Transcript Cross Over Funding: Private Equity to Project Finance David Eva

Cross Over Funding:
Private Equity to Project Finance
David Eva
Manager Renewable Power Project Development
Quantum Leap Asset Management
Beyond the Public Markets: Alternative Investments in the Environmental Economy
April 20, 2005
Today’s Discussion



Need for clean, economical infrastructure
No ‘magic bullet’ solutions are expected
Many technologies in various stages being developed


‘Crossing-over’ into project finance requires major reduction in risk and
substantial increases in capital outlay
Investors are looking for more than ‘proven technologies’
Case Studies


Case study #1: Clean Energy Developments
Case study #2: Encelium Technologies
Quantum Leap



Overview of Quantum Leap
The Quantum Leap Company – Asset Management
Fund Overviews: Renewable Power and VC Funds
Market
Context
Cross-Over
Requirements
How to meet energy infrastructure needs in a
clean (yet economical) fashion?
Ontario electricity supply and demand outlook
40,000
30,000
25,000
Supply
Gap
20,000
15,000
Aggressive
Renewables
10,000
5,000
0
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
Generation Capacity (MW)
35,000
Existing
Generation
Capacity
No ‘magic bullet’ – it will likely take a portfolio
approach to meeting our growing power needs
1500
Surprise
Geothermal
Solar
1000
Exajoules
New
Biomass
Wind
Nuclear
Hydro
1500
Gas
Oil & NGL
Coal
Traditional
Biomass
0
1860
1880
1900
1920
1940
1960
1980
SHELL: 2003
2000
2020
2040
2060
Many technologies are being developed to
address this opportunity
Fundamental
Research
Generation
and Fuels
Supply
• Hydrogen
(Fuel Cells,
and IC)
• Fly Wheels
• Super
Capacitors
Prototype
Development
Product
Demonstration
Initial Mass
Production/
Deployment
NON-EXHAUSTIVE
“Proven”
Small Hydro
Solar PV
Small Wind
Geothermal
• Tidal Power
• Clean Coal
MSW and Biomass
Large Scale
Wind
District Cooling
Demand
Management/
Reduction
Geoexchange
Solar Thermal
Smart Meters
Today’s Discussion



Need for clean, economical infrastructure
No ‘magic bullet’ solutions are expected
Many technologies in various stages being developed


‘Crossing-over’ into project finance requires major reduction in risk and
substantial increases in capital outlay
Investors are looking for more than ‘proven technologies’
Case Studies


Case study #1: Clean Energy Developments
Case study #2: Encelium Technologies
Quantum Leap



Overview of Quantum Leap
The Quantum Leap Company – Asset Management
Fund Overviews: Renewable Power and VC Funds
Market
Context
Cross-Over
Requirements
“Crossing over” into project finance requires
reductions in risk and large capital outlays
Fundamental
Research
Prototype
Development
Product
Demonstration
Initial Mass
Production/
Deployment
Typical
Governments / Foundations / Industry
sources
Angel Investors
of financing
“Proven”
Traditional Project Finance
(Debt & Equity)
Venture Capital
“Cross-over”
Returns
20%+
Equity 12-20%; Debt 6-11%
Risk
High
Moderate/Low
Capital
Tens of
millions
Hundreds of millions to billions
Being a “proven technology” isn’t enough for
project finance investors
Investors Needs
1
Examples

100 operating wind turbines
of a given model before able
to secure bank financing
Quantifiable
and
manageable
risks +

2+ years of hydrology data
plus 20 year correlation
Long-term pricing on outputs
Stable Regulatory
Regime and Gov’t
Policy

Proven
Technologies
+
2
3


Status of 1000 MW+ of wind
farm contracts if WPPI not
reinstated?
US wind industry: roller
coaster PTC
+
4
Solid
development
partners

Developers must be professionals
able to anticipate project
needs/requirements
With all these
requirements, how
can emerging
technologies
achieve mass
deployment and
access capital?
Today’s Discussion



