Financing the U.S. Power Fleet

Transcription

1 Financing the U.S. Power Fleet Generation reliability and transformation of the power fleet Las Vegas, April 9 th, 2013 Jorge Camina Head of Project & Acquisition Finance U.S. Santander Global Banking & Markets

2 Financing the Power Industry in U.S. About Santander p.2 A growing franchise in the U.S. Largest bank in the Eurozone by market cap and 9 th in the world 1 : serving 100 million customers Santander in the U.S.: 1.7 million customers, $178bn assets, 777 branches and 14,000 employees Committed to the Power Industry We have financed 34 deals with either debt or equity in the North American power space in the last 24 months: 8.2 GW capacity, $14bn of EV Among these, 11 solar - PV and CSP - (1.7GW), and 16 wind (2.6GW) Santander led 6 bank-institutional hybrid deals in 2012, raising + $2.3bn debt Greenest Bank in the World in 2012 by Bloomberg

3 Financing the Power Industry in U.S. Santander : Debt Provider to Power Projects in the U.S. p.3 CAD 2012 Broad River Flat Ridge 2 Des Moulins Phase I Centinela Solar Imperial Solar South Acquisition of 847 MW gas-fired power plant 470 MW Wind Farm in Kansas 136 MW Wind Farm in Quebec 170 MW Solar PV Plant in California 130 MW Solar PV Plant in California US$ 355,000,000 US$ 352,000,000 CAD$ 296,000,000 US$ 756,000,000 US$ 476,000,000 Senior Managing Agent Co-Documentation Agent Left Lead Coordinator Left Lead Coordinator Left Lead Coordinator California Ridge Alpine Solar Alta Wind VII & IX Arlington Valley Desert Sunlight 214 MW Wind Farm in Illinois 68 MW Solar PV Plant in California 300 MW Wind Farms in California 127 MW Solar PV Plant in Arizona 550 MW Solar PV Plant in California US$ 444,000,000 US$ 272,000,000 US$ 650,000,000 US$ 465,000,000 US$ 1,779,000,000 Left Lead Coordinator Mandated Lead Arranger Syndication Agent Co-Documentation Agent Left Lead Coordinator Alta Wind VI & VIII CPV Sentinel Lakefield Lost Creek Sharyland Two 150 MW Wind Farms in California 800 MW Gas Fired Power Plant in California 210 MW Wind Farm in Minnesota Refinancing of 150 MW Wind Farm in Missouri 300 miles Transmission Lines in Texas US$ 631,000,000 US$ 796,000,000 US$ 422,000,000 US$ 144,000,000 US$ 727,000,000 Co-Documentation Agent Co-Agent Mandated Lead Arranger Co-Agent

4 Financing the Power Industry in U.S. Santander : Equity Provider to Power Projects in the U.S. p.4 Punta Lima Solana Mountain Air Shiloh III SPP Project 23.4 MW Wind Farm 280 MW CSP 138 MW Wind Farm 102 MW Wind Farm 4.4 MW Solar PV CONFIDENTIAL US$ 2,000,000,000 US$ 138,000,000 CONFIDENTIAL US$ 21,000,000 Tax Equity Investor Equity Investor Equity Investor Tax Equity Investor Equity Investor US 2010 PRIVATE CLIENT Tonopah Solar Macho Springs Palm Valley Solar Austin Solar Flatt Water 110 MW CSP 50 MW Wind Farm 4.5 MW Solar PV 35 MW Solar PV 60 MW Wind Farm US$ 1,000,000,000 US$ 123,000,000 CONFIDENTIAL US$ 123,000,000 CONFIDENTIAL Equity Investor Equity Provider Equity Investor Equity Provider Equity Investor

