How to ensure an energy business case
during an economic crisis?”
Investment Services
Lecture TU Delft
Page 1
May 2013
Content
Introduction Royal HaskoningDHV
Energy market developments
Availability of funding
Business case / concept
Project development best practices
Project finance best practices
Investment Services
Lecture TU Delft
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May 2013
Profile Royal HaskoningDHV
We are a leading independent global consultancy, design, engineering and
project management service provider
8,000 staff, 800 in energy
Royal Haskoning and DHV merged on 1 July 2012
Investment Services
Lecture TU Delft
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May 2013
Global presence in over 35 countries
Introduction Investment Services
Solar
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Lecture TU Delft
Biomass
Hydro
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May 2013
conventional
Wind
Content
Introduction Royal HaskoningDHV
Energy market developments
Availability of funding
Business case / concept
Project development best practices
Project finance best practices
Investment Services
Lecture TU Delft
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May 2013
A Dutch Clean Energy gap to close (AMBITION)
Investment Services
Lecture TU Delft
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May 2013
A European Clean Energy gap to close (AMBITION)
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Lecture TU Delft
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A world of energy opportunities (NEED) (1/2)
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Lecture TU Delft
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May 2013
A world of energy opportunities (NEED) (2/2)
Investment Services
Lecture TU Delft
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May 2013
Content
Introduction Royal HaskoningDHV
Energy market developments
Availability of funding
Business case / concept
Project development best practices
Project finance best practices
Investment Services
Lecture TU Delft
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May 2013
Investment Services
Lecture TU Delft
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May 2013
Investment Services
Lecture TU Delft
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Venture Capital & Private Equity
Clean Energy deals (Q2 2012)
Investment Services
Lecture TU Delft
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May 2013
Content
Introduction Royal HaskoningDHV
Energy market developments
Availability of funding
Business case / concept
Project development best practices
Project finance best practices
Investment Services
Lecture TU Delft
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May 2013
Energy Asset Classes
Hydro Power Plant
Solar (PV) Power Plant
Biomass Power Plant
Waste to Energy Plant
Windfarm
Investment Services
Lecture TU Delft
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May 2013
Combined
Heat and Power Plant
Structuring of an energy asset in a SPC
Investor
Equity
Others
(roads
roads,, water)
Utility
Authorities
Services
Service
Development
PPA
SPC
administration
Permits
Tax Incentives
Operation & Maintenance (O&M)
Land
Landowners
Grid
contract
Loan
agreement
Bank
Investment Services
Lecture TU Delft
Engineering, Procurement &
Construction (EPC)
Insurance
Insurance Co.
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May 2013
Connection
Feed--in /
Feed
Subsidy
Utility / Authority
Grid owner
Our approach: vision, strategy, management
content
participation
proposal
intention
plan
idea
check technical solutions, check
urban design, make financial
calculations
strategy
process/decisions
Investment Services
Lecture TU Delft
support
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May 2013
Project phase returns: from high to stable risk/return
Pre-development
Project
finance
planning
Pre-developer
sets up SPC
Type of
investor
Estimated
project
IRRs &
duration
Investment Services
Lecture TU Delft
Development
Realisation
Operations
1st investor
buy SPC (~70% developed)
2nd investor buys
SPC (fin. close)
3rd investor buys
SPC (12-18mths)
Type 1 investor:
•Family office
•Entrepreneur
•Intermediary
•Fund
•Bank
Type 2 investor:
•Type 1 investor stays in
•Intermediary
•Fund
•Bank
Type 3 investor :
•2nd investor stays
•Pension fund
•Strategic investor
•Fund
Development/pipeline risk:
•Private Equity IRRs (20-30%)
Project duration:
•Development 6-18 mths (avg 12)
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Construction risk:
•High infra IRRs (10-15%)
Project duration:
•Construction ~4-8 mths
•Operation ~1-3 yrs
Operating risk:
•Low infra IRRs (8-11%)
Operating risk:
•Operation ~17-24 yrs
Content
Introduction Royal HaskoningDHV
Energy market developments
Availability of funding
Business case / concept
Project development and finance best practices
Investment Services
Lecture TU Delft
Page 20
May 2013
Project lifecycle Energy Asset Development
Project lifecycle – overview
Portfolio
strategy and
business
planning
Feasibility
phase
Scoping
phase
Definition
phase
Realization
phase
Operational
phase
Six phases can be distinguished in the project lifecycle:
Portfolio strategy and
Business Planning
: Select relevant activities for organization based on the long term strategy
and scope
Feasibility
: Assess leads on their feasibility (identify show-stoppers)
Scoping
: Select and optimize business opportunities
Definition
: Define, negotiate and finalize contracts
Realization
: Realization of the project (including commissioning)
Operational
: Operational management of asset
Investment Services
Lecture TU Delft
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May 2013
Project lifecycle Energy Asset Development
Opportunity
• In line business plan
• Commercial opportunity
• Technical feasible
• Plan & budget business
development phase
decision
Gate criteria - key deliverables per phase *
Gate 1
feasibility
• Confidentiality agreement
• Land secured
• Soil analyses
• Grid, fuel and cooling water
study
• Permit ability analyses
• Stakeholder analyses
• Study technical concept
(capex ±30%)
• Concept MoU
• Business case analyses
(financial model, strategy)
• Management paper and
project plan next phase
decision
Gate 2
scoping
• MoU and exclusivity
• Defined scope: BoD, ISBL,
OSBL, grid, fuel, cooling water
(capex ±20%)
• Tender/permitting strategy
• Define legal entity
• Critical aspects secured
(planning/risk perspective)
• Term sheet PPA, fuel
contracts
• Permit documents initiated
(ready for submission)
• Dedicated financial model to
confirm business case
• Management paper and
project plan next phase
• Results review TAR/VAR
Gate 3 (FID)
definition
• Evaluation and selection
process tenders
• Finalized assets contracts
• Finalized other contracts (e.g.
fuel, land, connection, utilities,
etc.)
• Results final reviews
TAR/VAR
• Confirmation business case
(capex ± 10%)
• Project plan realization phase
• Initial plan of the operational
phase
• Results internal approval
processes
decision
Board informed
Investment Services
Lecture TU Delft
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May 2013
Final investment decision by
Board
Project development & finance best practices (1/2)
Project development
Valuation
Stakeholder management
Risk management
Project structuring
Program management
Investment Services
Lecture TU Delft
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May 2013
Project development & finance best practices (2/2)
Finance What do banks need for an investment decision?
Sponsor with experience
Coverage of construction risk
Ideally a fixed price turnkey construction contract (not possible for
offshore wind)
Experienced contractor, cost overrun facilities
O&M
Proven equipment supplier
For offshore wind, access to infrastructure for maintenance
Investment Services
Lecture TU Delft
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May 2013
Relationship TU-Delft and Investment Services
Jeroen van der Beek, is currently working on his master thesis within
investment services (impact different support regimes)
Second half year of 2013 there is another opportunity for finishing your
master thesis within Investment Services
Feel free to contact me, or my colleagues Jeroen or Leon
Investment Services
Lecture TU Delft
Page 25
May 2013
Questions
Investment Services
Lecture TU Delft
Page 26
May 2013
Thank you for your attention
Emiel van Zwet
Royal HaskoningDHV
Investment Services
Mobile: +31 6 50213418
Email: [email protected]
Leon Pulles
Royal HaskoningDHV
Investment Services
Mobile: +31 6 46363481
Email: [email protected]
Investment Services
Lecture TU Delft
Page 27
May 2013
Jeroen van de Beek
Royal HaskoningDHV
Investment Services
Mobile: +31 6 12678002
Email: [email protected]