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  • PVs in Bloom Seminar
    PVE’s from the investors and M&A angle
    24th November 2010
  • Contents
  • 2007
    PVE M&A market in EuropePVE market values are declining, ranging between €2mil. to €4mil. per MWp in 2010
    Note: Represents only European transactions
    Source: Mergermarket, KPMG Analysis
  • PVE M&A market in EuropeMost of the PVE buyers are financial investors targeting PVEs in Spain and Italy
    By Type of Investor
    By Geography Location of PVE
    Source: Mergermarket, KPMG Analysis
    Source: Mergermarket, KPMG Analysis
    Transactions by geography
    As expected most of the transactions are focused on Spain and Italy PVE’s given their higher irradiaion levels ( above 2,000 hours per year)
    Transactions by type of investors:
    Financial investors
    Most of the buyers comprise financial investors, pension and other investment funds.
    Funds may offer higher purchase prices as they tend to require lower rates of return,
    most of them would also however require seller remaining operating the PVE
    Strategic investors:
    Due to usually higher required returns on equity (around 20%+), purchase prices can be expected lower.
  • Illustrative 1MWp PVE modelBased on 2010 FIT, the IRRs can range between 10% to 20%
    Based on the 2010 conditions PVE sufficiently attractive also thanks to considerable financial leverage:
    Financial leverage (80%)
    Source: KPMG Analysis
    Source: KPMG Analysis
    Source: KPMG Analysis
    Source: PVResources.com, Lazard Investments; KPMG Analysis
    Source: KPMG Analysis
  • Key factors affecting financial performance of PVEThe most influential financial factors for PVE are Price/FIT and CAPEX (development costs
    Key factors affecting PVE projects are:
    CAPEX expenditures – 10% saving represent increase in Equity IRR of 6% points
    Electricity selling price – 10% increase translates into 6% points.
    Irradiation – even though of a significant importance, there are only limited opportunities to influence this factor, given the geographic boundaries.
    Source: KPMG Analysis
  • Key factors affecting financial performance of PVEWhat would be the target CAPEX under certain FIT/selling price to achieve required rate of return
    Following chart illustrates under assumed condition what is the relation between various combinations of electricity selling prices and CAPEX costs
    In order to allow for acceptable investment returns and feasibility of PVE’s following correlation should be taken into consideration
    If selling price for example would be proposed 387 Eur/MWh, maximum development cost would need to reach 2.7 mil. EUR per MWp, in order to achieve equity rate of return above 15%.
    Optimal trajectory
    Source: KPMG Analysis
  • Strategy and timing mattersWhen looking at IRR, timing of cash flows and exit strategy can significantly improve returns.
    Time value of money plays important role in achieving profitability objectives
    Detailed planning of steps, cash flows planning and exit strategies can significantly improve overall profitability of the project.
    Investing and developing PVE for example after the peak season (summer) can result in 16.3% Equity IRR, whereas 19.5% can be reached when invested just before the positive cash flows can be expected.
    Improved IRR can be achieved when exiting the project to investor, who requires lower return on equity than IRR of the project.
    Example of two theoretical timing variations of the same project:
    Accelerated project – development and exit happen in the same year
    Year-over-year timing of the project – Development and exit happen year after year.
    2nd Year
    1 Year
    1st Year
    Source: KPMG Analysis
    Source: KPMG Analysis
  • SummaryConclusion
    PVE market price is declining
    2010 prices ranged between 2 to 4 mil. EUR per MWp, very often at or below 3mil. EUR
    Usual PVE acquisition targets represent PVEs located in Spain and Italy
    This is due to combination of favorable geographical and climate factors (double irradiation compared to Slovakia) and local regulatory support.
    Very difficult to compete with under local Slovak conditions.
    Main type of buyers of PVE represent financial investors
    Looking for stable and secured investment returns.
    Compared to strategic, can often offer higher price, due to lower equity returns required compared to strategic ones.
    Key factors affecting financial performance of PVE’s in the given geographic boundaries are price and Capex
    10% savings on development costs (CAPEX) (from 3€ to 2.7€ per Wp) alone can bring additional 6 percent points in terms of Equity IRR.
    On the other hand, 10% decline in prices (from € 425 to €382 per MWh) can result in in 5.4 percent point deterioration of Equity IRR
    Investment attractiveness should be therefore carefully assessed in defining price regulation policies.
    Proper analysis, and planning can help achieve higher investment returns.
    Cash flow planning, leveraging and exit strategy can significantly help reaching attractive investment returns.
  • Contacts and disclaimer
    Contact details:
    KatarínaVirčíkováTransaction Services Senior Associate, KPMG Slovensko, spol. s r.o.
    Tel: + 421-(2)-599 84 443email: kvircikova@kpmg.sk
    Ján HurbanCorporate FinanceSenior Associate, KPMG Slovensko, spol. s r.o.
    Tel: + 421-(2)-599 84 487email: jhurban@kpmg.sk
    KPMG Slovenskospol. s r.o.Dvořákovonábrežie 10 811 02 Bratislava Slovakia
    Tel.:          +421-(2)-59984111Fax:          +421-2-59984888Internet:     www.kpmg.sk
    Important notice:
    This presentation has been prepared exclusively for the participants of PVs in Bloom conference held in 23rd and 24th of November 2010anddoes not carry any right of publication or disclosure to any other party. This presentation is incomplete without reference to and should be viewed solely in conjunction with the oral briefing provided by KPMG. Neither this presentation nor its content may be used for any other purpose without prior written consent of KPMG.
    The information in this presentation is based upon publicly available information as well as information provided by the companies and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of any information available from public sources. All information contained in this presentation are only for illustrative purposes only, and should not be relied upon ore referred.
    Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.
    Whilst the information presented and views expressed in this presentation and the oral briefing have been prepared in good faith, KPMG accepts no responsibility or liability to any party in connection with such information or views.
  • Section headingAs much as 88% of all PVE targets are in Spain and Italy