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SunShare: A New Way of Investing in Green
Executive Summary

                  • SunShare is a renewable energy company offering the unique opportunity for individu...
Agenda



         • The Opportunity
             • Market Trend
             • Industry Profitability
             • Inve...
SunShare offers the opportunity for individuals to invest in
green energy production at a 12% return
                     ...
Due to an attractive regulatory framework, the Italian solar
energy market is a robust investment opportunity




        ...
The renewable energy market is expected to keep growing
    fast…
                                                        ...
…and maximum profitability will be achieved by building
    in 2010
Drivers                             Description       ...
The Opportunity: Investment benchmarking


                                                                     Investment...
Agenda



         • The Opportunity
             • Market Trend
             • Industry Profitability
             • Inve...
SunShare‟s business model is based on two key
    activities…

    Value Chain   Description

1                 This is ou...
1
    …the team will manage fundraising leveraging its expertise

                    Marino Giocondi                     ...
2
    …whereas the industrial partner (Solar Ventures) will
    manage all operations
                                   “...
We are targeting individuals like you

Potential investors   Description

                      • Investment funds do not ...
Fundraising plan

                       Potential investors        Approach & Marketing actions


                       ...
Fundraising will be completed by June 30th


               Steps and deadlines for fundraising
               € thousand
...
The investment is € 4.44 million, to be financed through
     equity and project financing
         Solar power plant tota...
EBITDA is 88% of the total revenues

Revenue and Cost stream (thousand €)                                                 ...
Net Income is 23% of total revenues
                                                                                      ...
Free Cash Flow to Firm stabilizes after year 1

                                     Free Cash Flow to Firm (FCF2F) trend ...
Free Cash Flow to Equity becomes positive in year 1

                                    Free Cash Flow to Equity (FCF2E) ...
The two main sources of risk are revenues and delays in
 project completion
                                              ...
Risk on revenues #1: government incentives decrease


Solar power plant financial return


     IRR %                     ...
Risk on revenues #2: electricity price falls


Solar power plant financial return

     IRR %
25
                         ...
Risk on revenues #3: plant operative in 2011
                                                                             ...
Development plan
                                                                                                    Exces...
Exit strategy


                Option 1:
                • Shares can be traded in the
                  peer-to-peer mar...
Summarizing…

What we are looking for:
 • Fund raising 800.000€ from individuals willing to
   invest in solar power plant...
Our pioneer investor…




                 Ignacio de La Vega - IE Business School
                 Entrepreneurial Manage...
Our contact information


Marino Giocondi         marino.giocondi@googlemail.com
        In Italy        (+39) 346.4136355...
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Business Plan Photovoltaic Venture Slide 1 Business Plan Photovoltaic Venture Slide 2 Business Plan Photovoltaic Venture Slide 3 Business Plan Photovoltaic Venture Slide 4 Business Plan Photovoltaic Venture Slide 5 Business Plan Photovoltaic Venture Slide 6 Business Plan Photovoltaic Venture Slide 7 Business Plan Photovoltaic Venture Slide 8 Business Plan Photovoltaic Venture Slide 9 Business Plan Photovoltaic Venture Slide 10 Business Plan Photovoltaic Venture Slide 11 Business Plan Photovoltaic Venture Slide 12 Business Plan Photovoltaic Venture Slide 13 Business Plan Photovoltaic Venture Slide 14 Business Plan Photovoltaic Venture Slide 15 Business Plan Photovoltaic Venture Slide 16 Business Plan Photovoltaic Venture Slide 17 Business Plan Photovoltaic Venture Slide 18 Business Plan Photovoltaic Venture Slide 19 Business Plan Photovoltaic Venture Slide 20 Business Plan Photovoltaic Venture Slide 21 Business Plan Photovoltaic Venture Slide 22 Business Plan Photovoltaic Venture Slide 23 Business Plan Photovoltaic Venture Slide 24 Business Plan Photovoltaic Venture Slide 25 Business Plan Photovoltaic Venture Slide 26 Business Plan Photovoltaic Venture Slide 27 Business Plan Photovoltaic Venture Slide 28 Business Plan Photovoltaic Venture Slide 29
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Business Plan Photovoltaic Venture