Need for clean, economical infrastructure
No ‘magic bullet’ solutions are expected
Many technologies in various stages being developed


‘Crossing-over’ into project finance requires major reduction in risk and
substantial increases in capital outlay
Investors are looking for more than ‘proven technologies’
Case Studies


Case study #1: Clean Energy Developments
Case study #2: Encelium Technologies
Quantum Leap



Overview of Quantum Leap
The Quantum Leap Company – Asset Management
Fund Overviews: Renewable Power and VC Funds
Market
Context
Cross-Over
Requirements
Example #1: Clean Energy Developments
•
Provides high efficient heating/cooling/hot water systems to new residential
developments. Combines benefits of geoexchange with solar-thermal hot water
systems. Payback to new home owners of 3-5 years.
•
Approach and Learning's
– 650 home development will require approximately $15 million in financing for
geoexchange systems
– Had to prove technology was mature (specific team had several operating
systems)
– Needed to assess several models and approach multiple parties (utilities,
builders, banks – mortgages, equipment financing – hot water heaters)
– Over time, expect model to evolve: early stage (mortgages) to securitization
of cash flows (heating charge / paid from savings / rental payments)
Example #2: Encelium Technologies
The Encelium Energy Control System is a lighting technology that:
• Reduces lighting related energy costs in commercial and industrial facilities by
50% to 75%
•
Improves lighting quality and workplace ergonomics
•
Offers next generation of lighting efficiency hardware and software, providing
facilities managers with significant electricity cost savings
•
2 to 4 year simple payback for system users
•
Approach and Learning's:
– Initially: Customers buy outright
– Over time: for larger installations, developing a paid-from-savings model
(whereby customer not out of pocket for initial capital outlay)
Today’s Discussion



Need for clean, economical infrastructure
No ‘magic bullet’ solutions are expected
Many technologies in various stages being developed


‘Crossing-over’ into project finance requires major reduction in risk and
substantial increases in capital outlay
Investors are looking for more than ‘proven technologies’
Case Studies


Case study #1: Clean Energy Developments
Case study #2: Encelium Technologies
Quantum Leap



Overview of Quantum Leap
The Quantum Leap Company – Asset Management
Fund Overviews: Renewable Power and VC Funds
Market
Context
Cross-Over
Requirements
Quantum Leap – Business Overview
A Toronto based asset
management and advisory
firm focused on building
value in the areas of Energy
and Efficiency
Asset Management
• Venture Capital
• Project Finance
Venture Services
Principal Business
Quantum Leap
– Private Equity Venture Portfolio
Technology applications
Portfolio
Companies
Energy
Conversion
Power
Control
Electronics
Energy
Convergence
1. Adventus
Remediation
2. Eco Waste
]
3. Encelium
4. Enerworks
5. Fuel Cell
Technologies
]
]
]
6. Oxegen
7. Rtica
8. RuggedCom
9. MeterCo
10. Ventus Wind
11. Clean Energy
Developments
]
]
]
]
]
]
]
Emissions
Reduction
Water
Purification
]
]
]
]
]
]
]
]
]
]
]
]
Remediation
and
Recycling
]
]
]
Quantum Leap
– Project Finance and Power Development
Investee
Sector
Province
Observatory Inlet Development Corp.
Hydro
BC
Glace Bay Lingan Wind Power Ltd.
Wind
NS
Springhill Riverhurst Wind Power Ltd.
Wind
NS
Spuzzum Creek Power Corp.
Hydro
BC
Ventus Energy Inc.
Wind
ON
SkyPower Corp.
Wind
ON
Vector Wind Energy Inc.
Wind
ON
Schneider Power Inc.
Wind
ON
WindSwept Power Inc.
Wind
SK
Cape Breton Power Inc.
Wind
NS
Thank you !
www.quantumleapco.com