CIBC - Roberts - Corporate Banks Perspective On The FiT
A Corporate Bank’s Perspective On The Feed-in-Tariff
Landscape For Renewable Energy
Green Energy Act Finance Forum
January 29, 2010
Managing Director, CIBC World Markets Inc.
CIBC World Markets Inc.
613-564-0827 FOR INSTITUTIONAL CLIENT USE ONLY.
email@example.com NOT FOR GENERAL DISTRIBUTION.
See "Important Disclosures" section See "Price Target Calculation" and "Key
at the end of this report for important Risks to Price Target" sections at the
required disclosures, including end of this report, or at the end of each
potential conflicts of interest. section thereof, where applicable.
Before The FiTs, Where Was The Capital Flowing?
Other low carbon
Efficiency tech & services
1.8% Other low carbon 2.9%
Biomass & Waste
Other renewables tech & services
Other renewables 2.3%
Biomass & Waste Efficiency
42.8% 10.5% Wind
Renewable Energy Investment (2008)
Efficiency Other low carbon
4.6% tech & services
Biomass & Waste
Compared to the U.S. and the rest of
the world, Canada has attracted
relatively more investment in wind
and biofuels/biomass, and relatively
less in solar.
Biofuels This partly reflects differences in
endowments of renewable
Source: New Energy Finance.
Don Roberts 613-564-0827 firstname.lastname@example.org CIBC World Markets Inc. 2
Ontario’s Feed-in-Tariffs: International Comparison
200 135 138 133
B ms < 0 W
L n fill G s
io a s
o r ro n )
S la (ro f)
S la (g u d
o r o
io a s 1 M
Source: New Energy Finance.
Ontario Germany Spain
Compared to other jurisdictions,
• Wind and solar get the most favorable rates
• Biomass is generally in line
• Landfill gas gets the worst
• …… and nothing for geothermal
Given the levelised cost of energy, expect a greater supply response in wind and solar
than for biomass or landfill gas.
However, given the FiTs, some new small-scale CHP biomass gasification technologies
can likely generate a ROCE of over 20%.
Don Roberts 613-564-0827 email@example.com CIBC World Markets Inc. 3
FiT Programme Un-Capped?
FiT Programme is officially “un-capped”…government has
adopted a “take-all comers” approach.
• Even if transmission were not constrained, there is
ultimately a provincial government budget constraint.
• Public finances throughout the developed world have
deteriorated and will get worse before they better.
• FiTs are essentially an unfunded liability with a long
Don Roberts 613-564-0827 firstname.lastname@example.org CIBC World Markets Inc. 4
Do We Want To Play?
CIBC has a strong background and long history in general
project finance. We are also serious about expanding our
presence in the renewable energy space.
• We think a structural shift toward a low-carbon economy
• We see significant opportunities for financing renewable
power in Canada – could well surpass conventional
• Overall market potential in Canada of ~$20 billion over
the next five years?
• Have recently hired experienced project financiers with
a background in renewable energy (e.g., wind) to
supplement our team.
• Part of a firm-wide initiative to examine opportunities
and execute in the space – project finance, M&A, IPOs.
…..We intend to play
Don Roberts 613-564-0827 email@example.com CIBC World Markets Inc. 5
• Lack of transmission lines is a key constraint – beware of
• Samsung Effect:
• Less transmission capacity available for other large
• Market will have to focus more on smaller projects
(which have distribution lines to existing transmission
lines) than would otherwise be the case.
Operating Experience Matters:
• Contrary to what the Toronto Star says, PPAs are not the
same as a Government of Ontario bond.
• There is operating risk, especially when operating over
• Ontario is not Spain – technology risk varies with location
(e.g., how will solar units perform after a couple of
• Warranty packages from manufacturers?
Don Roberts 613-564-0827 firstname.lastname@example.org CIBC World Markets Inc. 6
• Same due diligence and documentation effort for small &
large deals – economies of scale for the financier.
• Utility scale wind & solar projects can get project financing.
• Small scale biomass-based projects may actually be easier
than large-scale due to reduced fuel price risk.
• Solar roof-top is challenged.
• Especially for small developers without experience and
• Role of land owner/building owner? (What if they go
bankrupt? Structural integrity of roofs?)
• Factor in re-stallation of solar panels if the roof must be
replaced over the duration of the 20-year PPA.
• Real estate bankers may do this, but unlikely
infrastructure bankers will.
Don Roberts 613-564-0827 email@example.com CIBC World Markets Inc. 7
• Time Frame Matters:
• Lifecos may go for the full length of the PPA.
