Transcript NEDPower Mount Storm Wind Farm Project Update 10/20/2009 Project Location Grant County, West Virginia Mt.

NEDPower Mount Storm
Wind Farm Project Update
10/20/2009
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Project Location
Grant County, West Virginia
Mt. Storm
Coal-Fired Station
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Site Location
264 MW on
8000 Acres
of Leased Property
Wind project site is approximately 2 miles east
of Dominion’s Mt. Storm coal-fired facility
 Maximum Turbine Height – 388 ft
 Turbine Blades – 127 ft long & 262 ft diameter rotor
 Cut-in/Cut-out Speed – 4 m/s (9 mph) / 25 m/s (56 mph)
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Project Data
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Location
Status
Facility Owners
Total Capacity
Number of turbines
Maximum Output per Turbine
Commercial Operation Date
Total Capital Cost:
Turbine Supplier
Source of Turbine Manufacturing
Land Area Covered
Regional Transmission Operator
Grant County, West Virginia
OPERATING
Dominion (50%) / Shell (50%)
264 Megawatts
132
2 Megawatts
December 2008
$530 million
Gamesa (Model G80-2.0)
U.S. and Spain
~8,000 acres (12 miles of ridgeline)
PJM Interconnection
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Turbine Dimensions
262 ft
Completed
Wind Turbine
Turbine Dimensions:
Rotor Diameter:
Tower Height:
262 ft
256 ft
256 ft
Total Height to Blade Tip: 388 ft
Distance from Bottom of
Blade Tip Arc to Ground:
388 ft
125 ft
125 ft
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Project Benefits
• Taxes Over 25 Years
Payments to Land Owners:
Property Taxes:
State Taxes:
B&O Taxes:
Schools:
$17.45 million (35 land owners)
$14.23 million (county)
$ 6.87 million
$ 3.79 million
$ 1.74 million
Construction provided over $30 million in revenues for local companies
Jobs – reached 300 during construction and one dozen full time for operation
Each 2 megawatt turbine provides enough electricity for 500 homes
Entire project will provide power for 66,000 homes
Excellent working relationship with local elected officials
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Project Timeline
• Discussions Initiated with Land Owners & County
2001
• WV CPCN Site Certificate Application Submitted
2002
• WV CPCN Site Certificate Approved
2003
• Pre-Construction Conditions Completed
2006
• Construction Started
2006
• Construction Completed
2008
• Project Financing
2008
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What is Project Finance?
• Financing of long-term infrastructure
• Relies on external debt and contributed equity
• Loans are secured by the project assets
• Relies on project cash flow for repayment
• Lenders evaluate project risk
• Special Purpose Entity (SPE) used to hold project assets
• Loan is made to SPE
• Lenders include – Banks, Insurance Companies, Private Equity
Firms, ect.
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Why Project Finance?
• Limit Recourse to Project
- Possible non-recourse and off-balance sheet treatment
• Have multiple project owners
- 50/50 partnership or other options
• Lever the project
- Increase debt and returns
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Dominion’s Investment in Equity Method
Accounting Projects (2008 & 2007)
Consolidated Balance Sheets
2008
At December 31,
(millions)
2007
ASSETS
Current Assets
Cash and cash equivalents
Customer receivables (less allowance for doubtful accounts of $32 and $37)
Other receivables (less allowance for doubtful accounts of $7 and $10)
Inventories:
Materials and supplies
Fossil fuel
Gas stored
Derivative assets
Assets held for sale
Prepayments
Other
Total current assets
Investments
Nuclear decommissioning trust funds
Investment in equity method affiliates
Loans held for resale (less allowance for loan losses of $7 in 2007)
Other
Total investments
Property, Plant and Equipment
Property, plant and equipment
Accumulated depreciation, depletion and amortization
Total property, plant and equipment, net
Deferred Charges and Other Assets
Goodwill
Pension and other postretirement benefit assets
Intangible assets
Regulatory assets
Other
Total deferred charges and other assets
Total assets
$
$
66
2,354
205
$
283
2,130
226
509
328
329
1,497
1,416
163
794
7,661
427
341
277
775
1,160
387
664
6,670
2,246
726
—
285
3,257
2,888
331
323
338
3,880
35,448
(12,174)
23,274
33,331
(11,979)
21,352
3,503
514
712
2,226
906
7,861
42,053
3,496
1,565
598
957
621
7,237
39,139
$
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Dominion’s Investment in Equity Method
Accounting Projects (2008 & 2007)
Equity Method Investments
Investments that we account for under the equity method of accounting are as follows:
Company
Ownership %
Investment Balance
2008
As of December 31,
Iroquois Gas Transmission System, LP
Elwood Energy LLC
24.72%
50%
Fowler I Holdings LLC
NedPower Mount Storm LLC
Other
Total
50%
50%
various
$
$
2007
(millions)
114
$
83
292
154
83
726
Description
$
97
77
—
67
90
331
Gas transmission system
Natural gas-fired
merchant generation
peaking facility
Wind-powered merchant generation facility
Wind-powered merchant generation facility
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Project Financing Process
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Determine if construction financing and term financing will be required, and the target loan period
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Develop cash flow model for the project with desired debt size and anticipated financial results
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Develop a Project Information Memorandum to market the project
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Hire borrower’s counsel/attorney
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Solicit interest with banks and sign confidentiality agreements
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Hire an independent engineer who is a recognized leader in the field and have the banks’ trust
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Sign off on lender’s selected counsel/attorney
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Negotiate high-level project economics / perform market analysis / “stress-test” the economic model
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Acquire credit committee approval from candidates for lead arranger banks
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Select 1 to 3 lead arrangers for project financing
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Negotiate and sign engagement letter and term sheet with selected lead arrangers
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Negotiate financing agreement and other ancillary documents
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Proceed with syndication (lead arrangers sell down their hold amounts)
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Acquire credit committee approval from bank syndicate
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Independent engineer, insurance agent, and other consultants sign off
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Finalize debt size using latest project data approved by the independent engineer, banks, borrower, and sponsors
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Acquire consents / opinions from contract counterparties
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Close the transaction
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Project Financing – Debt Service Coverage Ratio
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Debt Service Coverage Ratio (DSCR)
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DSCR =
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Banks want to stress test the project cash flows to have debt repayment certainty
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Is used to size the debt
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Usually a six-month or annual test during operation of the facility and entire term of the loan
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Is the project generating cash flows sufficient to repay debt?
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Usually requires dual test:
Funds from Operations
Debt Payment in the same period
– DSCR is usually 1.0 to 1.2 for P95/P99 stress test
– DSCR is usually 1.2 to 1.5 for P50 stress
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After closing and during operation of the project, if DSCR requirements are not met, the banks will
require the sponsor(s) to inject cash to meet DSCR tests
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Project Financing – Important Negotiating Points
As the borrower, you want to achieve:
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Balance between high debt size and low risk of debt repayment occurrences
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Terms that allow flexibility if market disruptions occur
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Hiring the best attorney money can buy – it is worth it
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Paying the lowest possible bank fees due at closing (but still market price)
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Lowest debt-service-coverage-ratio for debt sizing and equity injection thresholds
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Non-recourse treatment to sponsor(s)
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Use of more probable revenue projections (use P90 or P95 rather than P99 projections)
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Finding a bank group that wants the project & sponsor(s) to succeed
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Finding a bank group that has experience financing the technology/locations
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Increase in returns to the sponsors compared to no financing
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NedPower Mount Storm Wind Farm
Thank You
Questions?
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