Four types of offshore wind turbine foundation

There are four types of offshore wind turbine foundation and they can be illustrated in the following figure:

Source: English Summary EIA Gemini windfarms

Why use a yield co to raise capital for solar projects?

This blog post extracts some interesting parts related to the benefits and challenges of using a yield co to raise capital for solar projects based on an article titled "New Horizons In Solar Financing" published on Law360 on 15 May 2014 by Freedman and McFayden - partners at Shearman and Sterling LLP. They noted that alongside public debt markets and crowdfunding, yield co can be helpful in financing solar projects.

What is a yield co?

Historically, developers raised equity at a parent level, requiring investors to optimally value an entire pipeline of projects in various stages of development and even (in some cases) non-development businesses. Recently, developers have shown growing interest in an alternative.

A yield co is a special purpose vehicle created to hold a portfolio of de-risked operating assets and monetize a portion of its value through the sale of equity on a public exchange.

The yield co distributes some or all of the projects’ revenues as dividends. The parent company may use the cash raised from the initial sale of shares and from ongoing dividends to develop additional assets to sell to the yield co or for general corporate purposes.

Any cash retained by the yield co may be used for operations and maintenance and to acquire additional projects.

Projects may be acquired from the parent or an affiliate, which may also be involved in managing the company, or from third parties.

The company may be established around a portfolio of identified projects, or it may be established as a blind pool of capital, with management exercising discretion to acquire projects opportunistically.

Benefits

First, in a yield co, the tax attributes of renewable generation can offset the tax obligations of other projects in the portfolio. In order for the yield co to utilize all of its tax benefits, some of the projects in the portfolio must have net profits resulting in tax liabilities, either because they are conventional generation assets or because they are older renewables projects that have already exhausted their tax benefits. The yield co’s ability to shelter its own tax obligations eliminates the need to access a potentially constrained pool of tax equity investors.

Second, a yield co may allow a parent to finance its corporate operations (and potentially its further project development activities) more cheaply than selling equity at the corporate level, if investors have not appropriately valued the assets’ potential as part of the parent or if investors will pay a premium for the high, stable yields of operating assets in isolation.

Third, selling assets into a yield co may provide certain tax benefits — the parent company can realize the tax value of net operating losses from retained operations immediately rather than over the several years of project cash flows; and the yield co’s investors enjoy the benefits of tax-free distributions (as return of basis — for as long as the yield co does not generate earnings and profits) and a tax shield resulting from incremental depreciation.

Challenges

Several challenges must be addressed in order to effectively use a yield co to monetize solar projects.

First, the yield co must have a large enough portfolio to justify the expense of a public offering.

Second, it must continue to acquire new projects to maintain its favorable tax position and to generate the growth that investors seek.

Third, affiliated entities (such as developer-managers) may incur high costs to protect against potential conflicts of interest when they want to sell assets to the yield co, a risk highlighted by ratings agency reports in connection with the NRG Yield offering.

Fourth, the portfolio must be carefully selected and marketed to match the risk appetite of the target investors, and the market’s lack of familiarity with either the technology or the applicable regulatory regimes can lead to underpriced or failed offerings. For example, in 2013 ,when AES Corp. withdrew its IPO of Silver Ridge Power, a solar yield co, reports attributed the offering’s failure to investor uncertainty about the applicable international regulatory regimes.


http://www.shearman.com/~/media/Files/NewsInsights/Publications/2014/05/New-Horizons-In-Solar-Financing-Freedman-McFadyen-Lamb-051614.pdf

PV market as of May 2014

This is what PV Crystalox Solar PLC commented about the PV market as of May 2014: 

PV market conditions remain challenging with pressure on pricing resuming in recent weeks  following the modest recovery seen at the beginning of the year and during the latter part of 2013.  

Weaker internal demand in China has renewed the global oversupply of wafers and driven down pricing, reversing most of the gains seen earlier in the year.  

Pricing remains below industry production costs as polysilicon, the key raw material, has maintained most of this year's increase and currently trades well above its price at the end of 2013.

What is New Markets Tax Credit (NMTC) Program?

About The New Markets Tax Credit Program (NMTC) 

NMTC is a federal community development program designed to stimulate the flow of investment capital in underserved communities. 

Taxpayers that make qualified equity investments in designated Community Development Entities (CDEs) receive a tax credit that is claimed over a multi-year credit allowance period. 

