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VAT is applicable on virtual programmes to delegates attending from the UK*. If participating from the EU, a valid VAT number is required to ensure VAT will not be charged under the reverse charge mechanism. VAT is not applicable to attendees from all other countries.
*For virtual courses ran through our Asia office, VAT may be applicable to HK and Singapore residents only. Find out more by contacting learning@euromoney.com

 

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Economic Analysis, Financing & Modelling for Renewable Energy

Understand project finance & energy renewable investments with this week-long course.
  • Economic and Financial Analysis of Renewable Energy is a digital class that will work through analysis of different renewable technologies including LCOE, pricing for renewable energy projects, resource analysis and financing. The course will be hands-on where participants take turns sharing the screen and demonstrate how you can construct renewable analysis and evaluate materials that incorporate a variety of economic and financing issues. The course put emphasis on practical techniques with current data and covers batteries as well as corporate PPA’s. The outline below is separated into five different on-line sessions.

    Objectives

    • Incorporate energy storage and battery analysis in analysis of renewable energy from an energy storage perspective and from an ancillary service point of view.

    • Learn practical tools to analyse renewable energy including efficient tools to work with wind, hydro and solar data; creating flexible scenario and sensitivity analysis to evaluate resource risk, construction risk, O&M risk and debt structuring; developing techniques to resolve circular references related to funding debt and sculpting debt without copy and paste macros.

    • Understand the implications of project finance features in the context of renewable energy (sculpting, debt funding, debt size, DSCR, DSRA, debt tenor, re-financing) on costs and equity returns from renewable energy.

    • Develop efficient ways to quickly compute the levelised electricity cost of different technologies using carrying charge factors and alternative financial models.

    • Work through resource assessments and compute probability of achieving different levels of production (P90, P75 etc.) using hands-on exercises for different types of projects in order to effectively review consulting studies.

    • Create flexible and transparent financial models of renewable energy from A-Z that incorporate resource risk, financing structure, tax treatments, alternative pricing policies and other factors.

    • Evaluate the economics of renewable energy (including ancillary services) in the context of merchant markets and review the structure of corporate PPA contracts.

  • This course will take place using Video Conferencing Technology.   To find out more, please contact learning@euromoney.com

    The course will take place over 5 days with 5 distinct parts.

    Each day will start at 9am BST (British Summer Time)

    The course will run continuously to 5pm each day, however there will be continuous breaks throughout the day, including a longer break in the middle.  




    SESSION 1: DEFINITION OF TERMS, RENEWABLE COST DRIVERS, LEVELIZED COST OF ELECTRICITY

    • Overview of Terms in Project Finance Terms in the Context of Renewable Energy through Review of Financial Models
    o Renewable Energy Terms
    o Economic Issues Associated with Renewable Energy
    o Alternative Contract Structures Relative to Conventional Plants
    o Grid Parity
    o Carrying Charge Factor
    o Feed-in Tariff Policy
    o Renewable Energy Pricing versus Multi-part Tariffs in Conventional Energy

    • Drivers of Value in Renewable Energy Projects
    o Resource Assessment, Yield and Capacity Factor
    o Development Cost and Timing
    o Electricity Pricing
    o Capital Costs
    o Operating and Maintenance Costs
    o Capital Recovery Factor, Taxes, Financing
    o Operating Costs, Maintenance Costs and Availability

    • Capital Intensity and Levelized Cost of Alternative Technologies
    o Definition of Capital Intensity and Cost of Capital
    o Four Factors that Drive Renewable LOCE
    o Capital Cost of Project
    o Capacity Factor or Yield of Project
    o Operation and Maintenance Expenses
    o The Carrying Charge Rate
    o Effect of Batteries and Storage on LCOE

    • Exercise on Computing Grid Parity With and Without Storage
    o Databases for Electricity Costs
    o General Discussion of Cost Trends in Wind, Solar, Coal, Natural Gas and Other Technologies
    o Review Cost Analysis for Various Types of Renewable and Non-Renewable Plants Including On-Shore and Off-Shore Wind, Solar PV, Solar Thermal, Geothermal, Wave Energy, Hydro and Biomass
    o Natural Gas Prices by Region and Over Time
    o Grid Parity with Different Capital Cost, Carrying Charge Rates and Natural Gas Prices

    SESSION 2: REVIEW OF COSTS, CAPACITY FACTORS, AND PRICING STRUCTURES FOR ALTERNATIVE RENEWABLE TECHNOLOGIES AND BUILD-UP OF PROJECT FINANCE MODEL

    • On-Shore Wind
    o Historic and Current Trends in Capital Cost
    o Review of Financial Data for Suppliers
    o Fixed and Variable O&M Cost
    o Capacity Factors and General Discussion of One-year versus Long-term P90, P75 etc.
    o General Contract Terms
    o Feed in Tariffs and PPA Agreements for On-Shore Wind
    • Off-Shore Wind
    o Capital Cost Data Base, Distance, Depth and Height
    o Balance of System Costs for Off-Shore versus On-Shore
    o Operating Costs and Availability Issues
    o Capacity Factors
    o Feed-in Tariffs
    • Solar Photo Voltaic
    o General Discussion of Technology
    o Demand and Supply and Changes in German Feed-in Tariffs
    o Review of Solar Companies and Financial Issues
    o Financial Performance of Manufacturers
    o Balance of System Costs and Inverter Costs
    o Performance Guarantees and Other Contract Terms
    o First Solar Case Study


