1. The Solar Future in Belgium
Infrastructure Investor: DG Infra+ / DG Infra Yield
March 23, 2011
2. 2
DG Infra+ and DG Infra Yield
sponsored and managed by GIMV and Dexia
Infrastructure activities launched end 2007 through a joint-venture of GIMV and Dexia
2 dedicated and complimentary infrastructure investment funds with EUR 250m of capital
committed and available for investment
DG Infra+
DG Infra Yield
Team of 8 professionals, located in Antwerp and The Hague (at the premises of Gimv)
Capital raised from 3th party investors including insurance companies and pension funds
Investments across different target sectors:
Public Private Partnerships Waste
(Renewable) energy Water
Transport / Logistics Social infrastructure
Selective real estate Telecom / ICT
3. DG Infra+ and DG Infra Yield
Key terms and features
DG Infra+ DG Infra Yield
Investment Focus Infrastructure and selective real Infrastructure and selective real estate
estate
Geographical Predominantly Benelux Predominantly Benelux
Focus
Risk Profile Development and/or Limited exposure to development and
construction risk allowed construction risk (only when
subordinated or senior debt
investments)
Return Profile Focus on value creation and Focus on periodic cash distributions
capital gains
Financing solution Equity, Equity-linked debt Secondary equity, Subordinated debt,
Senior debt
Fund Size 135 million 116 million (first Closing)
Incorporation 2007 2011
Term 12 years 30 years
4. 4
PV Installations : who will invest ?
Not interesting for industrial companies
Capital intensive - often burden on financial structure
Not a core asset for industrial companies
Value destructive: return on asset often lower than capital cost of an industrial company
Project developers mostly prefer to set up a separate dedicated structure for the financing of
PV installations:
Focus on developing – prefer to free-up capital for the next project(s)
Often not capital intensive companies
Investment funds / Institutional (direct) investors
Subject to correct risk / return profile
Perception of the sector often important (e.g. renewable energy is hot)
5. 5
PV Installations : an easy investment ?
Different project phases: Main participants:
Development phase Client
Operational phase Project developer (PD)
End phase - dismantling EPC contractor (EPC)
O&M contractor (O&M)
Manufacturers of parts
Bank (or leasing company)
Investor
Each project phase has its specific risks:
Who is bearing a specific risk ?
How is the risk managed ?
Allocate the risk to the participant who can best manage that risk
Investors are not prepared to take some of the risks
6. 6
PV Installations : an easy investment ?
Main risks in the development phase … to be allocated to … … and managed through …
Stability of the roof Client Building right agreement
Insurance contract
Grid capacity Client Building right agreement
Building permit in place (land based) Client Building right agreement
Find appropriate financing PD / Client Building right agreement
Construction delays PD / EPC Building right agreement
EPC guarantee*
Quality and performance of installation PD / EPC Techn. DD / EPC guarantee
Quality of parts (PV module, inverter, …) Manufacturer Techn. DD / suppl. guarantee
Quality of monitoring and reporting PD / EPC Techn. DD / EPC Agreement
Damage (building or PV installation) Insurance comp. Insurance contracts
* remark: the value of a guarantee also depends on the strength of the guarantor
7. 7
PV Installations : an easy investment ?
Main risks in the operational phase … to be allocated to … … and managed through …
Performance of the PV Installation EPC / O&M Guarantee EPC / O&M
Availability of the PV Installation EPC / O&M Guarantee EPC / O&M
Interruption of parts (module, inverter, …) Manufacturer Supplier agreement
Roof renovation Client Building right agreement
Damages (building or PV installation) Insurance comp. Insurance contracts
Retroactive changes to regulation Client / Investor Building right agreement
Radiation Investor / Bank
Client bankruptcy Investor / Bank building right agreement
% of local use of electricity Investor / Bank Local PPA
Evolution of market electricity prices Investor / Bank Local / Excess PPA
Evolution of market interest rates Investor / Bank Hedging agreement
Delayed cash flows Investor / Bank Financing Agreement
Event of default in financing agreement Investor / Bank Financing Agreement
8. 8
PV Installations : an easy investment ?
Main risks in the dismantling phase … to be allocated to … … and managed through …
Ownership of the PV Installation PD / EPC / Client Building right agreement
Dismantling cost PD / EPC / Client Building right agreement
Conclusion
Investing in PV installations is not an easy and straight-forward exercise
Varying deal structures, risk allocations and definitions of risk management can have a large
impact on the returns for investors
9. 9
Return Requirements ?
The return requirement of the investor is not just a fixed rate, but will depend on:
Deal structure
Risk allocation and management
The strength of the guarantor related to a guarantee
Some projects can possibly not be financed
Extensive due diligence:
Technical due diligence (installation + PV modules)
Building right agreement
Insurance contracts
Local / excess PPA
EPC Agreement + EPC Contractor itself
Supplier agreement + Supplier itself
O&M Agreement
Financing and hedging agreement
10. 10
2011 and 2012 ?
The Solar Future in Belgium will definitely depend on the evolution of the following items:
Minimum guarantees on the green certificates
Market electricity prices
Price of the PV modules
Market interest rates
However, the Solar Future will also depend on how risks have been and will be allocated and
managed. If not, this could have detrimental consequences:
For the client:
Development phase: delayed PV installation at less favorable conditions
Operational phase: less local electricity and / or less rental fees
For the investors / banks: lower returns or even write-offs
And in the end also for the solar sector itself as it would become more difficult to get
new clients and investors.
Hence, the solar sector itself is to a certain extent also responsible for its own future.