• Corporate banks will be shorter term (7-8 years?),
which means re-financing risk should be considered.
(However, banks can generally go for larger amounts
• Clarity On Details Of The PPA Matter; e.g.,
• Domestic content validated only after the project is
• Curtailment provisions.
• Relationships Matter:
• Expect first capital to go to existing clients
– especially bigger projects sponsored by proven
Don Roberts 613-564-0827 firstname.lastname@example.org CIBC World Markets Inc. 8
• Terms are set by the market.
• They are always subject to change, but what are
representative numbers for good onshore wind projects
for an established developer in January 2010?
• ~75% debt (definitely under 80% and lower if poorer
project/less experienced developer).
• Term-load spread 300 bps-500 bps (In U.S., hit 600
bps-700 bps during the 2008 crash).
Don Roberts 613-564-0827 email@example.com CIBC World Markets Inc. 9
In response to “Climate-Gate”, new research
has been done in Fort McMurray on the TRUE
cause of global warming…..
Don Roberts 613-564-0827 firstname.lastname@example.org CIBC World Markets Inc. 10
…it should have been obvious to any objective observer.
Don Roberts 613-564-0827 email@example.com CIBC World Markets Inc. 11
Appendix: Bio Of Don Roberts
! Mr. Roberts is a Managing Director with CIBC World Markets Inc. He is frequently described
as a “thought leader” in the both the global forest products and bio-energy industries. From
1992-2008 he led a team of analysts in advising financial institutions (e.g., pension/mutual
funds) on their investments in the global paper & forest products industry. In institutional
investor surveys he was consistently ranked among the top in the industry.
! During a sabbatical year in 2009, Mr. Roberts focused on two projects:
— On behalf of the Forest Products Association of Canada he led the Future
BioPathways Project which examined transformational strategies for the
Canadian forest industry.
— On behalf of CIBC Inc he developed a business plan for the creation of a Clean
! In addition to his work with CIBC World Markets Inc., Mr. Roberts is also
— An Adjunct Professor in the Department of Forest Resource Management at the
University of British Columbia (Vancouver);
— On the Board of Executives of the Sloan Center for Paper Business and Industry
Studies at the Georgia Institute of Technology (Atlanta, Georgia);
— On the Board of Directors of the Rights & Resources Institute (Washington, D.C.)
— Serves in an advisory capacity for a range of government, industry, and NGO
! Mr. Roberts has a Bachelor’s degree in Agricultural Economics from the University of British
Columbia, a Master’s degree in Forestry Economics from the University of California at
Berkeley, and both an MBA and doctoral studies in International Finance and Economics
from the University of Chicago.
Don Roberts 613-564-0827 firstname.lastname@example.org CIBC World Markets Inc. 12
Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
accurately reflect such research analyst's personal views about the company and securities that are the subject of this
report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by such research analyst in this report.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from
revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking
Department. Research analysts do not receive compensation based upon revenues from specific investment banking
transactions. CIBC World Markets generally prohibits any research analyst and any member of his or her household from
executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets
generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that
such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities
discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
Don Roberts 613-564-0827 email@example.com CIBC World Markets Inc. 13
CIBC World Markets Inc. Stock Rating System
Abbreviation Rating Description
SO Sector Outperformer Stock is expected to outperform the sector during the next 12-18 months.
SP Sector Performer Stock is expected to perform in line with the sector during the next 12-18 months.
SU Sector Underperformer Stock is expected to underperform the sector during the next 12-18 months.
NR Not Rated CIBC World Markets does not maintain an investment recommendation on the stock.
R Restricted CIBC World Markets is restricted*** from rating the stock.
O Overweight Sector is expected to outperform the broader market averages.
M Market Weight Sector is expected to equal the performance of the broader market averages.
U Underweight Sector is expected to underperform the broader market averages.
NA None Sector rating is not applicable.