  1. 1. SunShare: A New Way of Investing in Green
  2. 2. Executive Summary • SunShare is a renewable energy company offering the unique opportunity for individuals to invest in small shares of a photovoltaic power plant (investments range from 2,500 € to 100,000 €): o Contributing to a clean environment o Limiting risk o Receiving a high annual dividend of 12% • Due to the attractive regulatory framework, the Italian photovoltaic energy market is a sound investment opportunity. Maximum profitability will be achieved by building in 2010 thanks to high government incentives (fixed for 20 years) and a large decrease in plant set-up costs in recent years • The company’s business model is based on two key activities: 1. Fundraising, managed by a team with different expertise in private equity, consultancy and entrepreneurial ventures 2. Operations, managed by a well-known industrial partner (Solar Ventures) that would act as the general contractor, managing the project down to the smallest details: o purchase of pre-authorized land o supply of solar panels and all required equipment o plant installation and maintenance • Target investors are private investors looking for a high-return investment opportunity or people who are environmentally conscious. Investors will be reached through innovative channels • Total investment is 4 million €* to be financed through 20% equity and 80% leverage • The overall risk of the project is considered medium-low because 80% of the revenue stream is given by incentives that are guaranteed by law • The exit strategy for investors would be through sales of shares to other investors or sale of the entire plant to a bigger company for a high premium • We believe in this project so much the we are investing our personal money. * Plus 440.000€ VAT that will be reimbursed by the government at the end of the first year
  3. 3. Agenda • The Opportunity • Market Trend • Industry Profitability • Investment Benchmarking • The Investment • Business Model • Team • Industrial Partner • Target Investors • Financials • Risk Analysis • Exit Strategy 3
  4. 4. SunShare offers the opportunity for individuals to invest in green energy production at a 12% return 1 2 SunShare is: 1. building a 1 MWp photovoltaic power plant in Apulia, Italy 2. contributing to a clean environment 3. offering small shares to individuals (2,500 € - 100,000 €) 4. rewarding them with an annual return of 12% at limited risk 4 3 4
  5. 5. Due to an attractive regulatory framework, the Italian solar energy market is a robust investment opportunity “Investors are looking for a 12% return” “The returns of projects in green energy are among the highest in Europe” … …the return on equity in the photo- voltaic sector is around 11-12%... and in some cases, the return reaches 18- 20%” 5
  6. 6. The renewable energy market is expected to keep growing fast… Italy European Union Consumption of renewable energy out of total (%) • EU target of renewable energy -9% consumed out of total production = 20% 20,0 20,0 17,0 15,4 • Incentives from the Italian government 8,5 in order to achieve this target: 5,2 o fixed amount per unit of energy produced 2005 2020 Target 2020E o duration of 20 years post- construction Solar power plant installation trend (MWp) • The incentives have resulted in a 142% CAGR of Italian solar installations, but this is not enough for Italy to reach the 2020 target. For this reason, the 2.750 government could not significantly +142% decrease incentives. Italy together 1.600 with Belgium, Luxembourg, Malta, 900 Bulgaria and Denmark are the only EU 418 80 countries that are unlikely to reach the EU target 2007 2008 2009 2010E 2011E Source: http://www.terna.it/default/Home/SISTEMA_ELETTRICO/statistiche/dati_statistici.aspx; http://ec.europa.eu/energy/renewables/transparency_platform/forecast_documents_en.htm 6 http://qualenergia.it/UserFiles/Files/Which_Member_States_will_meet_their_targets.pdf