Substantially all of the qualified equity investment must in turn be used by the CDE to provide investments and job creation in low-income communities.

How to Combine Data from Multiple Rows into One Cell

This article might help:  
http://exceltactics.com/combine-data-multiple-rows-one-cell/ 
Useful formulas:

=IF(A2=A1,C1&", "&B2,B2) 

=IF(A2<>A3,"Last","") 

Spanish Wind Energy

In 2013 Spain became the only country in the world where wind energy is the leading electricity supplier over a whole year ...

The Spanish electricity system operator, Red Eléctrica de España (REE), reported that wind powered electricity met 20.9% of the country’s power demand, followed by nuclear at 20.8%.

Wind produced 54,478 Gigawatt hours of electricity in 2013 in Spain, a 13.2% increase compared to 2012. Nuclear meanwhile produced 2,377 Gigawatt hours more than wind last year, but its contribution to the power demand was lower because it consumes more electricity than wind farms to run its facilities, the Spanish Wind Energy Association (AEE) explained.

... but wind energy is facing huge regulatory hurdles ...

In January 2012 the newly-elected government introduced a moratorium on all new wind power installations in Spain and since then only the projects that were already underway have been completed.

Then a new regulation came into force which implies that all wind farms in Spain built before 2005 will not receive tariffs. This makes it very difficult for financing – your income estimates will change because of this. Some companies could fail.

The regulation works against investor confidence. When there is a framework that ensures good conditions, investments happen. When this is changed by the government, investors don’t know what is happening. The government has demonstrated that it doesn’t trust wind; that it is working in another direction. It plans to promote fossil fuels.

... and the reason is the Government thinks renewables created the electricity system deficit problem which the EU has told it to solve

In Spain the electricity system has a deficit of €30 billion – this is a big problem for the government and the EU has told the government to solve it. The government thinks this deficit is because renewables are receiving tariffs.

But the electricity market in Spain is not efficient. For example, nuclear power costs €17 per Megawatt hour but it receives €50/MWh from the government. At a time when we need to reduce the deficit we could modify this, but the government is only interested in targeting renewables.

Based on interview with Jaume Margarit Roset, Director General of the association of renewable energies in Spain, APPA

Key points of UK Budget 2014 that could potentially affect my personal finance

From April 2014, point at which people start paying income tax will be raised to £10,000. From April 2015, workers will be allowed to earn up to £10,500 before being liable for income tax.

From July 2014, investors will be able to put up to £15,000 into New Individual Savings Accounts (NISAs), either as cash or shares. Currently savers can only invest £5,760 a year into a cash ISA and £11,520 a year in a shares ISA. Cash and shares ISAs are to be merged into single New Individual Savings Accounts (NISAs). NISAs will "reduce confusion on the differing amounts which could be saved in cash and stocks and shares, and more importantly give people more flexibility to earn tax-free interest", said Graham Beale, the chief executive of Nationwide.

From June 2014, savers will be allowed to hold up to £40,000 in Premium Bonds, up from £30,000 previously. In 2015, the limit will be raised further to £50,000.

The amount of income that one half of a married couple can transfer to their partner will be set at £1,050 for 2015-16.

GDP forecast to grow by 2.7% in 2014 and 2.3% next year, then by 2.6% in 2016 and 2017 and by 2.5% in 2018.

From April 2014, threshold for 40% income tax to rise from £41,450 to £41,865 and by a further 1% to £42,285 in 2015.

http://www.bbc.co.uk/news/uk-politics-26626280

More likely that offshore wind turbine will have a maximum capacity of 15MW by 2020

As of 2014, the maximum capacity of an offshore wind turbine is 7.5MW (Enercon E-126 7.5MW).

In my view, the finalisation of the 4-year Azimut project in Spain which aims at enabling the development of a 15 MW offshore wind turbine by 2010 has brought good news to the offshore wind energy market. 

Below is an excerpt of the press release by Gamesa.

Ending of the Azimut project that will enable the development of a 15 MW offshore wind turbine in 2020 

• The Azimut Project has finalized successfully with important progress in technological advances, new materials, simulation tools and a web application.
• Eleven Spanish companies and 22 research centers, coordinated by Gamesa, have joined forces on the Azimut Project to enable the development of world’s largest capacity wind turbine by 2020.

