Arthur cox greenexpo


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Arthur cox greenexpo

  1. 1. Renewables and Green Finance Green Expo – Croke Park Garrett Monaghan, Partner 21 May 2010
  2. 2. Ireland’s leading law firm <ul><ul><ul><li>Award for Excellence in Client Service </li></ul></ul></ul><ul><ul><ul><li>CHAMBERS EUROPE AWARDS 2009 </li></ul></ul></ul><ul><ul><ul><li>Topped the PLC Which Lawyer? survey of Irish law firms for the tenth consecutive year in 2009 </li></ul></ul></ul><ul><ul><ul><li>PLC WHICH LAWYER? 2009 </li></ul></ul></ul><ul><ul><ul><li>Irish Tax Firm of the Year </li></ul></ul></ul><ul><ul><ul><li>THE INTERNATIONAL TAX REVIEW, 2010, 2007 AND 2005 </li></ul></ul></ul><ul><ul><ul><li>Irish Law Firm of the Year 2007, 2008 and 2009 </li></ul></ul></ul><ul><ul><ul><li>FINANCIAL TIMES / MERGERMARKET </li></ul></ul></ul><ul><ul><ul><li>Irish Law Firm of the Year 2007 and 2010 </li></ul></ul></ul><ul><ul><ul><li>INTERNATIONAL FINANCIAL LAW REVIEW </li></ul></ul></ul><ul><ul><ul><li>Mould Breaking Initiative and Best HR Initiative </li></ul></ul></ul><ul><ul><ul><li>MPF 2008 EUROPEAN PRACTICE MANAGEMENT AWARDS </li></ul></ul></ul><ul><ul><ul><li>No. 1 Irish Legal Advisor, by value and volume, to M&A </li></ul></ul></ul><ul><ul><ul><li>MERGERMARKET IRISH LEAGUE TABLES 2006, 2007 AND 2008 </li></ul></ul></ul><ul><ul><ul><li>Top Ranked Irish law firm in the Infrastructure Journal League Tables for legal advisors for both transactions closed and mandates won </li></ul></ul></ul><ul><ul><ul><li>Infrastructure Journal 2009 </li></ul></ul></ul><ul><ul><ul><li>Best Managed Firm and Best Corporate Citizen </li></ul></ul></ul><ul><ul><ul><li>MANAGING PARTNERS’ FORUM EUROPEAN PRACTICE MANAGEMENT AWARDS 2007 </li></ul></ul></ul><ul><ul><ul><li>European Law Firm of the Year </li></ul></ul></ul><ul><ul><ul><li>LEGAL BUSINESS 2006 </li></ul></ul></ul><ul><ul><ul><li>Top ranked Irish law firm named in the 2008 Financial Times 50 Report, which ranks Europe’s top 50 private practice law firms on innovation in business practice, staff development, structures and contribution to the community </li></ul></ul></ul><ul><ul><ul><li>FT 50 REPORT, 2008 </li></ul></ul></ul><ul><li>Selected major awards </li></ul><ul><ul><li>As reflected in the following major awards, we are consistently recognised as Ireland’s leading law firm by domestic and international commentators: </li></ul></ul>
  3. 3. <ul><li>Renewables financing: Current and Future Projects? </li></ul><ul><li>Green Finance: What is it? </li></ul><ul><li>Green Finance: Universal Applicability </li></ul><ul><li>Carbon Markets </li></ul><ul><li>Typical Renewable Energy Project Financing Structure </li></ul><ul><li>Green Rights </li></ul><ul><li>Project Pre-Requisites </li></ul><ul><li>Renewable Energy Support Mechanisms </li></ul><ul><li>Irish Domestic Offset scheme </li></ul><ul><li>Closing thoughts </li></ul>Topics
  4. 4. <ul><li>Established: </li></ul><ul><ul><li>Onshore wind </li></ul></ul><ul><ul><li>Hydro </li></ul></ul><ul><ul><li>Waste to Energy </li></ul></ul><ul><li>Emerging : </li></ul><ul><ul><li>Offshore wind </li></ul></ul><ul><ul><li>Solar </li></ul></ul><ul><ul><li>Biomass / CHP </li></ul></ul><ul><ul><li>Tidal / wave </li></ul></ul><ul><ul><li>Carbon Capture and Storage </li></ul></ul><ul><ul><li>Electric vehicles </li></ul></ul><ul><li>Project financing – opportunties for Ireland: </li></ul><ul><ul><li>Expansion of Irish Companies </li></ul></ul><ul><ul><ul><li>Capital to fund large scale build-out projects overseas or in Ireland </li></ul></ul></ul><ul><ul><ul><li>Monetising of carbon credits? </li></ul></ul></ul><ul><ul><li>Real Economy benefits </li></ul></ul><ul><ul><ul><li>Develop and prime the supply chain from Ireland </li></ul></ul></ul><ul><ul><ul><li>Research and Development </li></ul></ul></ul><ul><ul><ul><li>Manufacturer </li></ul></ul></ul><ul><ul><ul><li>Corporate Headquarters </li></ul></ul></ul><ul><ul><ul><li>Intellectual Property </li></ul></ul></ul>Renewables Financing: Current and Future Projects?
