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Effective Financing Strategies, HSBC 2011

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  • 1. Project Finance Malaysia Effective Financing Strategies – A debt Providers Perspective 7 September 2011:
  • 2. A Debt Providers Perspective
  • 3. Certainty lowers cost… The Macro Environment - Government is important International Protocols, conventions, treaties etc. National legal system Energy Policy Green Energy Policy Developed with input from all industry participants Policy into laws and regulation – Targets are fine, but action by example and investment is better – e.g. Buying green power, national equity investment pools, residual risk management – Forms of Assistance: Fuel, FIT, direct subsidies (land, funds, etc), taxation provisions, grants, loans, insurance (backstop, liability assumption, provision, etc), ownership, demand quotas The Big Picture – Cashflow is king Contractual terms and risk allocation Energy: Certainty and consistency of input Off take: open market, captive, PPA etc. 3
  • 4. Certainty, clarity and contractual terms The Project Level Equity: Whom, for how long and what level of expertise. Structure: Simple, with minimal risk of interference/untoward change. Scalable? Capital costs and recurrent costs: Obligations to complete and operate as stated. Pass through of penalties? How will the plant manage declining industry unit costs. Fixed vs operating, more important where energy consistency is not certain, (caloric value of waste) Income: Min debt servicing assuming downside case. Subsidy certainty. Returns: ROE and payback period vs debt tenor Non-recourse: Equity preference, lenders objective. The details are important and the more that are “missing” the greater concerns and perception of risk 4
  • 5. Selected alternative energy experience Global expertise across key sectors 2011 2009 EUR2.5bn USD245m Confidential USD3.4bn Advisor to S-Oil’s acquisition of 33.4% stake in HK Silicon Support bid to acquire Beijing Leader & Harvest in China Advisor Advisor Advisor Acquisition of Jiangsu Zhongneng Polysilicon Technology and USD475m share placement Advisor and placing agent Ongoing 2010 2010 2010 EUR150m USD82.8m EUR260m Rights issue to fund deployment of Concentrating PV solar technology Follow-On Nasdaq Combined Equity and convertible bond rights Issue Listing of K-Green Trust by way of introduction Global co-ordinator Equity Capital Markets 2011 Proposed merger of Iberdrola with Iberdrola Renovables, its listed renewable energy arm Advisory 2011 Co-Manager Advisor Issue manager DCM HSBC Principal Investments 2010 2011 DCM / Principal Invest. 2011 RMB750m RMB150m First offshore public wind energy bond issue in Asia Offshore bond to finance a China Clean tech project Equity investment in Bloom Energy, the first company to commercialise solid oxide fuel cells Principal Investments led USD350m round of equity financing for Better Place and took a 10% stake Sole Lead Manager and Bookrunner Sole Lead Manager and Sole Bookrunner Principal Investor Principal Investor 2010 Better Place
  • 6. Leading project finance franchise Award winning and market leading project financing and Renewables business HSBC leads from 2006-2010 the PF Financial Advisor League Tables Source:The Banker, October 2010 Most innovative Investment Bank for Infrastructure and Project Finance Most innovative Investment Bank for Corporates Most innovative Investment Bank for Bonds Most innovative Investment Bank for Islamic Finance Advisor 1 2 3 4 5 Source:The Asset Triple A Awards, 2011 HSBC SBI Capital Markets BNP Paribas Citigroup PwC Source: www.ijonline.com 18.5 16.9 14.3 13.8 11.1 Best Project Finance House Best Loan House Best Bond House Best Debt House Source:Euromoney Awards for Excellence, 2011 Best Global Infrastructure and Project Finance House Best Project Finance House in Asia Best Debt House in Asia Best Debt House in Western Europe 2011 GBP340m 92MW wind energy project which is India’s largest project financed wind power financing and first to be ECA supported 2010 100 MW of solar panels on social housing across UK MLA, Swap Provider and Market Bank 2010 €354 million Solacor 1 & 2 Solar Thermal Project in Spain (100MW) Structuring Bank& MLA Euromoney Awards 2011 Amount (USDbn) 2011 Structuring Bank& MLA 2010 Regional awards Power and Renewables PF Financial Advisor (2006-10) Selected renewables project finance transactions €543 million Palma Saetilla Solar Thermal Project in Spain (150MW) MLA & Co-ordinator Bank 2010 2009 US$80 million GBP340m Baicheng Wind Farm China 220MW Wind Power Portfolio (194MW offshore) Mandated Lead Arranger Mandated Lead Arranger
