Alternativas de Financiamento para as Escos

1. Patrick Doyle
MGM Innova Capital
Sao Paulo, Brazil
30
2016
August
CONGRESSO BRASILEIRO
DE EFICIÊNCIAENERGÉTICA
COBEE

2. INTRODUCTION
MGM SUSTAINABLE ENERGY FUND (MSEF) focuses on financing
energy efficiency and renewable energy projects in Colombia,
Mexico, Central America and the Caribbean, and is now
expanding to Brazil

3. ENERGY EFFICIENCY RENEWABLE ENERGY
Efficiency in
buildings
Hotels, hospitals, shopping
centers, fast food chains.
Efficiency in
municipal
infrastructure
Water pumping systems.
Street lighting.
Industrial
efficiency
Waste heat recovery,
biogas and waste biomass.
Cogeneration.
Technologies Solar for sale to the grid.
Hydro generation (small scale)
and rehabilitation of hydro
electric plants.
Landfill Gas
Early stage Enter projects at early stage
to add value to local
developers
Distributed
generation
Opportunities in countries
with high electricity retail
prices.
INVESTMENT TYPES
AND STRATEGY

4. Up to 100 % of the investment by MSEF
Includes investments required for analysis, main equipment,
auxiliary systems and civil and electric works needed by the project
Long-term contracts
Company not required to provide collateral
Contract conditions to ensure company’s balance sheets and debt
capacity are not affected
Early exit contract clause if so required by company
Automatic transfer of assets to company on contract expiry
INVESTMENT FEATURES

5. • Based on walk-through inspection and available information
• Analysis of technical and production risks
• Submission of report and non-binding conditions for project
development under ESCO model
Conceptual analysis of the opportunity(A1)
• Basic engineering and adjustment of investment budget
• Environmental assessment
• Legal and financial due diligence
• Submission of binding terms and conditions
Analysis of basic engineering and due
diligence (A2 and due diligence)
• Development of detailed engineering
• Procurement and project implementation
• Project tests and commissioning
• Close financing
Detailed engineering, financing and project
implementation
• Project operations
• Preventive and corrective maintenance
• Monitoring of achieved savings or energy supply
Project operation, maintenance and
monitoring
• Transfer of the installation in operating conditions for continued use
by the company
Transfer of installation
TYPICAL ANALYSIS STEPS

6. Offshore
Onshore
Energy sale
contract/leasing/shared savings
Equity
(100%)
Dividends
Fixed monthly payments indexed to CPI
Special Purpose
Vehicle (SPV)
Service contract
Design, construction, installation,
commissioning and monitoring
(optional: operation and
maintenance)
MGM Innova Capital manages MSEF
Pre-Construction steps
- Signature of term sheet
- Submission to Investment
Committee
1. Contract signature between SPV and
Client.
2. Capitalization of SPV.
3. SPV purchases equipment and
coordinates installation through service
contract.
4. Suppliers provide equipment and
associated guarantees.
5. Payment of investment through
savings/energy generated by the
project.
6. SPV returns dividends to MSEF.
1
2
3
4 5
6
Client
local/international
contractors
MSEF
TYPICAL INVESTMENT STRUCTURE

7. ENERGY EFFICIENCY AND CLIMATE CHANGE MITIGATION
PROJECT SUNSET HOTEL CHAIN – CANCUN, MEXICO
CASE STUDY
Scope
Replacement of chillers and air conditioners
Installation of heat recovery chiller
Installation of high efficiency lighting
Installation of temperature control systems
Replacement of air handlers
Solar water heaters
Development of Greenhouse Gas Inventory
and Climate Neutrality Strategy
Equity IRR:
Contract:
Tenor/Duration:
Energy Savings
Payment:
High teens unlevered
Operating lease
6 years
93% of recorded savings (Baseline) +
fixed payment component (fan & coils
and solar water heaters)
Before
Standard water heater Solar heaters
High efficiency cold water generatorStandard cold water generator
After
Savings
Electric energy: 38.40% (MX$ 6,573,243/yr)
GLP gas: 32.50% (MX$ 1,369,727/yr)
GHG emission reductions: 26,096 tCO2e over project lifetime
(12 years)

