk
on SHPP'S Cash Flow (easy to estimate)
On sponsor's other businesses' Cash Flow
Type of Financing
Non-Recourse Recourse
Leverage to Sponsor in case of multiple SHPPs
Enables multiple lending as only project assets are used as guarantee
Limited to Sponsor's other Assets and or Wealth
SHPP Financing Project Finance Corporate Finance
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Elements of the training
– Finance aspects
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SHPP project development process
can be divided into three main
stages (from the perspective of the
Bank as debt provider for SHPP
project):
Stage 1: Initial Contact & Screening
Stage 2: More detailed Screening
Stage 3: Detailed Due Diligence
19
Elements of the training – Finance aspects
19
Separation between Internal and External
staff:
Bank-internal staff:
SHPP Team Manager
Credit Officer(s)
Client Relationship officer(s)
Bank-external (independent expert) staff:
Independent technical expert
(engineer)
Legal expert
Insurance Advisor
20
Legal aspect of training includes introduction to following areas of
interest:
• Electricity and Renewable Energy Sources Markets
• Specific Renewable Energy Sources Legislation and Regulation
• Feed in tariffs and other related incentives
• Permitting and Approvals Process
• Key Contracts (Key Clauses, Critical Milestones and Associated Risks)
Elements of the training – Legal aspects
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The Financial Model is tailored to the needs and requirements of the
BREP
Consideration of the technical peculiarities of SHPP
Consideration of the legal and regulatory framework (feed-in-tariff scheme)
Consideration of the requirements of a project finance scheme
User-friendly
• Use of Marcos to run all relevant calculations and sensitivity analysis
• Protection of cells, which shall not be manipulated
• Build-in control and error messages
• Clear structure of the model, supported by color codes
Elements of the training – Financial Model
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Elements of the training – Financial Model
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The Financial Model bases on the following principle
Input Data
Calculation
Construction Operation Financing Debt
IRRFinancial
StatementsDSCR
LLCR
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Elements of the training – Financial Model
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Basic Structure of the Financial Model
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Elements of the training – Financial Model
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All relevant information is presented in a summary sheet
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Once the bank has identified potential SHPP developer, support is
provided by the Consultant. Potential Activities:
• Support in technical, environmental, financial, legal, commercial evaluation of
the project and the project sponsor
• Support in specification of scope of work of external advisors (e.g. lenders
engineer)
• Support in risk assessment
• Review of due diligence reports prepared by external advisors
• Support in preparing the loan agreement
Elements of the training –
support in SHPP assessment
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Under the BREP, participating banks obtain:
A set of manuals, explaining in detail all relevant aspects of SHPP project
evaluation and project finance from a financial, technical, legal, budgeting and risk
point of view
A financial model, which is tailored to the requirements of SHPP project finance
and which can be used for the assessment of the SHPP projects
A three day training course, where in class room trainings and small working groups
all relevant aspects of SHPP project finance and the use of the financial model are
trained
Beyond these training measures, IFC and Consultant support in a joint
effort the bank in the assessment of the first three SHPP projects
Summary
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Contact Persons
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For IFC:
Nebojsa Arsenijevic
Balkans Renewable Energy Program Manager
Europe & Central Asia - Advisory Services, IFC
Bulevar kralja Aleksandra 86
Belgrade, 11000
Serbia
Tel: +381 (11) 3308959 Fax: +381 (11) 3023740
Cell: +381 (64) 6111164
E-mail: [email protected] Web: www.ifc.org
For Consultant:
FICHTNER GmbH & Co. KG
Germany in collaboration with
Frankfurth School of Finance and
Management
Dr. Johannes Hoenig
Team Leader BREP
Phone +49 (711) 8995 377
Mobile +49 (178) 8123001
E-mail [email protected]
Faruk Serdarevic
Deputy Team Leader
Mobile: +387 (611) 344 09
E-mail [email protected]
Marjan Stojiljkovic
Finance Expert
Phone: +49 69 154 008 896
Mobile: +49 172 8108578
E-Mail: [email protected]