  • 7. Renewable financing franchise HSBC has consistently led the execution of ground breaking financing transactions in Renewable Energy including Renminbi bond financing Exemplary transactions for HSBC clients First financing of large scale UK distributed project finance Date March 2011 First ever offshore public wind energy bond issue in Asia March 2011 First RMB denominated non-recourse wind financing in China April 2010 First ECA supported Vestas wind farm in India Most innovative Investment Bank for Infrastructure and Project Finance November 2009 Highlights First financing of large scale roof-top solar PV in the UK on non-recourse basis 100MWp project across the UK through 38,000 2.6Kw installations with free installation and free electricity for tenants, 25y guaranteed FiT for SPV HSBC equity partnership through HSBC Environmental lnfrastructure fund (40%) China WindPower Group Limited debut bond offering in international debt markets and the first ever offshore public wind energy bond issue in Asia Despite an uncertain market backdrop, the bond priced at the tight end of price guidance, and was upsized from RMB 500 to 750 million on the back of strong demand HSBC acted as Sole Lead Manager and Bookrunner on this landmark transaction 49.95MW wind farm in Baicheng China utilizing Suzlon turbines First non-recourse financing for a wind farm closed in China under the Chinese framework First RMB denominated financing in China HSBC acted as sole structuring bank, joint-MLA, facility & security agent, account bank 92 MW Jangi wind farm project is one of the largest wind IPPs in India The largest wind power financings in India on a project finance basis and the first ECA supported Indian wind sector transaction HSBC acted as mandated lead arranger, swap counterparty, agent for the commercial facility and EKF facility, security agent and account bank
  • 8. Disclaimer The Global Banking and Markets division of The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) has prepared this document (the “Document”) for information purposes only. This Document does not constitute a commitment to underwrite or purchase or subscribe for all or any portion of the securities mentioned herein. Any such commitment shall be evidenced only by a fully executed subscription agreement, purchase agreement or similar contractual document. This Document should also not be construed as an offer for sale of or subscription for any investment, nor is it circulated to invite/solicit any offer to purchase or subscribe for any investment. HSBC has based this Document on information obtained from sources it believes to be reliable but which it has not independently verified. HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability for the contents of this Document and/or as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Document. HSBC and its affiliates and/or its or their respective officers, directors and employees may have positions in any securities mentioned in this Document (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and/or any of its affiliates may act as market maker or have assumed an underwriting commitment in the securities of any companies discussed in this Document (or in related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform banking or underwriting services for or relating to those companies. As HSBC is part of a large global financial services organisation, it or one or more of its affiliates may have certain other relationships with the parties relevant to the proposed activities as set out in this Document, and these proposed activities may give rise to a conflict of interest, which the addressee hereby acknowledges and which will be addressed accordingly. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This Document is not a substitute for, and should not be regarded as, an independent evaluation and analysis and does not purport to be all-inclusive. Each recipient should perform and is deemed to have made its own independent investigation and analysis of the Project, the Shareholders, the Sponsors, the Guarantor and all other relevant matters. This Document, which is not for public circulation, must not be copied, transferred or the content disclosed, to any third party and is not intended for use by any person other than the addressee or the addressee's professional advisers for the purposes of advising the addressee hereon. The Hongkong and Shanghai Banking Corporation Limited, Level 15 HSBC Main Building, 1 Queen’s Road Central, Hong Kong SAR © Copyright. The Hongkong and Shanghai Banking Corporation Limited 2006-10, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited. 8

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