  7. 7. …and maximum profitability will be achieved by building in 2010 Drivers Description Trend • In 2008 the government set an Incentives -2% Government incentive per KWh produced, € cent Incentives fixed for 20 years 40 36,0 35,3 34,6 • Plants going live in 2011 will benefit from different incentives 20 (still to be determined) • These drivers make 0 2008 2009 2010 2010 the most profitable year to complete € Million construction • The set up cost for solar power -20% per MWp plants dropped by 20% per 5,5 Set-up Cost 5 4,5 • Next year, year over the last two years 3,5 incentives will be reviewed and 0 profitability for future 2008 2009 2010 plants will be reduced, as law- makers take lower • The current low interest rates IRS set-up costs into 20y % -9% positively impact the financial account Interest Rates 4,8 structure for this operation 5 3,8 4,0 (project financed with 80% leverage) 0 2008 2009 2010 * incentives decreased by 2% per year as stated by the initial law Source: Borsa Italiana, Interviews with suppliers 7
  8. 8. The Opportunity: Investment benchmarking Investment benchmark (100€ invested, end of 2005) We compared available investments and 5-year their return over the last 5 years: Euro Investment return • Solar power plant (our project): This Solar Power 150 +48%* option has less risk because it is not Plant linked to the volatility of the stock market and has a fixed rate of return. It is less Bond (20 y) +30% liquid than an investment in listed stock 125 and it starts distributing dividends in year 2. • Bond (20 years): The reference base rate for bonds with 20 years expiration date 100 100 (IRS) plus a 2% spread (average of EU). • MIB 30: Average of Italian Blue Chip -28% listed companies Cir (Sorgenia) 75 • CIR (Sorgenia): The industrial group that MIB 30 -29% owns Sorgenia, the first green electricity Enel -34% producer/distributor. The market price reflects the entire portfolio of businesses, 50 of which Sorgenia is only a small part. • ENEL: The Italian incumbent electricity producer is one of the most traded stocks 0 in Italy due to its low risk and stable 2005 2006 2007 2008 2009 2010 business. Source: www.borsaitaliana.it * Assuming dividend 0% the first year and 12% the following four 8
  9. 9. Agenda • The Opportunity • Market Trend • Industry Profitability • Investment Benchmarking • The Investment • Business Model • Team • Industrial Partner • Target Investors • Financials • Risk Analysis • Exit Strategy 9
  10. 10. SunShare‟s business model is based on two key activities… Value Chain Description 1 This is our innovation. We will raise funds from private investors, through small individual investments (average investment of 10,000 €) using both typical and innovative channels: Key Success Factors Fund • Our personal network (friends, colleagues) Raising • Social networking (LinkedIn and Facebook) • Innovation: we are offering a new opportunity to private • Environmental associations (their members) investors to have a high We have contributed 27,500 € as initial capital return at low risk with a 2 green investment The operations will be outsourced to an industrial partner that will deliver a turn-key solar power • Key trusted partners: plant. They will manage the following aspects of o Industrial: Solar Ventures the project: o Financial: two of the Operations • Project financing with banks largest banks in Italy will • Supply of materials (panels, inverters, provide us with the wires...) required support to • Pre-authorized site preparation and plant finance the project construction • Connection of the plant to the electricity network and testing for overall efficiency 10
  11. 11. 1 …the team will manage fundraising leveraging its expertise Marino Giocondi Suzanne O‟Brien Marino graduated with a degree in Suzanne graduated cum laude from Iowa Business from LUISS in Rome, and is State University with a degree in Advertising currently attending the International MBA and is currently enrolled in the International MBA program at IE Business School. He has program at IE Business School. Through her worked for P&G, Accenture and McKinsey & Company. experience working as a project manager in marketing, she Through his experience as a strategic consultant he has developed strong negotiation skills, increasing revenue by 30% developed outstanding problem structuring and solving and reducing costs by 23%, while managing a budget of over $1 skills. He has also developed considerable management million. More recently, Suzanne has gained further experience skills during his entrepreneurial experience as founder of the working 3 years for the Center for Education Abroad, responsible renewable consulting company Renova Power (2007) and for developing and