FWP 2017 l Antoine RABAIN, MPrime “Project financing: what conditions need to be fulfilled?”

1. OFFSHORE PROJECT FINANCE:
WHAT CONDITIONS NEED TO BE FULFILLED?
ANTOINE RABAIN – DIRECTOR
STRATEGY CONSULTING & STUDIES DIVISION OF MPRIME

2. #FWPAtlan*c
GLOBAL OUTLOOK
KEY POINTS TO ADDRESS
§ From pilot to commercial projects: how LCOE and IRR evolve?
§ What are the main strategic leverages to op>mize project
finance?
§ What is happening today in fixed offshore wind and may occur
tomorrow in floa>ng projects?
Antoine Rabain – 3rd October 2017

3. AN INDEPENDENT ADVISORY FIRM
Specialized in
DEVELOPMENT STRATEGY & INDUSTRIAL PROJECT MANAGEMENT
Ø ENERGY
Ø MARITIME
Ø DEFENCE
WITH ALMOST 10 YEARS ASSISTING PRIVATE & PUBLIC ACTORS IN
MRE MARKETS IN FRANCE AND WORLDWIDE
§ ENERGY DEVELOPERS & OPERATORS
§ MAJOR INDUSTRIAL CONTRACTORS & SUPPLY CHAIN
§ START-UPS & INNOVATIVE SMEs
§ BANKS & INVESTORS
§ INSTITUTIONALS (states, regions, clusters, ports, …)
Who is MPrime?
Economics
Technologies
Politics
Antoine Rabain – 3rd October 2017

4. 4
FLOATING OFFSHORE LCOE AND IRR POTENTIAL EVOLUTION
CAPEX: 4-8 €/W
OPEX: 3-6% per year
Load Factor: 40-50%
IRR: 12-15%, some`mes more!
LCOE: around 200-250€/MWh
Today … or very soon
Pilots & pre-commercial
farms
CAPEX: 2.5-3.5 €/W
OPEX: 3-6% per year
Load Factor: 40-50%
IRR: 8-10%, or even below
LCOE: 80-120€/MWh … maybe less !
Tomorrow
Key drivers:
• Risk management & mitigation
• Access to new and/or public funds
• Commercial strategies
Antoine Rabain – 3rd October 2017

5. 5
§ Risk management: decreasing risk premiums thanks
to enhancements in:
• Development (securing load factor, permiSng, public
acceptance, public assistance, …),
• Supply chain & technology qualifica>on
• Built & run phases (types of contracts, technology
performance, …).
§ Funding: interest rates increasing trend vs. access to
more new and/or public funds with extra financial
requirements
§ Commercial strategies: e.g. low bids today in fixed
offshore wind to get less compe>tors tomorrow and
more economic profits … in fixed and floa>ng market?
EQUITY
20-30%
FINANCIAL NET DEBT
70-80% (PUBLIC &/OR PRIVATE)
CAPITAL EMPLOYED
Expected return
≈ 15-30%
Cost of Debt
≈ 5-6%
EXPECTED PROJECT IRR
8-15% (+/-)
3 KEY DRIVERS IMPACTING IRR
HOW TO OPTIMIZE PROJECT FINANCE?
Antoine Rabain – 3rd October 2017

6. 6
RISK MITIGATION & PUBLIC FINANCE
AN IMMEDIATE AND EFFECTIVE LEVER TO DROP IRR AND THEN LCOE
LCOE (€/MWh)
REFERENCE
SCENARIO
Capex: 3.5€/W
Load factor: 45%
IRR: 12%
IRR
10%
-8%
IRR
8%
-15%
-22%
IRR
6%
-31%
CAPEX
-74%
OPEX
+28%
Produc-
ible
IRR decrease
LCOE drop
-2pts -4pts -6pts
≈ ≈ ≈
Impact of several levers on LCOE
Project finance could help decrease rapidly and significantly LCOE
Antoine Rabain – 3rd October 2017
Source: MPrime
Based on a specific offshore wind project

7. 7
WHAT IS HAPPENING TODAY IN FIXED OFFSHORE WIND … AND
MAY OCCUR TOMORROW IN FLOATING MARKET?
EVOLUTION OF LCOE IN UK FIXED
OFFSHORE PROJECTS
LCOE
2012
LCOE
2017
145 €/
MWh
65 €/MWh
FALLING IRR ON EUROPEAN OFFSHORE PROJECTS (36 qualified)
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
WACC
Risky projects
Strategic bids
>2 000
>1 000
>500
Capacity (MW)
Equilibrium
Source: MPrime
-50€ due to cost
drop & scales
-30€ due to
IRR drop
IRR
Antoine Rabain – 3rd October 2017
Project finance
contribu*on:
≈1/3
vs
Cost drop & scales:
≈2/3
What are the best
IRR requirements
to launch first
floa*ng projects
and take the
leadership?
Source: MPrime

8. 8
Antoine RABAIN
Director
Strategy Consulting & Studies Division
Mobile : +33 (0)6-59-29-09-00
E-mail : antoine.rabain@mprime.fr
9 Avenue de Friedland
75008 Paris
http://www.mprime.fr
THANK YOU FOR YOUR ATTENTION
Antoine Rabain – 3rd October 2017