The Credit Crisis and Alternatives to Project Finance

The Credit Crisis and Alternatives to Project Finance 21 April 2009

Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object]

Section 1 The Funding Environment

Current funding environment is challenging ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Utilities are raising debt - at a cost ,[object Object],[object Object],[object Object],[object Object],[object Object],Debt to be refinanced in 2009-10 (as % of 2008 net debt) Source: UBS Recent European utility bond issues

Some distance to go on 20 – 20 – 20

Number and value of deals in decline

Section 2 The Banking Model is Broken

Banking was a simple business ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What Project Finance Used to Look Like ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Projects now face a number of problems ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],How does this alternative to Bank funding work ?

Section 3 Supra-Nationals – How they can help

O&M Agreement Construction Contract Senior Lenders Debt Basic PF Structure Construction Company Operating/ Maintenance Company Special Purpose Company PPA Equity Sponsors Power Purchaser Equity

A Fund – Similar to SME scheme Special Purpose Company PPA Equity Sponsors Power Purchaser Equity O&M Agreement Construction Contract Debt Operating/ Maintenance Company EIB / KFW SupraNat Backstop or Funding Supra Nationals EIB Nordic Investment Bank EBRD IADB IFC Senior Lenders Construction Company

Look at the arbitrage opportunity ,[object Object],[object Object],Yield over Bunds (bps)

Section 4 Back to the 1970’s ?

Reminder for the over 50’s – a history lesson for others ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

A New Bond Structure for Project Finance ? Export Credit Agency Bond Support Agreement Special Purpose Company Underlying Energy Entity PPA / Other Contract Equity Investor/ Sponsor Debt Equity Bond Underwriters Bond Market

The Future ? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Conclusions …1 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Conclusions …2 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The Credit Crisis and Alternatives to Project Finance

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