Three things are needed to qualify a project
for this form of financing:
1)
The project must require financing in the
amount of at least $10,000,000.
2)
The project must be able to generate a cash
stream sufficient to amortize the amount financed over the term of the
loan.
3)
A beneficiary of the project (e.g. an off-take
purchaser) with an investment-grade credit rating must give an
assurance for the required portion of the cash stream from the
project.
Traditional project financing requires proven technologies,
collateralized assets, significant equity infusions, and a developer
with an acceptable credit. Few developers using a design, build, own,
and operate model can meet the equity and credit requirements for
traditional project financing, even for economically viable projects.
Due to capital and credit requirements established by traditional
lenders, developers that do qualify for financing are often limited to
fewer projects than they are capable of doing, especially with
emerging technologies.
This financing model is contract and future cash flow-driven. By
leveraging the operational needs of an off-take purchaser with the
financing needs of a project developer, we are able to provide up to
100% financing and ensure viable projects get done. Using our model,
a project developer can fund projects by obtaining an assurance from
an off-take purchaser with an investment-grade credit rating. The
assurance is given based upon remedies, incentives and other
contractual protections offered by the developer to the off-take
purchaser. The benefits of this association are realized by both
parties. The developer gets a funded project, and the provider of the
assurance gets added value from the project. Additionally, the
developer has not limited its capacity to do additional projects, and
the provider of the assurance has improved its position in the project
by only allowing the use of its investment-grade credit rating; not by
providing cash. This model was created specifically to finance new
technologies.
The Developer has room to
negotiate incentives with the Off-taker and still end up with
significantly more equity or value than would be retained with
Traditional Equity/Debt Project Financing.
Ø
The Developer can now finance up to 100% of the costs of its project,
limited only by the project’s ability to cash flow the debt
amortization and operating expenses.
Ø
Since each project stands alone to qualify for financing, the
Developer is no longer limited by financing to the number of projects
that can be developed in parallel. The number of projects is not
limited by financing
Ø
Technologies that are not yet proven are supported.
Ø
Rather than the size of the project being squeezed down to qualify for
financing, demand-driven project financing facilitates the broadening
of the scope of the project to fit the capacity or out-sourcing of
services needed by the Off-taker while limiting the chance of building
a project with unintended overcapacity. In other words, the size of
the project can be larger.
Ø Without the need for equity financing, local ownership is now possible
by the Developer/Operator or the feedstock suppliers; local ownership
promotes rural economic development by the project by giving profits a
chance to stay in the local community.
Ø
Uncertainty about the project is removed because there is no financing
contingency.
Ø
The “Design, Build, Own & Operate” model is supported.
Ø
The potential added value that can be created is dramatic.
With no cash outlay, other than the purchase of product,
there is an opportunity to add significant shareholder value.
Ø
Outsourcing of a non-core internal project is possible.
Ø
The product can be acquired as a monthly cost under a services
agreement rather than as a capital asset with all costs up front.
Ø
Incentives received from the developer can give market advantage over
competitors.
Ø
Supply can be locked in at an acceptable price.
Ø
Uncertainty about the project is removed because there is no financing
contingency.
Ø The potential added value that can be created and shared with the
Off-taker is dramatic.
The only limit is that the amount to be
financed be greater than $10 million dollars. Otherwise, funds are
readily available from a pool of available capital from our
institutional investor base is virtually unlimited and can be used to
fund almost any size project that meets our requirements for
financing.
Ø
The project must be able to cash flow its debt amortization and
operating expenses.
Ø
Contractual assurance or capacity payment from an investment-grade
credit (BBB- or better) entity for the debt amortization of the
project will be necessary. This is usually received from the Off-take
purchaser but can be from any beneficiary of the project.
Industries
where this financing is known to be applicable:
Ø
Power Generation (Utilities, Electric Service Companies, Wind
Power, Solar Power, Waste to Energy)
Ø
Water supply facilities
Ø
Waste management
Ø
Oil and natural gas production and refining/processing
Ø
Agribusiness; ethanol and bio-diesel
Ø
Manufacturing
Ø
Service contracts
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