HSH Nordbank AG. Financing of Wind Projects in Germany. Current Market Situation and Future Challenges

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1 Financing of Wind Projects in Germany Current Market Situation and Future Challenges HSH Nordbank AG Lars Quandel ENERGY& UTILITIES HUSUM 16 SEPTEMBER 2015

2 Our Profile Renewable Energy Business model PRODUCTS AND SERVICES Energy types International sector specialist Leader in project financing Highly qualified team of experts Loan Cash Risk Consulting Project financing (incl. construction financing) management Deposits Payments Cash Management management Currencies Interest Rates Inflation Wind onshore/ offshore Corporate Finance, M&A Solar Hydro Target clients Core market Project Developers/ Investors / Utilities Europe HSH NORDBANK-FINANCING OF WIND PROJECTS

3 We are the leading finance partner for wind and solar projects in Europe Our area of operation* Clear focuson wind andsolar energy* Middle and East Europe Countries 10% Italy 10% Benelux 2% Other Western Europe (DK, CH, GB, FIN and IRL) 2% France 32% Wind Onshore 10% 45% Others 2% Wind Offshore 1% Solar 52% Spain 15% Our skills Germany 29% In-depth experience in the field of renewable energies Our portfolio in the wind and solar segments comprises about 230 farms worth around 4.4 bn Mainly mandated lead arranger positions or bilateral business Target final-hold positions for new business: million Optimal integration of programme loans (e.g. KfW, EIB). ECA cover if required (e.g. Euler-Hermes, EKF) *as per HSH NORDBANK-FINANCING OF WIND PROJECTS

4 Our Track Record Deals Wind (onshore) Pajukosken Tuulipuisto Oy WINDPARK YLIVIESKA PAJUKOSKEN WINDPARK SCHOENFELD (ERW. WP PREMSLIN II) WINDPARK PORTFOLIO SEINE RIVE GAUCHE BÜRGERWINDPARK NEUENKIRCHEN WINDPARK KÜRRENBERG 45,200,000 5,100,000 92,000,000 62,705,000 29,300,000 Finland Germany France Germany Germany WINDPARK SAINT RIQUIER 3+4 WINDPARK PARC EOLIENNES DE CLEMENTINE ( BLA ) WINDPARK SAINT CONGARD WINDPARK ZULTEN- BERG-SEUBERSDORF WINDPARK WANDERUP 31,100,000 18,500,000 10,600,000 31,915,000 20,650,000 France France France Germany Germany HSH NORDBANK-FINANCING OF WIND PROJECTS

5 Electricity Production in Germany from Wind and total Renewable in gwh wind Windenergie energy Erneuerbare renewable energy Energien source: AG Energiebilanzen e.v. () HSH NORDBANK- FINANCING OF WIND PROJECTS

6 Requirements for a successful Wind Power Development Legal and Regulatory Framework Project Conditions Financing HSH NORDBANK- FINANCING OF WIND PROJECTS

7 Important Project Parameters for Financing Professional project partners Project developer Manufacturer General contractor Investor O&M provider Other parameters Stable legal and regulatory environment Sustainable project structure with balanced risk diversification Established technology O&M concept Full maintenance agreement maintenance cost - reserve Typicalrobustness requirements of banks Stress and base case for sensitivities Wind onshore: Min. DSCR 1.30 at p50, min. DSCR 1.20 at p75 Solar PV: Min. DSCR 1.20 at p50 Wind offshore: Min. DSCR 1.35 at p90 HSH NORDBANK- FINANCING OF WIND PROJECTS

8 Wind in Germany Regulatory Instruments for a stable Growth of an upcoming Sector Renewable Energy Act Priority feed-in and access to grid Long-term price security by FiT, later remuneration by market premium with a duration of 20 years Grandfathering No changes made for existing plants Transitional periods to protect existing investments in projects not yet built Low interest rates for investments KfW-Programmes HSH NORDBANK- FINANCING OF WIND PROJECTS

9 Important Changes in last Amendment of Renewable Energy Act (EEG) Introduction of EEG Lower tariffs Mandatory direct marketing Growth corridors Tenders HSH NORDBANK- FINANCING OF WIND PROJECTS