8. CASE STUDY
Scope
Rooftop solar panels (98 kWp, 136 kWp and 122 kWp)
Hybrid controller to switch between solar and diesel
generation
Remote monitoring system
Equity IRR:
Contract:
Tenor/Duration:
Payment Structure:
High teens levered
Operating lease
20 years (expected exit prior)
Fixed payment equivalent to $0.30/kWh
in first year and $0.21/kWh in
subsequent years
Savings
Renewable energy generated: 234,510 kWh/yr
Fuel savings: 20.019 Gal/year (118,000 US$/yr)
GHG emission reductions: 3,804 tCO2e over 20 years
DISTRIBUTED GENERATION PROJECT
RED FROG BEACH RESORT - PANAMA

9. CASE STUDY
Scope
Replacement of AC units for VRV technology with a
centralized monitoring system
Installation of high efficiency lighting
Installation of a 75 kWp solar generation system divided in
three 25 kWp systems
Equity IRR:
Contract:
Tenor/Duration:
Energy Savings
Payment:
Mid-teens levered
Operating lease in US$
10 years, to be negotiated
95% of the savings
Savings
Electric energy: 51.18% (237,000 US$/yr)
GHG emission reductions: 7,894.8 tCO2e over project lifetime
(10 years)
COMMERCIAL ENERGY EFFICIENCY AND
SOLAR DISTRIBUTED GENERATION PROJECT
BANCO DE AMERICA CENTRAL (BAC) – EL
SALVADOR
P1 –P2
Variable flow system
Control by floor Control by air
management
unit
Only operates in
required area

10. CASE STUDY
Scope
Replacement of Municipality of Ensenada’s 25,000 street
lights with high efficiency LED lighting
MSEF investment of up to US$ 2.5 million mezzanine
financing for Optima’s Ensenada street lighting project
Remaining 85% of project capital structure provided by
senior loans from InterAmerican Development Bank (IDB)
and Canadian Climate Fund for the Private Sector in the
Americas (C2F)
Equity IRR:
Contract:
Tenor/Duration:
Payment Structure:
Exit Strategy:
High teens
Sub Debt Contract (mezzanine debt)
9 years
Monthly payment with variable interest
rate in MX$ adjusted to US$-MX$
exchange rate
Total sub debt repayment, or pre-
payment premium
Savings
Electric energy: 59% (approx.)
GHG emission reductions: 150,000 tCO2e over 20 year life of
luminaires
OPTIMA STREET LIGHTING IN MEXICO

11. • Contractual complexity:
– Lease (operating/financial?), PPA or rental?
– Take or pay – on weekends/holidays?
– Risks of tax and net-metering legislation changes
– High legal costs for small projects
– Insurance coverage
• Debt issues
– Off-taker/customer credit ratings may not be available
– What if customer wants a buy-out early?
– Delays in bill paying possible
– Finance pre-construction? EPC wrap possible?
– What tenor and % leverage is likely?
• What is the expected exit/sale price for the projects?
Challenges in financing off-balance sheet
distributed generation vs. utility-scale solar

12. Shades of : Renewable Energy (27%)
Shades of : Energy Efficiency (73%)
MSEF PORTFOLIO
MSEF INVESTMENT AMOUNT PER TYPE OF INVESTMENT
Commercial EE
30%
Industrial EE
17%
Solar Utility
5%
Hydroelectric
Generation
10%
Landfill Biogas
12%
Solar Distributed
Generation
16%
Street Lighting
10%

13. PIPELINE
INVESTMENT AMOUNT BY COUNTRY
Costa Rica
6%
Mexico
18%
Colombia
23%
Dominican Republic
5%
Panama
4%
Peru
2%
Honduras
7%
Haiti
2%
Brazil
32%
Regional
1%

14. THANK YOU !!!
Patrick Doyle
Managing Director, MGM Innova Capital
pdoyle@mgminnova.com