Who are we? Jens Lohmueller, Credit Union Central of Ontario 3/9/2005

Transcription

1 Who are we? Credit Union (CUCO) is the trade organization of Ontario credit unions. We work within a collective network of service locations comparable in size to the major banks. There are over 700 branches serving more than 1.6mio members in Ontario. About one in seven residents of Ontario is a member of a credit union. 1

2 Who are we? Cont d We are supporting about 40,000 small and medium enterprises (SMEs) in Ontario with about $ 3.4bn in commercial loans. Our loan syndication program alone has more than $ 1bn invested in Ontario businesses. We are working in partnership with the Business Development Bank (BDC), Farm Credit Corporation (FCC), Export Development Canada (EDC), and with the Community Futures Development Corporations of Ontario (CFDCs). 2

3 Jens Lohmueller, Credit Union Central of Ontario 3 Developing a Business Plan for your Wind Project

4 Mission Statement A clear statement of your company s longterm mission. Try to keep is concise. Short and sweet. 4

5 The Company Describe the company in terms of it s legal form: Partnership, Co-op, Joint Venture etc. Have you incorporated? When? Provide details. Location Address Contact Information 5

6 The Management Team List CEO and key management by name. Include current qualifications and previous accomplishments to show their qualification. Summarize number of years of experience in this particular field. 6

7 Market Summary Market: past, present, & future Describe the main drivers in the market Where is the competition? How is it impacting you? Do you have any competitive (dis-) advantages over the competition? 7

8 Business Concept / Description of your Project Summarize key technology, concept or strategy on which your business is based on. Give a summary of the stages and timelines: 8

9 Canadian Government Support Federal: Canadian Renewable and Conservation Expense (CRCE) Federal: Wind Power Production Incentive (WPPI) Federal: Emission Reduction Credits (Kyoto, ERCs slowly becoming available on a test basis) Provincial: Renewable Portfolio Standards (RPS) Provincial Government Support, i.e. Ontario Renewable RFP, or Refundable Tax Credit (i.e. Quebec) 9

10 Canadian Government Support Cont d CRCE Qualifying expenditures are fully deductible from income for tax purposes. These expenses can be financed by using Flow-Through Shares, which allow the developer to pass these expenses on to investors who can use these as deductions against taxable income. 10

11 Canadian Government Support Cont d CRCE eligible expenses: Costs of feasibility studies and wind studies; Costs of negotiation of PPA and other agreements; Costs of site approvals and some site preparation costs; Some interconnection costs, and The cost of the test turbine within 1.5km of the prospective site for at least 120 days. 11

12 WPPI: Canadian Government Support Cont d For the first 1,000 MW wind power installed between 2002 and 2007, Fed. Gvt. makes annual incentive payments to wind developers for every kwh of net production for 10 years. Total of $ 260mio committed for WPPI for first 5 years. Mar-2003 until Mar-2006 = $ 0.01 per kwh Mar-2006 until Mar-2007 = $ per kwh 12

13 Canadian Government Support Cont d ERC: A market based mechanism to achieve an overall reduction in emission reduction to allow the producer with the lowest emission abatement cost to reduce, while higher abatement industries / producers pay by buying ERCs. While companies like OPG and TransAlta have been acquiring ERCs in preparation for future regulatory obligations, a liquid market does not yet exist in North America. Wind Power producers are allowed to utilized ERCs only on a test basis. Sea Breeze Power of B.C. is allowed to sell about 124,000 tonnes of green house gas emission reductions for 2006 and 2007as part of the Environment Canada s Pilot Emission Removals, Reductions and Learnings (PERRL) Initiative - based on 50MW installation capacity-. 13

14 Canadian Government Support Cont d RPS: They set a min. standard for renewable energy capacity additions as a percentage of total provincial electric power generation capacity. The proposed shutdown of Ontario s coal fired stations in 2007 is expected to lead to a shortfall in electricity production. To compensate the Ont. Gvt. has committed to increase power production by renewable resources to 5% (1,350MW) of total generation by 2007, and 10% (2,700MW) by

15 Goals & Objectives Five-year goals State specific measurable objectives State market share or other development objectives State revenue/profitability objectives 15

16 Financial Plan High-level financial plan that defines financial model, pricing assumptions, and presents yearly expected sales and profits for the next three to five years. Revenue considerations: Wind is usually a predictable resource with annual deviations of only around 10%. Modern turbines contain a reliability factor of about 95%, but you might experience fine-tuning problems in the first year of operation. PPA generally guarantees fixed pricing for certain period with potential inflation adjustment. Any extra revenue from sale of Green Tags etc? Large turbine producers offer warranties covering lost revenues related to manufacturing / installation defects. 16

17 Financial Plan Cont d Cost considerations: Low operation costs due to fully automated operation. Annual maintenance cost in the range of 1.5% 2% of total installed system cost per year. Infrastructure costs, as insurance premiums and payments for land access and use, typically amount to around 1% of installed system costs. You might want to consider a maintenance contract for i.e. 5 years, thereafter remember to build up enough reserves to pay for repairs and replacement parts. 17

18 Financial Plan Cont d Suggestion: Work in three stages: Stage 1: Production Plan Stage 2: Funds Flow Statement Stage 3: Balance Sheet Statements, Pro Forma Income Statements 18

19 Financial Plan Cont d Stage 1: Production Plan For Example: Whirlwind Production Plan for

20 Financial Plan Cont d Stage 2: Funds Flow Statement 20

21 Financial Plan Cont d Stage 3: Balance Sheet, Income Statement Have your accountant prepare an opening Balance Sheet including asset and liabilities. Prepare a Pro Forma Income Statement for at least three five years going forward. Discuss all the underlying assumptions in detail. You want to provide as much information as possible to make the reader understand your plan. Allow for some variances and ideally provide an upper and lower case scenario also for the Production Plan. 21

22 Material Requirements / Contracts JV, co-op, management agreements Engineering, procurement and construction agreements Maintenance agreement with turbine producer or other company Land lease agreement Power purchase agreement Any other agreements, i.e. with finance companies, contribution agreements with govt. agencies, etc. 22

23 Material Requirements / Permits Building permits Environmental assessment or exemption permits Zoning approvals Aircraft obstruction clearance approvals from Transport Canada and Nav Can Other land use approvals 23

24 Potential Risks to your project? Be aware and discuss the risk and potential solutions at each stage of the project, for example: Site identification - poor wind results How can you mitigate this? Site acquisition / permits fail to obtain site access -? Project development failure to sign PPA, get grid connection approval, denial of subsidies, poor wind assessment -? Financing unable to secure financing for each stage of the project -? 24

25 Potential Risks to your project? Cont d Grid connection and test turbine installation test turbine shows poor results, or installation cost overruns -? Infill Construction installation cost overruns -? Production Stage material breakdowns not covered under manufacturer warranty, or counterparty withdraws from contract -? 25

26 Summarize Key Issues Near term What are the immediate or near-term plans / goals? Long term Specify long-term goals / objectives? Do you want to expand with more turbines / wind parks? What needs to be done? What do you need to get there? If you are seeking funding, state specifics based on your detailed analysis. 26

27 Thank you very much. Contact information: Jens Lohmueller (905)