10 Excursus Community wind power A predominant part of the investments in renewableswas made by private individuals. HSH strongly supports investments in community wind projects. Characteristics of community wind power projects Investors are citizens living close to the wind park High local involvement in project planning phases Diverse company structures High cost advantages might appear Local value creation Project-Example Neuenkirchen Bürgerwindpark Neuenkirchen UG (haftungsbeschränkt) & Co. KG 12 Senvion 3.2M114, 38,4 MW total capacity Commissioning in May 2015 Duration of planning: Approx. 4 years Investors participate in funds as a limited partner with a minimum deposit of 500 EUR (risk and profit-participation) HSH NORDBANK- FINANCING OF WIND PROJECTS

11 Your contact person Lars Quandel Head of Energy & Utilities Tel HSH Nordbank AG Gerhart-Hauptmann-Platz Hamburg HSH NORDBANK- FINANCING OF WIND PROJECTS

12 Disclaimer The market information contained in this presentation is for general information purposes and is provided as a guideline only. It is no substitute for doing one s own market research or for other legal, tax or financial information or advice. It does not represent an invitation to buy or sell. HSH Nordbank AG wishes to point out that the market information presented is destined only for investors with their own business experience who are able to gauge the risks and opportunities of the market(s) presented here and who obtain comprehensive information from a variety of sources. The statements and information provided inthis presentation are based on information that has been thoroughly research by HSH Nordbank AG and/or obtained from generally available sources which cannot be verified by HSH Nordbank AG but which it considers to be reliable: HSH Nordbank AG considers the sources used to be reliable but it is unable to checktheir reliability with ultimate certainty. The individual information in these courses was only examined for plausibility; the factual accuracy was not examined. Moreover,the presentation contains estimates and forecasts based on a large number of assumptions and subjective evaluations by both HSH Nordbank AG and other sources, whichconstitute non-binding assessments of markets and products at the time of publication. Despite careful preparation, HSH Nordbank AG and its employees and corporate bodies cannot guarantee that the information and forecasts provided are complete, up to date and accurate. This document is distributed in accordance with the legal provisions governing the countries in question and persons in possession of this document should obtain information on the applicable local regulations. These documents do not contain all information that is material for important business decisions and can differ from the information and assessments provided in other sources/by other market participants. Neither HSH Nordbank AG nor its corporate bodies or employees can be made liable for losses resulting from the use of this presentation or its contents or occurring otherwise in connection with this presentation HSH Nordbank AG wishes to point out that this material must not be passed on to third parties. The amount of any damages resulting for HSH Nordbank AG from the disallowed passing-on of this material to third parties must be reimbursed in full by the party that passes the material on. The party must hold HSH Nordbank AG harmless of any third-party claims based on the disallowed passing-on of this material and of any legal defence costs incurred in this connection. This applies, in particular, to the passing-on of this presentation or information contained in it to persons in the US or UK. This presentation is promotional material. This promotional material does not meet all legal requirements regarding the impartiality of financial analyses and is not subject to a ban on trading prior to the publication of financial analyses. HSH NORDBANK- FINANCING OF WIND PROJECTS

13 Back-Up

14 Project financing steps The borrower is a project company in the form of a special purpose vehicle (SPV) Repayment of debt capital from the future cash flow of the project Cash flow secured under longterm contracts Assets of the SPV and shares in the SPV serve as collateral No / limited recourse to assets or cash flow of the project sponsor beyond the equity contribution Basic structure of project financing Operator Plant supplier Suppliers Management contract General contractor agreement Supply contracts Sponsor(s) equity capital providers, e.g. project parties, financial investors Project company Lenders, banks Company agreement Delivery contract Financing agreement Customers e.g. (EEG electricity) The financing possibilities are determined by the cash flow (amount and stability) HSH NORDBANK- FINANCING OF WIND PROJECTS

15 Project financing advantages and disadvantages for the sponsor Advantages Disadvantages Large investment projects are made possible in the first place by the limited liability Optimised equity utilisation and thus increased IRR for the sponsor Allows sponsors to avoid full consolidation Access to (very) long-term financing at riskadequate conditions Extensive due diligences by the lenders in the run-up Complex contractual documentation with relatively restrictive clauses Great ongoing monitoring and documentation effort High creditworthiness of the project parties required HSH NORDBANK- FINANCING OF WIND PROJECTS