**Broader market averages refer to the S&P 500 in the U.S. and the S&P/TSX Composite in Canada.
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
***Restricted due to a potential conflict of interest.
Don Roberts 613-564-0827 firstname.lastname@example.org CIBC World Markets Inc. 14
Ratings Distribution*: CIBC World Markets Inc. Coverage Universe
(as of 29 Jan 2010) Count Percent Inv. Banking Relationships Count Percent
Sector Outperformer (Buy) 113 45.2% Sector Outperformer (Buy) 106 93.8%
Sector Performer (Hold/Neutral) 111 44.4% Sector Performer (Hold/Neutral) 97 87.4%
Sector Underperformer (Sell) 18 7.2% Sector Underperformer (Sell) 16 88.9%
Restricted 8 3.2% Restricted 8 100.0%
Ratings Distribution: Paper & Forest Products Coverage Universe
(as of 29 Jan 2010) Count Percent Inv. Banking Relationships Count Percent
Sector Outperformer (Buy) 3 18.8% Sector Outperformer (Buy) 3 100.0%
Sector Performer (Hold/Neutral) 11 68.8% Sector Performer (Hold/Neutral) 11 100.0%
Sector Underperformer (Sell) 1 6.3% Sector Underperformer (Sell) 1 100.0%
Restricted 1 6.3% Restricted 1 100.0%
Paper & Forest Products Sector includes the following tickers: ABWTQ, CAS, CFP, CFX.UN, CTL, IFP.A, LPX, MERC, NBD, SFK.UN,
SXP.UN, TMB, TRE, TWF.UN, UFS, WFT.
*Although the investment recommendations within the three-tiered, relative stock rating system utilized by CIBC World Markets Inc.
do not correlate to buy, hold and sell recommendations, for the purposes of complying with NYSE and NASD rules, CIBC World
Markets Inc. has assigned buy ratings to securities rated Sector Outperformer, hold ratings to securities rated Sector Performer, and
sell ratings to securities rated Sector Underperformer without taking into consideration the analyst's sector weighting.
Important disclosures required by IIROC Rule 3400, including potential conflicts of interest information, our system for
rating investment opportunities and our dissemination policy can be obtained by visiting CIBC World Markets on the web
at http://researchcentral.cibcwm.com under 'Quick Links' or by writing to CIBC World Markets Inc., Brookfield Place, 161
Bay Street, 4th Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request.
Don Roberts 613-564-0827 email@example.com CIBC World Markets Inc. 15
This report is issued and approved for distribution by (i) in Canada, CIBC World Markets Inc., a member of the Investment Industry Regulatory
Organization of Canada (“IIROC”), the Toronto Stock Exchange, the TSX Venture Exchange and CIPF, (ii) in the United Kingdom, CIBC World Markets plc,
which is regulated by the Financial Services Authority ("FSA"), and (iii) in Australia, CIBC Australia Limited, a member of the Australian Stock Exchange and
regulated by the ASIC (collectively, "CIBC World Markets"). This report is distributed in the United States by CIBC World Markets Inc. and has not been
reviewed or approved by CIBC World Markets Corp., a member of FINRA. This report is intended for distribution in the United States only to Major
Institutional Investors (as such term is defined in SEC 15a-6 and Section 15 of the Securities Exchange Act of 1934, as amended) and is not intended for
the use of any person or entity that is not a major institutional investor. Major Institutional Investors receiving this report should effect transactions in
securities discussed in the report through CIBC World Markets Corp. This report is provided, for informational purposes only, to institutional investor and
retail clients of CIBC World Markets in Canada, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any
jurisdiction where such offer or solicitation would be prohibited. This document and any of the products and information contained herein are not intended
for the use of private investors in the United Kingdom. Such investors will not be able to enter into agreements or purchase products mentioned herein
from CIBC World Markets plc. The comments and views expressed in this document are meant for the general interests of wholesale clients of CIBC
The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives,
financial situation or specific needs of any particular client of CIBC World Markets. Recipients should consider this report as only a single factor in making
an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of
independent judgment of the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or apparent
authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security recommended in this
report, the recipient should consider whether such recommendation is appropriate given the recipient's particular investment needs, objectives and financial
circumstances. CIBC World Markets suggests that, prior to acting on any of the recommendations herein, Canadian retail clients of CIBC World Markets
contact one of our client advisers in your jurisdiction to discuss your particular circumstances. Non-client recipients of this report who are not institutional
investor clients of CIBC World Markets should consult with an independent financial advisor prior to making any investment decision based on this report or
for any necessary explanation of its contents. CIBC World Markets will not treat non-client recipients as its clients by virtue of their receiving this report.
Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of
any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely
affected by exchange rates, and investors may realize losses on investments in such securities, including the loss of investment principal. CIBC World
Markets accepts no liability for any loss arising from the use of information contained in this report, except to the extent that liability may arise under
specific statutes or regulations applicable to CIBC World Markets.
Don Roberts 613-564-0827 firstname.lastname@example.org CIBC World Markets Inc. 16