  5. 5. <ul><li>Capital Investment, Banking, Treasury and Insurance Businesses which support the development and promotion of a low carbon economy. This includes: </li></ul><ul><ul><li>Renewable Energy Generation </li></ul></ul><ul><ul><li>Energy efficiency measures </li></ul></ul><ul><ul><li>Management and trading of carbon credits </li></ul></ul><ul><ul><li>Financing and optimising environmental aspects of waste, water and weather </li></ul></ul><ul><ul><li>Development of climate change insurance products </li></ul></ul><ul><li>Renewables financing is a sub set of Green Finance </li></ul><ul><li>Private Equity purchasing and running utilities </li></ul><ul><li>PPP infrastructure financing beginning to incorporate Green Finance </li></ul><ul><ul><li>Dublin Waste to Energy PPP (67MW renewable generator) </li></ul></ul><ul><ul><li>School Bundles 2 PPP (solar and wind generator specifications) </li></ul></ul><ul><ul><li>UK Hospital PFI Projects (Carbon Reduction Commitment costs) </li></ul></ul>Green Finance: What is it?
  6. 6. Green Finance: Universal Applicability <ul><li>Green Finance – Carbon </li></ul><ul><ul><li>Key Global Economic Driver </li></ul></ul><ul><ul><li>Renewable Energy Targets </li></ul></ul><ul><ul><li>Carbon tax </li></ul></ul><ul><ul><li>Voluntary v’s compliance </li></ul></ul><ul><ul><li>Cap and trade </li></ul></ul><ul><ul><li>Domestic offsets </li></ul></ul><ul><ul><li>Climage Change Bill </li></ul></ul><ul><li>Green Finance – General </li></ul><ul><ul><li>Project Finance </li></ul></ul><ul><ul><ul><li>(renewables and increasingly PPP and other sectors) </li></ul></ul></ul><ul><ul><li>Vendor / Equipment Finance </li></ul></ul><ul><ul><ul><li>(e.g. smart meters, microgeneration) </li></ul></ul></ul><ul><ul><li>General / Retail Finance </li></ul></ul><ul><ul><ul><li>(e.g. Walmart model, retrofit houses, geothermal) </li></ul></ul></ul><ul><li>Green Finance – Specific </li></ul><ul><ul><li>Carbon credits / emissions trading </li></ul></ul><ul><ul><li>Treasury functions </li></ul></ul><ul><ul><li>Forestry </li></ul></ul><ul><ul><li>Aviation </li></ul></ul><ul><ul><li>Green Procurement </li></ul></ul><ul><ul><li>Green IFSC </li></ul></ul>
  7. 7. Carbon Markets <ul><li>Global carbon abatement costs </li></ul><ul><ul><li>Financing flows: €65–100 billion required in developing countries </li></ul></ul><ul><ul><li>Carbon finance: developed nations buy ‘offset’ credits from developing nations </li></ul></ul><ul><ul><li>Public finance: developed nations contribute cash to a global fund, or establish bilateral relationship with developing countries </li></ul></ul><ul><li>Compliance Market </li></ul><ul><ul><li>Kyoto “flexible mechanisms” </li></ul></ul><ul><ul><li>EU ETS / JI / CDM </li></ul></ul><ul><ul><li>Phase III EU ETS: Carbon Cap 2013 onwards </li></ul></ul><ul><li>Voluntary Market </li></ul><ul><ul><li>No longer the poor relation? </li></ul></ul><ul><ul><li>Multiple players in a fragmented market </li></ul></ul><ul><ul><li>No composite standard </li></ul></ul><ul><li>Emergence of a “cross-over credit” </li></ul><ul><ul><li>Green IFSC proposals </li></ul></ul><ul><ul><li>International Carbon Standard </li></ul></ul><ul><ul><li>Dublin International Voluntary Offset Registry (DIVOR) </li></ul></ul>
  8. 8. Typical Renewable Energy Financing Structure Shareholders’ Agreement Loan Agreement & Security Package Operation & Maintenance Contract Operator Turbine Supply Contract Sponsors Funders Power Purchase Agreement Offtaker Construction Contract Turbine / Equipment Supplier Civil Works Contractor Project Company “ Green Rights ” REFIT DCENR