    • Overview of Resource Assessment in Renewable Projects
    o Resource Assessment of Wind – working with hourly wind speeds, Weibull Distributions and Statistical Analysis (P90, P50 etc.)
    o Resource Assessment of Solar – Direct and Diffuse Radiation, Sunlight Angles and RetScreen.)
    o Resource Assessment of Geothermal and Hydro
    o Probability Distributions of Resources
    o Case Study on Resource Analysis in Loans

    • Modelling Resource Distributions of Solar Power
    o Data sources for Solar Irradiation
    o Computation of Production from Efficiency with Adjustments for Performance
    o Statistical and Seasonal Distribution of Production Data in Different Locations
    o Computation of P95, P90, P75 and P50 Statistics

    • Case Study on Interpretation of P75, P90, P95 and P99
    o Review of Credit Analysis for Wind Projects
    o Analysis of Resource Risk in Different Reports
    o P90/P50 for One Year and for Ten Years
    o Case Study on Detailed Calculation of Resource Distribution

    SESSION 3: OVERVIEW OF PROJECT FINANCE, COST OF CAPITAL AND PRICING CONTRACTS FOR RENEWABLE ENERGY

    • Measurement of Value and Risk using Project Finance
    o Debt Capacity and Credit Analysis of Different Transactions
    o Use of Equity IRR versus Project IRR
    o Relying on External Cash Infusions Rather than Internal Analysis
    o Financing for Different Types of Projects
    • Debt Capacity and Project Finance Terms
    o Effects of Debt Service Coverage Constraint versus Debt to Capital Constraint
    o Debt Service Coverage Ratio Definition and Targets
    o Debt Tenor, Alternative Repayment Structure, Average Life
    o Credit Spreads and Target Credit Ratings in Project Finance
    o Debt Service Reserve and Maintenance Reserve
    o Covenants, Cash Flow Sweeps and Subordinated Debt

    • Project Finance Valuation for Renewable Energy
    o Project IRR to Screen Projects
    o Equity IRR to Structure Projects and Minimum Required Equity IRR for Different Renewable Projects
    o Equity IRR Complexities from Re-Financing and Development Fees


    SESSION 4: VALUATION AND PROJECT FINANCE MODELLING FOR RENEWABLE PROJECTS


    • Model Complexities for Renewable Finance Projects – Accelerated Tax Depreciation, Investment Tax Credit, Production Tax Credits and Renewable Energy Pricing
    o Mechanics and Rational for Alternative Incentive Schemes
    o Benefits of Investment Schemes Relative to Feed-In Tariffs
    o Effects of Incentives on the Overall Cost and Require Feed-in Tariffs of Different Renewable Projects
    o Flips and Allocations of Cash Flow to Different Equity Investors – Interpretation of Risk and Return with Different Cash Flow Allocations
    o Computation of Project Value Assuming Different Sale Dates and Risk Adjusted Discount Rates from Buyer Perspective as Risk of Project Changes from Signing Contracts, Working Through Mechanical Issues and Demonstrating Cash Flows from Historic Record.
    o Incorporate Refinancing Assumptions in Financial Models through Adding Sources and Uses of Funds Analysis in Alternative Re-financing Periods and Evaluating Different Possible Features of Re-financing.


    • General Discussion of Risk in Renewable Energy Projects
    o Discussion of Differences in the Nature of Risks for On-Shore Wind (Wind Resource), Off-Shore Wind (Maintenance and Life Expectation), Solar (Small Risks become Big with High Leverage), Hydro (Capacity Factor and Merchant Price Risk), Wave (Refurbishment Timing), Geothermal (Development Probability).
    o Risk Matrix, Risk Classification and Risk Mitigation
    o Risk Evaluation Using Break-Even and Sensitivity Analysis
    o Risk Evaluation Using Scenario Analysis with Focus on the Manner in which Bankers Apply Downside Analysis
    o Measurement of Risk Using Structured Master Scenario Page in Excel Model with Options for Adding Sensitivity Analysis to Defined Scenarios
    o Risk Analysis Using Spider and Tornado Diagrams

    • Credit Analysis in Renewable Project Finance
    o Background on Probability of Default and Loss Given Default
    o Definition and Calculation of DSCR
    o Use of DSCR in Base (P50 Cases) and Downside (P90, P95 Cases) in Determining Debt Capacity
    o Application of LLCR and PLCR

    • Contract Structuring in Renewable Project Finance
    o Importance of EPC Contract in Different Projects (Off-Shore Wind and Hydro)
    o Performance Contracts in Solar Projects
    o Power Curve and Availability Guarantees in Solar and Wind Projects
    o O&M Contracts and Warranties
    o Insurance
    o Counterparty Risk in Different Projects