maintaining partnerships resulting in a 17% as the Executive Director for the start-up uSport S.r.l. (2009). improvement in revenue. Giovanni Miserotti Fabio Pisi Vitagliano Giovanni graduated cum laude in General Fabio graduated cum laude in Mechanical Management from Università Commerciale Engineering (specialization in Energy) and is Luigi Bocconi in Milan and is currently currently attending the International MBA attending the International MBA program at IE program at IE Business School. He has been Business School. He has developed significant expertise working for 5 years for Accenture, leading teams of up to 18 working as a management consultant for McKinsey & members and interacting with clients daily. He has, therefore, Company. He has been assigned to nine projects diverse in a solid quantitative and managerial background. Moreover he industry and function, thus developing both problem solving has improved his financial skills and his knowledge of the skills and a multi-functional business perspective ranging energy market, having interned at an investment fund from strategy and operations to marketing and sales. External focusing on projects in renewable energy. collaborators e.g. associations would be leveraged for fundraising 11
  12. 12. 2 …whereas the industrial partner (Solar Ventures) will manage all operations “One of the top 50 pioneer European companies to have invested in renewable energies, as classified by CNBC European Business.” - Italian Trade Commission Project pipeline (MWp ready to be built) • The company has a strong market share and reputation in the Italian photovoltaic market Q1 2010 47 • It has the required skills to act as the 89 MWp to be built general contractor, following the project during 2010 in Italy down to the smallest details: o site screening Q2 2010 42 o purchase of pre-authorized land o purchase of solar panels and equipment o plant installation and maintenance International presence: Deal ready • 21 MWp in France • The management team is very 121 experienced and it is lead by Michele 2011 • 100 MWp deal Appennino: signed in Jordan o ex McKinsey partner o founder in 1997 of the first venture Total 210 capital fund focused on Internet companies (215 million € raised with the highest IRR in Europe in the sector) 12
  13. 13. We are targeting individuals like you Potential investors Description • Investment funds do not represent a target investor for Investment funds SunShare because they focus on larger investments and they have already invested in the renewables market, thus proving the opportunity in this field • Renewables represent a very interesting investment Companies opportunity for companies to diversify their risk, assure high returns on capital and promote a “green” corporate image • Nevertheless, the financial crisis is having a strong impact on their financials, thus making injection of funds in core business a priority • Companies represent therefore a secondary channel to find potential investors for SunShare • Opening the opportunity of investment to the mass market Private investors represents the real innovation • Private investors will have the possibility to contribute, investing in small shares of a photovoltaic power plant (average investment of 10,000 €) while diversifying their assets with a low-risk, high return project (minimum 10%) 13
  14. 14. Fundraising plan Potential investors Approach & Marketing actions • Founders • Family Phase 1 • Relatives • Friends • The capital raised in phases 1 and 2 will serve as a strong foundation for the broad fundraising efforts of phase 3 • Professional network • Academic network Phase 2 • Social network • Mass market (to • Free publicity together with a further injection of broaden our audience) credibility is required (e.g. articles in newspapers, green Phase 3 and consumer associations*) • Marketing actions are based on viral marketing and the extensive utilization of WEB 2.0 * Such as Legambiente, Greenpeace, Altroconsumo 14
  15. 15. Fundraising will be completed by June 30th Steps and deadlines for fundraising € thousand 800 The team itself contributes 300  Fundraising activity € 27.5K as includes three steps: initial capital - Personal network 300 - Professional 200 network - Mass market  The equity needed, € Personal Professional Mass Total equity 800K, will be gathered network network market by June 30th Deadline for May May June each step 10th 31st 30th
