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Managing The Risk Of Financing Renewable Energy Projects
- 1. Managing the Risk of Financing Renewable Energy Projects
- 2. Introduction For Wind, Small Hydro and Solar projects, debt providers need to: Manage risks Ensure the Commissioned of the projects are to acceptable projects they constructed standards finance correctly This Video will explain ORTECH’s approach!
- 3. Three Phased Approach Phase 1: Technical Due Diligence Phase 2: Construction Monitoring Phase 3: Start-up, Testing, Commissioning & Post- Commissioning Monitoring
- 4. Phase 1: Technical Due Diligence Approach: Document Review of project from Lifecycle Point of View Development Construction Operation • Adequacy of Land Area, • Scope, • Energy output • Resource (Audit for • Schedule, projections, reasonableness unless • Capital Cost, and • Revenue projections, otherwise required by • Project • Operating cost Debt Provider), Management. projections, and • Grid Connection, • Net revenue projections • Permitting Status, including reasonableness • Domestic Content issues, of operational cost and • Constructability, projections the owner’s • Equipment Suitability, ability to meet debt and service coverage ratios. • Development Risk Summary.
- 5. Phase 2: Construction Monitoring Approach: Review the Engineer, Procure, Construction (“EPC”) contracts progress Attend Kickoff Attend Progress Review Change Prepare Lender’s Meeting Meetings Order Engineer’s Report The following will be • Assessment of project • Reviewed by • Review and approve determined: advancement including: ORTECH to ensure any draw requests. • responsibilities of that the changes are each party, • Design: Conformity of in line with the • Compare actual verses • working final design with the overall project contracted budgets to arrangements, milestone schedules. strategy ensure the project is • communications, proceeding at a proper • documentation • Procurement: pace. requirements, and Procurement contracts’ • Reporting overall progress. • ORTECH will conduct certification and this review monthly payment procedures. • Construction: Attend and issue reports major inspections, tests showing detailed or the start of important progress work phases.
- 6. Phase 3: Start-up, Testing, Commissioning & Post- Commissioning Monitoring Review Performance Testing • Review all testing procedures for the Procedures and Sites project and provide commentary. • Review all testing performed for project Review Performance Testing and provide commentary. Review Contractor’s Test Reports • Review the test reports prepared by the EPC vendors Submit Letter Report(s) to Debt • Prepare a letter report(s) covering planned Provider execution of the start-up and pre-commissioning programs. Verify Project Completion • Monitor and verify punch list items have been completed
- 7. If you need Technical Due Diligence or Lenders Engineering Services, please contact ORTECH info@ortech.ca 905 822 4120 x 680
Editor's Notes
- Phase 1: Technical Due Diligence: This phase is essentially a document and planning review exercise designed to uncover any deficiencies in project planning and to identify potential difficulties that may arise during the construction and operational phases. The intent is to ensure that the Debt Provider is aware of (i) the current status of the project; (ii) remaining steps required to bring the project to the construction phase; (iii) the responsibilities of each party under the agreements covering the construction and operation of the project with particular emphasis on any limitations, exceptions and exclusions that may impact the ability of the owner to service the long-term debt; (iv) any higher than normal risks and measures that are proposed to deal with such risks; i.e. Domestic Content plan is in place and meets the requirements of the relevant project and (v) confirmation, subject to proper completion of construction, that it is reasonable to assume that the project should generate sufficient revenues and cash flows to comfortably service its long-term debt. Phase 2 Construction Monitoring: Pending satisfactory completion of Phase 1, ORTECH will monitor all aspects of the construction phase of the project so as to ensure that (i) design specifications are met; (ii) applicable health and safety regulations are complied with; (iii) debt drawdown requests are in accordance with project budgets and adequately documented in accordance with the loan agreement; (iv) any material variances from project budgets or the exhaustion or potential exhaustion of any contingencies are identified in a timely manner; and (v) any change orders are justified and at reasonable cost in the circumstances. Phase 3 Start-up, Testing, Commissioning & Post-Commissioning Monitoring: During this phase ORTECH will ensure that the facility has been completed in manner that (i) permits it to deliver energy to the grid in accordance with the requirements of the grid operator and in compliance with the terms of the OPAs FIT contract including the Domestic Content provisions; (ii) any outstanding construction and installation matters have been dealt with; (iii) conditions for the release of any holdbacks are met; (iv) the state of the project is such that warranties and performance guarantees are in effect; and (v) the project is operating in a manner that produces sufficient revenues to enable the owners of the project to meet its obligations to the Debt Provider. Note that this Post-Commissioning monitoring may continue for at least one year with periodic monitoring thereafter as required by the Debt Provider.