    SESSION 5: CORPORATE PPA’s, RE-FINANCING, BIOMASS AND GEOTHERMAL ISSUES

    • Alternative Pricing Structures
    o Feed-in Tariffs
    o Classic PPA’s with Government or Utility Off-taker
    o Corporate PPA’s for Large and Small Projects
    o Merchant Pricing and Partial Merchant Pricing
    o Revenue Swaps without Resource Risk

    • Corporate PPA Details
    o Forward Contracts and Prices from Exchanges
    o Contracts for Differences and Price Swaps
    o Basis Differentials from Location
    o Shaping Problem and Excess or Deficit Production
    o Length of Contracts
    o Tracking Accounts and Risks to Lenders

    • Re-Financing for Renewable Projects
    o Types of projects where re-financing is important – off-shore wind, wave energy, merchant hydro projects and geothermal
    o Effects of re-financing on equity IRR and difficulty of defining the equity IRR with short-debt duration
    o Structuring project finance models and analysis to measure the effect of re-financing on equity returns

    • Electricity Pricing Analysis in the Context of Renewable Energy
    o Overview of Electricity Prices and Electricity Pricing Designs Around the World
    o Relevance of Electricity Pricing to Renewable Analysis
    o Short-term and Long-term Marginal Cost for Pricing Analysis

    • Pricing Analysis for Biomass Projects
    o Evaluation of Project Finance Model for Biomass
    o Capital Cost, Heat Rates and Operating Costs of Biomass Projects
    o Examples of Biomass Projects
    o Tipping Fees and Construction of Price Curves from Local Supply and Demand Data

    • Development Costs in Renewable Projects
    o Development Time Frame and Costs in Wind and Solar Projects
    o Exploration Costs and Time Frame in Geothermal Projects
    o Fees and Compensation for Development and Treatment of Development Fees when Computing Equity IRR.
    o Probabilities of Proceeding Beyond Development

    • Value and Costs of Development and Research Stage
    o Value of Development Expenditures versus Construction Expenditure
    o Payment of Development Fees
    o Development Costs and Real Option
    o Valuation of Development as Real Option
    o Compensation for Development Costs

    • Modelling Exploration and Development Options – Geothermal Case
    o General Cost and Resource Parameters for Geothermal Projects
    o Review of Project Finance Model for Geothermal Project
    o Exploration and Development Cost, Probability Time Frame
    o Segregating Development Phases
    o Discount Rates for Different Stages
    o Computation of Expected Value


  • Our Tailored Learning Offering

    Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company’s exact requirements? If you’d like to do either of these, we can bring this course to your company’s office. You could even save up to 50% on the cost of sending delegates to a public course and dramatically increase your ROI.

    If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

    We produce learning solutions that are completely unique to your business. We’ll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.

  • We have a combined experience of over 60 years providing learning solutions to the world’s major organisations and are privileged to have contributed to their success. We view our clients as partners and focus on understanding the needs of each organisation we work with to tailor learning solutions to specific requirements.

    We are proud of our record of customer satisfaction. Here is why you should choose us to help you achieve your goals and accelerate your career:

    • Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
    • Track record – 10/10 of the world’s largest banks have chosen us as there training provider and we have delivered training across the largest banks and have trained over 25,000 professionals.
    • Knowledge – our 100+ strong team of industry specialist trainers are world leading financial leaders and commentators, ensuring our knowledge base is second to none.
    • Reliability – if we promise it, we deliver it. We have delivered over 25,000 events both in person and online, using simultaneous translation to delegates from over 99 countries.
    • Recognition – we are accredited by the British Accreditation Council and the CPD Certification Service. In an independent review by Feefo we scored 4.2/5 on service and 4.7/5 on Coursecheck
This course can be run as an In-house or Tailored Learning programme

Instructor

  • Ed Bodmer

    Biography

    Ed has created innovative forward pricing, productivity measurement and investment valuation software for consulting clients throughout the United States. He has taught energy economics and finance throughout the world, and formulated significant government policy and corporate strategy in the U.S. His consulting clients include investment banks, commercial banks, research institutions and government agencies on a wide variety of complex valuation and advisory matters. He has constructed a unique framework for electricity price forecasting and valuation using production cost modelling techniques combined with option price theory and Monte Carlo simulation. He is also an adjunct professor at leading University where he teaches courses in microeconomics. Along with his practical experience that covers a multitude of major advisory projects, he has taught specialised courses in financial modelling, electricity pricing, option valuation, mergers and acquisitions and contracting to investment banks, commercial banks, industrial corporations and electric utility companies. He was formerly Vice President at the First National Bank of Chicago where he directed analysis of energy loans and also created financial modelling techniques used in advisory projects. He has used the models in providing expert testimony on subjects ranging from capital structure to investments in multi-billion dollar nuclear plants to complex valuation of new investments. He received an MBA degree specialising in econometrics (with honours) from the University of Chicago and a BS degree in finance from the University of Illinois (with highest university honours). He has written many articles and is in the process of completing a textbook on valuation of electricity assets.