  16. 16. The investment is € 4.44 million, to be financed through equity and project financing Solar power plant total investment Solar power plant total source breakdown (Mln €) breakdown (Mln €) Set Up 3.60 Equity 0.80 Authorization 0.40 for Land Project 3.20 financing Turn-Key 4.00 Short term 0.44 • VAT is to be debt VAT 0.44 paid upfront; the government will refund it in1 year Total 4.44 Total 4.44 • Financed by short-term debt 16
  17. 17. EBITDA is 88% of the total revenues Revenue and Cost stream (thousand €) SAMPLE YEAR #2 Sample year # 2 % of Revenues Description Around 80% of the total revenue comes Incentives 498 78% from government incentives fixed for 20 Revenue stream Electricity years 139 22% Around 20% of the total revenue comes Sales Transmission from electricity sales, it is assumed that 5 0% the price increases 2% annually contribution** Total 642 100% Revenues Maintenance is outsourced to the general Maintenance 46 7% contractor to ensure a high level of Operating cost* productivity, security and daily monitoring Insurance 16 3% Insurance is required by the financing banks, to reduce risks associated with Land rent 12 2% weathering, vandalism, etc. Transmission 0% 1 costs** EBITDA 567 88% *All costs are based on an assumed growth rate of 2% per year ** Rebalancing between revenues and costs with transmission network company 17
  18. 18. Net Income is 23% of total revenues SAMPLE YEAR #2 Net Income breakdown (thousand €) % of Revenues Description EBITDA 567 88% Italian law allows a 5% accounting Accounting depreciation per year, while the fiscal 203 31% depreciation depreciation of 9% minimizes taxes for the first 10 years EBIT 364 57% Long term debt assuming 6,7 % fixed Project financing 203 32% interest rate per 18 years* debt interest VAT short Interest due to short-term excess or need 0 0% term debt of cash. In the first two years small debt is Debt/Credit required, after that the balance will become 6 1% positive (credit) interest EBT 167 26% Taxes 17 3% Taxes during the first 10 years are low due to the high depreciation of CAPEX and the tax shield given by high leverage Net Income 150 23% *In the first year there is an upfront fee (1,5% of the loan) to be paid to the bank 18
  19. 19. Free Cash Flow to Firm stabilizes after year 1 Free Cash Flow to Firm (FCF2F) trend („000 €) FCF2F EBIT 1.100 Taxes The green line shows the Free 1.000 Depreciation Cash Flow to Firm, while the 806 Variation in bars represent its components: 900 Working Capital • EBIT slightly decreases during 800 Capex the 20 years 700 600 440 437 434 432 431 431 431 432 472 • Taxes correspond with EBIT 415 415 409 407 404 402 399 396 394 391 500 • Depreciation has a positive 400 impact for the first 20 years, 300 becoming zero in year 21 200 • Variation in working capital 100 is negative in the first two 0 years due to VAT reimbursement from the Italian -100 government -200 • CAPEX refers to the initial -300 investment in the plant -400 -4.501 -4.600 2010 2015 2020 2025 2030 19
  20. 20. Free Cash Flow to Equity becomes positive in year 1 Free Cash Flow to Equity (FCF2E) trend („000 €) FCF2E EBT Taxes The green line shows the Free 4.000 Depreciation Cash Flow to Equity, while the 3.900 Variation in Working Capital bars represent its components: 3.800 103 Capex • EBT is growing for 20 years 700 Debt • Taxes increase accordingly 600 213 119 110 261 418 419 with EBT 500 144 136 128 181 180 178 160 157 400 196 192 188 184 183 • Depreciation has a positive 300 impact for the first 20 years, becoming zero in year 21 200 100 • Variation in working capital 0 is negative in the first two -100 years due to VAT -200 reimbursement from the Italian government -300 -400 • CAPEX refers to the initial -500 investment in the plant -600 -700 -4.600 -756 2010 2015 2020 2025 2030 20
  21. 21. The two main sources of risk are revenues and delays in project completion SAMPLE YEAR #2 Description of financials • Risk #1: government incentives, Revenues 100 which account for ~80% of revenues, decrease Operating 12 • Risk #2: electricity sales, which Costs account for is ~20% of revenues, EBITDA 88 decrease • Risk #3: plant operative at the Depreciation 31 beginning of 2011 due to extraordinary circumstances EBIT 57 Financial • We believe that the best option for the 31 Costs project is to seek financing with a fixed rate that would be slightly higher at the EBT 26 beginning, rather that a floating rate, due to the nature of the investment (known Taxes 3 revenues and fixed costs) Net Income 23 21