5 Financing the U.S. Power Fleet 2013: Slow down in financing pipeline in the power Industry (Supply) p.5 Supply U.S. Electricity Demand down 0.3% in 2012 (10.6 Bn KW/hr/d) Slow down after a period of unprecedented support to the Renewable Energy industry through various programs: DOE, ITC Cash Grant, etc. Diminishing stock of PPAs in the wind & solar industry: getting closer to the RPS targets in California Tailwinds from the manufacturer cost curve in Solar PV: improving success ratio of aggressive PPA pricings and accelerating RPS compliance Mostly Generation driving the need of debt. Transmission not yet demanding significant private capital, with exceptions like the CREZ program in Texas Coal Retirement will drive growth but may not happen as quickly and may be semi-merchant driven

6 Financing the U.S. Power Fleet 2013: The IPP Power sector has been a key driver of Project Finance Lending in the last 5 yrs p.6 Power represented 86% of the Project Finance Market in 2011, 54% in 2012 U.S. Project Finance market volumes have remained stable at $ 35 Bn The Project Finance Market in the U.S Conventional Power Renewable Energy Oil and Gas Transportation - Infra. Other

7 Financing the U.S. Power Fleet 2013: Debt appetite is strong (Demand) p.7 Demand Strong demand for financing contracted power: traditional PF Banks, LifeCos and Bond Market (ie Topaz) Low Default track record in contracted power Relative Value with Corporate Credits: $15 Bn of the Heinz acquisition facility were flexed-down this month (6/7 Yrs Term Loan L+225 / 275 Bps) High Yield Investors chasing yield in the Infrastructure space: Sabine Pass 1.5 Bn trading at 5% yield (BB-; 5 year construction) European banks are mostly back (French & German) Japanese lenders targeting to maintain volume in a weaker pipeline: tightening pricing & increasing appetite for semi-merchant deals Growing appetite for power assets and presence of U.S. regional banks

8 Financing the U.S. Power Fleet Power: key driver of Project Finance Lending in the last 5 yrs p.8 Yield of non-ig credits continued dropping, reaching below 6% levels. Appetite for yield is driving more assets managers from more traditional HY structures to the power & infrastructure space 10.0 JPM High Yield Index (YTW %) JPMorgan High Yield Bond Index YTW (%) Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 7 to 10 yrs 10+ yrs

9 Financing the Power Industry in U.S. Supply / Demand Imbalance p.9 Near term outcome Competition in pricing and tenors in the short term, despite capital regulatory constraints kicking in full by 2018 Increased interest in other power asset categories, from purely utility scale contracted power with commercially proven technologies to: Increasing interest in Distributed Generation, Commercial & Residential Merchant & Semi-merchant projects will get more attention: Term Loan B players will find more competition from Commercial Banks Less commercially proven technologies (ie CSP) Partially alleviated by strong demand from multibillion LNG Exporting facilities (estimated in >15 Bn debt needs in the U.S for the next 12 months) The end of the cash grant era leads to the comeback of ITC Bridges Back to UW to capture deal-flow?

10 Financing the Power Industry in U.S The Project Finance Business Model is in the middle of a transition p.10 Capital requirements by asset class under Basel III 48% Basel III increased costs for long term financings challenging for PF business The new capital regulations kickin full by 2018 : Private Equity 38% 25% 16% Equity Property Credit 10 years 12% Credit 7 years 8% Credit 5 years 5% Credit 3 years 1. There is no carve-out in Basel III in the treatment of Project Finance 2. Commercial Banks will see their appetite for long tenors significantly reduced 3. Pricing & Return pressures: Increase in pricing and pressure en ROA

11 Financing the Power Industry in U.S. How will be Power Projects Financed in 2018? p.11 Likely elements of a transition in the power & infrastructure financing business model Assuming Basel III stays as is the PF Bank lending will be penalized Banks becoming Underwriters, Originators or warehouses for refinancing take-out in the institutional market Pension funds / Asset managers entering the PF: building debt teams coming from the equity and preferred equity space Hybrid Structures: Bank & LifeCo / Bond market working together MLP / REIT / Yieldco regimes: retail and/or tax efficient cost of capital becoming the subsidy for renewable energy projects CLOs / Term Loan C : investment term & return risk adjusted for the power asset class Securitization: commercial & residential solar

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