1. Focal Energy
Renewtech India 2011, Mumbai
17th February 2011

2. • Focal Energy’s mission is to invest in, and manage, a portfolio
Business: of renewable energy projects in India
• Based in Cyprus; backed by prominent group of global
investors
Capacity: • 34MW in three biomass and hydro projects
• 50/50 partnerships with local promoters
Modus • Implementing a tight project management and risk mitigation
Operandi: framework
• Looking to partner with leading, proven, local players
• Bringing a network of international technical, project
management and financial partners into projects as needed

3. Finding Good projects to build a
Theme 1:
portfolio
Creating a win-win Framework for
Theme 2:
partnerships Between Promoters
and Foreign Investors in the
Renewable Energy sector in India

4. Finding Good Projects – The Challenges
 The projects are not often as good as advertized
Half the biomass projects we see will not survive as
profitable enterprise
The development risk in hydro projects is almost
always underestimated and the generation potential –
overestimated
The base return provided by the wind sector for IPP’s
(where depreciation is not a factor) is typically below
investors’ threshold
 Valuation and other promoter’s expectations associated
with the more viable projects, often make a deal very
difficult to reach

5. Finding Good Projects – Our Approach
 Very detailed and aggressive due diligence
 Focus on facts that can be supported, not on
presentations
 Use knowledge from across our portfolio to benchmark
new opportunities
 Assess projects after allowing for a generous safety
margin in the projections
 Be patient
Enough time on the ground and with the promoter
If a deal is not waiting for us, we let it go

6. Creating a Win-Win Framework With Promoters
 The investor’s perspective (Focal)
 The Promoter’s perspective
 How to create a win-win
 Conclusion

7. Focal’s Perspective – What We Seek in Partners
 Honesty and integrity – A partner we can trust
 Understanding of local dynamics and strong local
network
 Willingness to take a leap in terms of managerial
standards, if needed (financial controls; reporting etc.)
 Long term vision and total commitment to business
 Proven execution and operational capabilities

8. Focal’s Perspective: What We Typically Find
Things We Like
 Strong entrepreneurial spirit
 Hard-work ethic
 Patience about the business
 Local connections and understanding of local dynamics
 Execution capabilities – in most cases
Things We Need to Deal With
 Overcoming “family-business” approach
 “Old” attitudes towards foreign investors
 A very different perception of the risk involved
 Tendency to beautify the project
 Unrealistic valuation expectations
 Execution capabilities

9. The Promoter’s Perspective
 Desire to maintain strong long term identification with
company
 Wants to remain in maximum control (over day-to-day
operations & percentage wise)
 Overriding emphasis on minimizing dilution (both in order
to keep control and for a sense of gain)
 Would like to see us putting more faith in him and the
project and relying less on written agreements
 Building on futuristic upsides that we are not always
comfortable taking into account

10. Defining a Win-Win – The Approach
Gap Approach
Differing risk We’ll be willing to take less equity than
perception fair valuation requires in exchange for
risk-mitigation measures
Valuation gaps We’ll focus on a “target return” plus
residual upside; we’ll be willing to give a
disproportionate part of the residual
upside to our partner
Equity dilution Because we focus on IRR and the equity
objectives of stake is not a standalone objective, we
the promoter can find ways to receive cash flow not
only based on common equity stake
Gaps in The distribution of cash flows in the early
assessing years can be different than in future years
future upsides

11. Defining a Win-Win – Deal Example
We have utilized multiple specific solutions to
create win-win partnerships with local partners.
The following outlines a specific example:
 Focal is paying a significant premium, more than a reasonable
valuation would call for today
 Our investment is in form of CCD’s and ECB
 In the early years, we receive more cash flow than our
share of equity and are subject to lower risk. Because of
that, we can be more generous on the valuation front
 Conversion happens once we receive our funds plus minimum
target return
 Promoter is undertaking risk of development cost or time
overrun
 Focal invests bulk of its equity only when project is ready for
construction (all approvals and licenses in place; land
purchased; debt arranged)

12. Conclusion
We are upbeat about the potential of the Renewable
Energy sector in India and specifically about the
quality of local promoters
It is, at the same time, a challenging business and
regulatory environment. Specifically, there are gaps
between the needs and approach of a foreign investor
and those of most local promoters
Periods of market hype or high profile, atypical, one-off
transactions, make those differences even more profound
We have developed the experience and the mindset
to create win-win partnerships with strong local
promoters.
We are excited about the opportunity to replicate our
approach and bridge between
 foreign capital looking for credible income-generating
investments and;
 the capital needs of projects in India