  22. 22. Risk on revenues #1: government incentives decrease Solar power plant financial return IRR % • IRR of the business is IRR (FCF2E) positive even if the 20 government incentives decrease by 40%, which is 15 highly unlikely • If we consider the new 10 incentives in the draft of the IRR (FCF2F) new law (31 € cents per KWh produced), and the 5 average drop in plant Incentives (€ construction costs (-36% per 0 cent per KWh year), the IRR would not be produced) 0,15 0,20 0,25 0,30 0,35 impacted significantly 22
  23. 23. Risk on revenues #2: electricity price falls Solar power plant financial return IRR % 25 • A reduction, even down to zero, in the electricity price 20 would still result in a high IRR (15,6% in the case of IRR (FCF2E) free electricity) 15 • Sales of electricity account for only 20% of revenues, 10 thus explaining the low impact of price changes on IRR (FCF2F) the IRR 5 Electricity 0 market price 0 -20 -40 -60 -80 -100 decrease (%) 23
  24. 24. Risk on revenues #3: plant operative in 2011 IRR FCF2F Potential scenario Description Return on the project IRR FCF2E • If the solar power plant starts 22,1 4-month delay in operating in the first four 17,1 construction months of 2011, government incentives will be lowered by 8,1 7,1 9,2% due to the ongoing revision in the legislation 2010 Up to April 2011 22,1 • If the solar power plant starts 8-month delay in 15,5 operating in the second four construction months of 2011, government 8,1 6,8 incentives will be lowered by 10,6% because of the ongoing revision in the legislation 2010 Up to August 2011 Target equity • The solar power plant will not be not reached built N/A N/A 2010 2011 24
  25. 25. Development plan Excess of cash generated by the Scenarios analysis Shareholders profitability business • 12% from year 2 to year 20 • Lower than expected, just enough Worst Case • Share buy back in year 20 at to buy back the shares in year 20 100% nominal value • 12% from year 2 to year 6 • Aligned with expectations and able Base Case to finance the building of 1 • 50% increase profitability every 6 years until the maximum of additional power plant every 6 24% years* • 12% from year 2 to year 6 • Exceeding expectation and able to Best Case • 50% increase profitability every finance the building of 1 additional 4 years up to the maximum of power plant every 4 years* 24% * assuming same operational profitability and 50% cost per MWp installed compared to the first investment
  26. 26. Exit strategy Option 1: • Shares can be traded in the peer-to-peer market facilitated by SunShare • High proven return will attract existing and new investors Option 2: • Sell to a large electricity provider/producer • Large suppliers can directly distribute power and charge a premium for green energy 26
  27. 27. Summarizing… What we are looking for: • Fund raising 800.000€ from individuals willing to invest in solar power plants in Italy around 10,000€ each shares from 2,500 € to 100,000 € are available) What we are offering: • A high annual return of 12% on the investment (based on our current projection) • A low risk stake in a project that will be started only if we would be able to guarantee a minimum of 10% annual return (based on the final agreements with bank and general conctractor), otherwise we will not start building the plant 27
  28. 28. Our pioneer investor… Ignacio de La Vega - IE Business School Entrepreneurial Management Professor Director of the International Centre for Entrepreneurship and Ventures Development “I see the innovation in your Business Model and like the industry potential and above all, the passionate team” 28
  29. 29. Our contact information Marino Giocondi marino.giocondi@googlemail.com In Italy (+39) 346.4136355 Giovanni Miserotti giovanni.miserotti@libero.it In Italy (+39) 346.5053585 Suzanne O‟Brien sobrien.imba2010@alumno.ie.edu In Spain (+34) 656.651194 In USA (+1) 215.789.9821 Fabio Pisi Vitagliano fpisi.imba2010@alumno.ie.edu In Italy (+39) 339.7800076 In Spain (+34) 658.593309 29
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