  9. 9. Green Rights <ul><li>Increasing importance as a possible revenue stream </li></ul><ul><ul><li>Rights, instruments, certificates, grants of financial aid or relief from any governmental authority in connection or otherwise associated with the generation of electrical production and which have a value </li></ul></ul><ul><ul><li>Any rights established as part of or associated with any green credit or green certificate regime or other scheme </li></ul></ul><ul><ul><li>Any credits for renewable energy that could or do qualify for application toward compliance with any local, national or international renewable energy, portfolio, standard, mandate or objective </li></ul></ul><ul><li>Examples: </li></ul><ul><ul><li>Renewable Energy Guarantees of Origin (REGOs) </li></ul></ul><ul><ul><li>Renewable Energy Obligation Certificates (ROCs - UK) </li></ul></ul><ul><ul><li>Levy Exemption Certificates (LECs – UK) </li></ul></ul><ul><ul><li>Domestic Offsets and Voluntary Credits? </li></ul></ul>
  10. 10. Funding Pre-Requisites <ul><li>Cornerstones of project finance </li></ul><ul><ul><li>Sponsor strength – financial and technical </li></ul></ul><ul><ul><li>Project economics – security of cashflows </li></ul></ul><ul><ul><li>Quality of offtake arrangements </li></ul></ul><ul><ul><li>Consents </li></ul></ul><ul><ul><li>Construction and technology </li></ul></ul><ul><ul><li>Robust contractual arrangements </li></ul></ul><ul><li>Green Finance is no less demanding </li></ul><ul><ul><li>Certainty of carbon revenues </li></ul></ul><ul><ul><li>Legal robustness of relevant credit </li></ul></ul><ul><ul><li>Ability to take security over carbon credit </li></ul></ul><ul><ul><li>Fungibility </li></ul></ul>
  11. 11. Renewable Energy Support Mechanisms <ul><li>Previous programmes: Alternative Energy Requirements (AER) I to VI (began 1993) </li></ul><ul><li>Current programme: Renewable Energy Feed in Tariff (REFIT) to support construction of 1,450MW of generation from 2006 – 2010 </li></ul><ul><li>Compatability with other EU energy markets – market based or subsidy? </li></ul><ul><li>Supports plant powered by biomass, hydropower, or wind </li></ul><ul><li>Proposals to extend REFIT to qualifying ocean energy technologies, biomass anaerobic digestion and high efficiency combined heat and power </li></ul><ul><li>European State Aid Clearance </li></ul><ul><li>Generators are paid the PPA strike price by Suppliers </li></ul><ul><li>REFIT is made up of three constituents </li></ul><ul><ul><li>Payments for every kWh contracted under a qualifying PPA </li></ul></ul><ul><ul><li>Technology premium </li></ul></ul><ul><ul><li>Market price equalisation compensation </li></ul></ul>
  12. 12. Irish Domestic Offset Scheme <ul><li>Proposed Climate Change Bill 2010 </li></ul><ul><li>Voluntary cap and trade scheme in Ireland covering non EU-ETS participants </li></ul><ul><li>UK Carbon Reduction Commitment </li></ul><ul><li>Methodology is critical </li></ul><ul><li>Compatibility with ICS / global carbon markets </li></ul><ul><li>Reduction in Co2 Emissions leading to Voluntary Credit </li></ul><ul><li>Likely Irish sectors include: </li></ul><ul><ul><li>transport </li></ul></ul><ul><ul><li>agriculture </li></ul></ul><ul><ul><li>residential </li></ul></ul>
  13. 13. Closing Thoughts <ul><li>Carbon and Project Finance are converging </li></ul><ul><li>Large scale commitment to grid, energy storage and ancillary infrastructure </li></ul><ul><li>Shareholder and investor pressure for cost efficiencies more influential than sustainability “branding” </li></ul><ul><li>Markets will drive low-carbon model irrespective of attempts to develop a long term successor to Kyoto or EU ETS </li></ul><ul><li>Pressure on EU markets to harmonise renewable support systems </li></ul><ul><li>No excuse for carbon illiteracy or complacency! </li></ul><ul><li>Ireland can adopt specific technologies and financial enablers to stimulate economic growth and become a global hub for Green Finance </li></ul>
  14. 14. Thank you