Post on 18-May-2018
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
ABC Presents:
Financing Biogas to Electricity Projects
Sponsored by:
Caterpillar
Featuring Speakers from:
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Quick Notes • Two Audio Options: Streaming Audio and Dial-
In.
1. Streaming Audio/Computer Speakers (Default)
2. Dial-In: Use the Audio Panel (right side of screen) to see dial-in instructions. Call-in separately from your telephone.
• Ask questions using the Questions Panel on the right side of your screen.
• The recording of the webinar and the slides will be available after the event. Registrants will be notified by email.
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Promoting the use of Biogas and Anaerobic Digestion
O 160 Members from the U.S., Germany, Italy, Canada and the UK
O All Industry Sectors Represented
Key Industry Goals:
O Promote biogas markets, technologies and infrastructure O Achieve policy parity O Promote as a best practice for environmental stewardship and greenhouse gas reduction
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Changing the Biogas Industry through:
o Legislative and Regulatory Affairs -
o Federal: Biogas Tax Credit; Clean Energy Standard; NAT GAS Act; Farm Bill
o States: California, Iowa, Massachusetts, Indiana, more…
o Sharing Expertise –
o Specialized Working Groups
o Education and Outreach -
o Briefings, presentations, and webinars for customers, policy makers, and the general public
o Large Industry Network – 150+ company members
o Entire supply chain of production, processing and use
Join Today! Email Josh Lieberman at jlieberman@ttcorp.com or call 202-261-1322
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Speakers
Jon Best - Sr. International Account Manager for Renewable Energy, Cat Power Finance
Bob Joblin - President,
Cenergy USA
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Presenter Jon Best - Sr. International Account Manager for
Renewable Energy, Cat Power Finance
Jon Best is the Sr. International Account Manager for Renewable
Energy with Cat Power Finance, a division of Caterpillar Financial
Services Corp. Jon has been the Renewable Energy
Account Manager at Cat Power Finance for over two years. In
this role, Jon supports Caterpillar's sustainability focus and
initiative by providing project debt financing for Renewable
Energy projects in North America. He also works closely with
Cat's Gas Engine division and dealerships to implement complete
biogas project solutions that promote the growth of the biogas
industry. Jon has been with the Caterpillar Enterprise for over 14
years beginning as the Financial Marketing Manager for a
Caterpillar Dealership followed by serving as a Construction
Machine Territory Manager with Cat Financial.
Financing Solutions for Gas Power
Projects
Jon Best
Cat Power Finance
Financial Solutions for Biogas Projects
Type of Project Common Types of
Financing
Behind the Fence Corporate Financing
Developer Project Project Financing
Municipal Project Governmental Financing
Financing Spectrum
Non-Recourse
Project Finance
Focus on the
Ability of the
Borrower to Pay
Very Strong
Corporate Borrower
Rely on
Project Cash
Flows
• Project Finance –
1. Equity & Non-Recourse Debt
2. Construction & Long-Term Financing
3. Collateral – all tangible & intangible assets
4. Cash flow of project is critical
Special Purpose Entities (LLCs, LPs)
Construction Financing provides the borrower
with bridge financing while their Project is under
construction and not productive. Upon Substantial
Completion of the Project, the construction loan is
converted into long-term financing.
HIGHEST RISK STAGE
Construction loan + Term loan
• Construction loan (up to X months) followed by a Term
loan (Y years).
(X months) Y years
CONSTRUCTION
LOAN TERM LOAN
SPC
Project Company (Borrower)
Operator Operations & Maintenance
Agreement Off-Taker(s) Power Purchase
Agreement, REC’s, VER’s
General Contractor
Engineering, construction
and procurement
Power Generation
Equipment
Supply
Legal Framework Law and Regulation
Gas Supplier Gas Supply
Agreement
Lender (debt)
Loan and Security
Agreement
Sponsors
Insurance &
Bonding
Developer
All of these “Agreements” must work together, be consistent, not be in conflict, and have
assignment/”step-in” provisions acceptable to the Lender.
Legal Agreements
Project Finance – Who is involved?
Principles of Project Financing
• Risk must be assigned to the party who is better prepared to deal with it!
Operational risk Operator
Credit risk Lender
Construction risk EPC Contractor
Storm / Fire risk Insurance company
Gas Supply risk Gas/Feedstock Supplier
Risk Allocation:
•Financially Viable
Min. DSCR of 1.5:1
•Strong Off taker
Investment grade off taker
•Sound Management
Experience in the space
•Good Construction Plan
Single EPC Contractor
•Completed on Schedule
6 - 9 mos. Construction
A Good Project…
Project Finance…a balancing act
The goal of the Lender is to
balance all of the various
agreements for a Project in
such a way there is
adequate reward for the
Borrower while providing a
satisfactory risk level to the
lender.
Project Activities
Project
Financing
Specifications for
Plant Design
Project Management &
Construction
Supervision
Management of
Plant Operations
Project Prospecting &
Screening
Partnership
Agreements
Permitting & Land
Acquisition
Negotiate PPA, EPC
and O&M
Agreements
Project development cycle…
Five key things considered by Lenders
before financing a Gas Power Plant
• Who is the borrower?
• Sufficient gas?
• How, who and what will be built?
• How will the project make money?
• Who will operate and maintain?
Who is the Borrower?
• Executive Summary of Gas Project
• Background information on principal owners
• Ownership diagram
• Equity source (s)?
• Partnership, Operating, and Equity agreements
Sufficient Gas?
