Principal Solar Institute

Chris LohmannVP Alternative Energy SolutionsEnergi Insurance

Managing Risks in Large Solar Energy Projects

As Vice President of Alternative Energy Solutions (AES), Chris focuses on managing the growth of Energi’s AES Warranty Programs—which recently announced projects in Hawaii and Toronto—as well as program development, business development and building strategic relationships. He works closely with Energi’s partners, insurance brokers/agents, policyholders and various stakeholders across the market, including banks and financial institutions that lend on renewable and energy efficiency projects.

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Energi Insurance

Energi is a leading provider of specialty risk management solutions, including insurance and reinsurance, to niche sectors of the energy industry.

Energi’s competitive strength lies in doing the hard work to truly understand the risks faced by operators and investors, and then developing proprietary mitigation, loss prevention, and operational risk management techniques to best serve them.

Energi is licensed to do business in all 50 states and Canada, and, through its strategic partners, can provide risk management services globally.

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Pioneering project performance warranty solutions for the advanced energy sector

24 master policies since January 2011, with steady growth each year Over 100 projects insured, ranging from <$50k to >$70mm

Alternative Energy Solutions

AES Product Offerings• Energy Savings Warranty

Backstops savings guarantees offered to building or project owners

• Output Performance WarrantyProvides payment of shortfalls in cash-flow due to underperformance of project

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Basic Energy Project Financing

Project financings require substantial capital expenditure upfront and depend on multi-year future cash-flows to provide returns.

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Cap Ex ($50,000,000) Production - 5,015,000 5,015,000 5,015,000 5,015,000 5,015,000Price $2.38 $2.49 $2.59 $2.68 $2.79 Cash-flow ($50,000,000) $11,935,700 $12,487,350 $12,988,850 $13,440,200 $13,991,850 Cumulative ($50,000,000) ($38,064,300) ($25,576,950) ($12,588,100) $852,100 $14,843,950 IRR 9%

These cash-flows depend upon a significant number of variable factors, which constitute risks to project success and return on capital.

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1. Identify Risks2. Eliminate Risks3. Structure Risks4. Mitigate Risks5. Establish ongoing Operational Risk

Management

Risk Management for Energy Projects

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Hazard, Disaster & General LiabilityMarket access, demand volume and priceInputs & FeedstockTechnologyEngineeringProductivity

Identify Risks

Energi Performance Warranty

Energi Performance Warranty

Energi Performance Warranty

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Screen out errors with multiple eyes on everything

Tighten precision through full actual system measurements and complete calculations vs. sampling, rules of thumb and other shortcuts

Eliminate Risks

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Align obligations with project operations

• Time obligations according to expected outputs, with conservative expectations of % uptime

Assign risks to the most appropriate partner and align incentives

• Facility owners take the risk for usage

• Plant operators take initial risk for performance

• Equity owners absorb downside in exchange for upside opportunities

• Insurance carries catastrophic risk

Structure Risks

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Build system redundancy

Plan for inventory buffers

Utilize Performance Warranties– Leverage aggregation of risks across

portfolios – Structure guarantees to customer

contracts to safeguard cash-flows

Mitigate Risks

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Continuous Learning & Improvement processes incorporated into all day-to-day operations1. Measure

• Utilize Remote Measurement, Verification & Controls (Internet of Things)

• Multiple in-process performance measurements with real-time corrections to smooth volatility early

2. Identify issues3. Investigate causes4. Remediate5. Revise processes to prevent repeated

issues

Ongoing Operational Risk Management

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510Nano developed and commissioned a 1.4 MW photovoltaic power plant on 25 acres in Garysburg, NC.

510Nano was able to secure financing from a local credit union contingent upon an investment-grade guarantee of the productivity of the project, that, combined with the PPA, would ensure adequate repayment of the debt.

Energi tailored a policy to the five-year period and precise annual energy output required to meet the lender’s risk management needs, and structured operational risk management factors sufficient to deliver the insurance at the lowest possible premium rate.

Through continuous remote monitoring of the solar panels and system equipment, 510Nano and Energi are able to react in real time to anomalies before they become problems that impact the annual output.

Case Study: 510Nano

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Experience with multiple technologies and market models and expertise in structuring of deals for optimal risk management and allocation

Ability to aggregate risks across large numbers of projects in order to gain efficiencies of scale and diversification

Investment grade balance sheet to enhance overall credit rating

Profile of a Good Risk Management Partner

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Questions and Discussion

Chris LohmannVP Alternative Energy SolutionsEnergi Insurance

Please enter your questions into the Chat window

Contact: clohmann@energi.comwww.energi.com