Financing Solutions for Renewable Temporary / Off-grid Power Daniel Zywietz, CEO, Enerwhere CEBC Sustainable Energy Financing in MENA event, November 5 th 2014 1
WHAT IS TEMPORARY / OFF-GRID POWER? 2
Diesel generators are a convenient source of shortterm, off-grid power November 3 2014 3
however they are extremely expensive compared to other power sources Example: 7,500-person labor camp in the UAE Annual electricity cost: AED 21.2 million AED 200 / worker / month Load characteristics 3.2 MW summer peak driven by A/C 24/7/365 occupancy Annual consumption: ~15,000 MWh Cost factors Diesel: AED 3 / liter Generator efficiency: 350 liters/mwh Generator rental: AED 450,000/month November 4 2014 4
WHAT IS SOLAR S ROLE IN TEMPORARY / OFF-GRID POWER? 5
Solar competes head on with conventional diesel Cost ($ / kwh) 1.60 1.40 Cost of temporary / off-grid power Over time and by installation size Solar power is cheaper than diesel generators in places with abundant sunshine like the UAE 1.20 1.00 Small diesel (e.g. Telecom) Telecom Diesel (0-10 kw) 0.80 Medium diesel (e.g. Construction) Construction Diesel (10-500 kw) 0.60 0.40 0.20 0.00 2007 Q3 2008 Q2 2008 Q4 2009 Q3 2010 Q2 2010 Q4 2011 Q3 2012 Q2 2013 Q4 2013 Q3 Large diesel (e.g. Mining) Mining Diesel (500-5000 kw) Solar PV short term Solar PV (Short-term rental) Solar PV long term Solar PV (Permanent) Notes: Source: Diesel at world market price; Solar PV short term: 5 year project lifetime; Solar PV long term: 20 year project lifetime; Indexmundi, BSW Solar, Solar Server. November 6 2014 6
The typical UAE load curve is peaking during the daytime due to high A/C demand Typical UAE commercial load curve Load 0:00 4:00 8:00 12:00 16:00 20:00 Time 50-70% of demand occurs during daytime November 7 2014 7
so solar can replace a significant amount of diesel (even without storage), and reduce costs by 15-20% Typical UAE commercial load curve Load Depending on the shape of the load curve, solar can cover 30-50% of energy needs, without expensive battery storage 1 Diesel 5 9 Solar = 30-50% of total kwh 13 17 21 Time Diesel generators make up the remainder Demand management, i.e. shifting loads to sun peak hours, can maximize solar usage and increase savings November 8 2014 8
Enerwhere is the world s first provider of transportable solar equipment for the off-grid power markets Reduces power costs by 20-30% vs conventional diesel Modular & scalable industrial and commercial size Cost optimized for logistics & easy setup ( IKEA principle ) Rapidly re-deployable anywhere in the world Reliable: 24/7 availability through hybridization with diesel generators www.enerwhere.com 9 9
Enerwhere s technology is already powering the world s largest rental solar power plant in Abu Dhabi Saadiyat Accommodation Village 4.5 MW capacity 7,500 staff Power Purchase Agreement signed April 2014 First power provided in early June 2014 Full commercial operation since July 2014 Enerwhere solar plant at SAV Guggenheim, Louvre and Foster s Zayed National Museum to open 2015-17 TDIC Saadiyat Accommodation Village November 10 2014 10
HOW IS TEMPORARY / OFF-GRID POWER BEING FINANCED TODAY? 11
Debt financing of diesel power rental businesses relies on re-utilization rate and diversified customer base Financing types for conventional diesel generator rental fleets Financing Type Equipment Finance or Equipment Lease Loan Collateral For Loans Equipment (PPE) with LTV 50-75% For Leases lessor owns the equipment Loan Credit Enhancement Term Fixed charge Investor Risks Principal Amortization faster than Depreciation Diversification of customer portfolio 3-5 years Monthly payments cover interest and amortization payments Borrower credit deteriorates Equipment utilization rates drop Equipment resale value fluctuates November 12 2014 12
Financing of on-grid solar power is becoming standard; relies on long term PPAs with high grade customers Financing types for conventional on-grid solar projects Financing Type Loan Collateral Loan Credit Enhancement Term Fixed charge Investor Risks Project Finance, Solar Bonds, Sale-Leaseback, Bank Loans, YieldCos Long term PPAs with regulated off-takers (Equipment has negligible value) Cash accumulation reserve Equity and junior capital investment tranches For loans and bonds 7 to 20 years For YieldCos perpetual For loans and bonds FCCR > 1.3x (U.S.) Borrower credit deteriorates (for lenders) Off-taker credit deteriorates (for all investors) Change in regulation November 13 2014 13
FUNDING OPPORTUNITIES FOR OFF-GRID SOLAR POWER 14
Solar temporary / off-grid power has elements of both on-grid solar PPA and diesel rental business models FUNDING & INVESTMENT OPPORTUNITY 1. Sales + Service 2. Equipment Rental 3. PPA Enerwhere Commercial Model Customer purchases equipment upfront Enerwhere installs, operates and maintains Enerwhere owns, installs, operates and maintains equipment Customer pays monthly rental regardless of load Enerwhere owns, installs, operates and maintains equipment Customer pays for kwh consumed Customer Requirement Permanent or longterm power need Short-term to medium-term need Short-term to medium-term need <100 kwp capacity >100 kwp capacity Less predictable load More predictable load November 15 2014 15
Financing a diversified portfolio of customers contracts with high solar asset utilization & redeployment rates CONTRACT DURATION SOLAR ASSET PORTFOLIO REDEPLOYMENT FREQUENCY CONTRACT PROFITABILITY < 12 months 12-24 months 24-48 months > 48 months Portfolio replicates stable cash flows but with potentially higher IRR November 16 2014 16
Example: Financing off-grid solar power portfolio with 90% utilization and redeployment rate Aggregate Power Capacity 1 MW Initial Capital Expenditure $1.3 million Aggregate Utilization Rate ~ 90% Amortizing Asset Finance (A) (B) (C) Debt as % Initial Capex 50% 60% 70% Term 6 years 8 years 10 years Interest Rate 7% 8% 10% DSCR 1.8x 1.8x 1.7x Equity IRR 12-15% 15-18% 18-21% November 17 2014 17
CONFIDENTIAL Daniel Zywietz CEO Email: daniel@enerwhere.com Phone: +971 4 427 4630 Web: www.enerwhere.com 18 Enerwhere Sustainable Energy DMCC