• Gas or feedstock study by an independent
3rd party
• Introduction and Scope of the study
• Site background information
• Gas generation and recovery projection
• Laboratory analysis of gas sample
• Feedstock availability and analysis
• Evaluation or summary of permit requirements
How will the project make MONEY?
• Financial Pro-forma – A complete projection
of the Project’s future performance.
• Microsoft Excel spreadsheet based
• GAAP presentation: Balance Sheet, Income
Statement and Statement of Cash Flows
• Terms and conditions of Revenue Contracts
• Viability of uptime assumptions
• Ongoing operations and maintenance costs
How, Who and What will be built?
• Who will engineer it?
• Who will be responsible for building it?
• Timeline for construction to operation
• Schedule of Values
• Costs broken down by major category and by
responsible party
• Timeline for equity, debt, and retainage
• LE uses to approve advances
• Lender holds 10% until Final Completion
Common Project Financing Terms and
Conditions
• PPA term should be 2 years longer than loan term
• All assets of the Borrower are pledged as collateral
• Cash Management Accounts are established
• Debt Reserve equal to 6 months principal & interest payments
• Maintenance Reserve
• All Project contracts are assigned to Lender
• Financial Covenants
Key Measures for Loan Amount
Determination
• Minimum Debt Service Coverage Ratio of 1.5 to 1
• Maximum Total Liabilities to Tangible Net Worth =
3.5 to 1
• Minimum Tangible Net Worth = >$0
• Ongoing Covenant Compliance
Project Finance – Milestones
1. CONCEPT – (several months)
Draft project documents & estimated project costs
2. PROJECT – (several months)
Final project documents, pro forma & credit approval
3. EXECUTED C/L and FEE – (one month)
Loan documents
4. CONSTRUCTION - (several months)
Period advances
5. PROJECT COMPLETE - (years)
Term financing
Pro Forma Analysis
Key Inputs
• Gas Study
• Project Cost Listing
• Power Purchase Agreement
• Gas Purchase Agreement
Assumptions for Pro Forma Analysis
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Presenter Bob Joblin - President, Cenergy USA
Bob Joblin is President of Cenergy U.S.A., which provides technical support, financial analysis, project management and development services for energy efficiency and renewable energy projects nationwide. Cenergy’s clients include Fortune 500 Companies, utilities, public institutions and private investors. Cenergy’s first digester project – developed with AgPower Partners and Dean Foods Company – recently received the Innovation Center for U. S. Dairy’s Sustainability Award for Outstanding Achievement in Energy. Cenergy is also a partner in AgPower Group, which develops, owns and operates biomass projects. AgPower Group recently completed development of the largest dairy digester project in America on a 15,000-cow dairy in Idaho.
A DEVELOPER’S
PERSPECTIVE
Bob Joblin
IN THE BEGINNING
• There is a need.
• There is an idea.
• There is a plan.
• There is a structure.
STOP!
• Have you talked to potential lenders yet?
THE RUBIX CUBE MODEL
• There are costs associated with each step, all at-risk.
• Each step takes time, always more time than you anticipate.
• Each step takes active leadership, a commitment to the project.
DEVELOPER’S AXIOMS
• You will not put the financing package together correctly on the first try.
• You will not get a lender to adapt its lending policies to your project.
• You must be willing and able to adapt your project structure to the lender.
CONSIDER THE OPTIONS
• Angel Funding
• Venture Capital
• Equity
• Leasing
• Debt Taxable/tax exempt
Short-term/long-term
etc., etc., etc.
• Operating Lines
ADAPT TO THE FINANCING
• When you make
commitments and
negotiate terms, are
you thinking about
what lenders will want
and accept?
• If you are in dialogue
with lenders, ask for
their input.
WWTLA
• If done right, a project and its financing develop on parallel paths, not sequentially.
• Show the potential lender(s) draft documents before you commit.
• Keep asking yourself: “WWTLA?”
BE PATIENT
• The reality is that the lender is your partner in the project.
• The lender wants you to succeed as much as you want to succeed.
• However, the financing always controls the project. Always.
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Q&A
Ask questions using the Questions Panel on the right side of your screen. All questions and comments will be recorded and incorporated in the webinar summary report.
Also, please a few moments to answer the survey questions.
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Upcoming Events •This Webinar will be available Monday, September 17th
Webinars
•Next in Operator Webinar Series:
•O&M – Sept 27, noon – 1 p.m. ET
•Register at www.americanbiogascouncil.org/about_webinars.asp
ABC Workshops
•Biogas USA West - San Francisco, CA
•Developing the Biomethane to Vehicle Fuel Market Workshop – October 9
•RETECH - Washington, DC
• Waste to Energy Workshop - October 16
For more info contact Josh Lieberman: jlieberman@ttcorp.com
39
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
More Information
• Don’t forget to fill out our survey!
• Sign up to receive ABC news on our website,
www.americanbiogascouncil.org.
• Consider Joining ABC --Receive regulatory and policy intelligence --Connect with other biogas and anaerobic digestion leaders --Support the industry’s growth and outreach
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Speaker Contact Information
Jon Best - Cat Power Finance
jon.best@cat.com
615.341.8571
Bob Joblin - Cenergy U.S.A.
bob@agpowergroup.com
501.868.6400
www.americanbiogascouncil.org
Promoting the Anaerobic Digestion and Biogas Industries
Thank You
Paul Greene, ABC Chairman
Paul.greene@obg.com
(518) 758-2179
Patrick Serfass, ABC Executive Director
pserfass@ttcorp.com (202) 640-6595