Barcelona, 12 March 2014. The Azimut project, which aims to enable the development of world’s largest capacity wind turbine by 2020, has successfully completed their applied research activities undertaken during the last 4 years. The project has reached the objective of generating knowledge as well as key technologies that will enable the development of a turbine with unit capacity of 15 MW. This turbine will be capable of overcoming the technical and financial hurdles currently limiting the rollout of offshore wind energy, such as availability and cost of energy.

The initiative brings together 11 companies, coordinated by Gamesa, which include Acciona Windpower, Alstom Wind, Acciona Energía, Iberdrola Renovables, Ingeteam, Imatia, Ingeciber, Digsilent Iberica, Técnicas Reunidas, and Tecnitest.

With a 30.3 million euro budget spanning its 4-year duration, this project, under the CENIT program of the CDTI, depending of the Spanish Ministry of Economy, has allowed Spanish industry to fetch technology leadership positions in wind energy generation in marine environments, and helping European countries to comply with the target set by the European Commission of 27% of energy consumption from renewable sources by 2030.

Upon its completion in December 2013, the different companies have obtained important results in key areas mainly developing new technologies, testing process and models, and creating a new web application.

http://www.noodls.com/view/9B32344A1A37F87A8B263039C48FC12FDDA026BF?1504xxx1394633926

Mini-bonds: Overview and examples

Mini-bonds and retail bonds

Similarity

• They are not covered by the Financial Services Compensation Scheme and considered as risky investments. (Hargreaves Lansdown investment expert Adrian Lowcock)
• They are smaller in size compared with corporate bonds or government bonds and are issued by smaller firms.

Differences

• Mini-bonds are not listed on the stock exchange, or on any other platform, while retail bonds are listed on the London Stock Exchange’s Order Book for Retail Bonds.
• Mini-bonds need to be held until expiry some years later while retail bonds on the ORB can be bought and sold during normal market hours, allowing investors the opportunity to both value and sell the bond.

These are also the risks associated with investing in mini-bonds and, in exchange, the mini-bond yield is higher than retail bonds.

A few examples of mini-bonds in the UK renewable energy sector

October 2010 Ecotricity

Ecotricity, a UK-based provider of electricity through renewable energy, raised £10 million through the launch of “EcoBonds” to its 40,000 business customers including body shops, EMI and co-operative banks, small and medium sized businesses, organic food retailers, local authorities, and schools. These are four year bonds with an interest rate of 7% (Ecotricity customers qualify for an improved rate of 7.5%). Minimum investment was set at $500 to encourage small investors to participate. The £10 million raised will fund Ecotricity’s equity investment in 12 wind farms then in development in the UK. The total aggregate projects costs will be £25-£30 million. Ecotricity will fund the remainder through debt financing from the banks. The Ecobond funding will also go toward initial development of solar projects and research and development into tidal energy.

September 2013 A Shade Greener  

A similar offering came from UK-based A Shade Greener which is aiming to raise £10m from small investors (min. £1000) by offering 3 year retail bonds at 6% annual return, but with an interesting twist – all the interest paid upfront as a lump sum. The company will use the proceeds to install panels at no cost to the householder and collects the feed-in tariff payments. As with the CBD bond, this must be held for three years until maturity.

October 2013 Good Energy Group plc

Good Energy Group plc set out to raise £5 million through a retail bond offering to finance investment in solar and wind energy generation. Within three weeks, Good Energy easily met their target, closing the book at £15m three weeks ahead of schedule. The bond offers investors a coupon of 7.25% per annum, paid every half-year. It has an initial term of four years and investments can be executed in multiples of £500 with no upper limit.

December 2013 Secured Energy Bond

Australia-based CBD Energy offered a “Secured Energy Bond” to raise finance to install solar panels for chosen UK businesses at no cost to the business but with income derived from Feed-In Tariffs. The bond is secured against the assets of the company and also has a corporate guarantee from the parent company. It will pay an annual coupon of 6.5%. The minimum investment into the bond is £2,000 for a 3 year fixed term and as the bond is non-transferable, it has to be held to maturity in late 2016.

Three damaging proposals for the German solar power sector

As of March 2014, German Energy Minister Sigmar Gabriel was planning 2 damaging policies for the local solar power sector (in my view): 

• Reducing solar subsidies available under the Renewable Energy Act (EEG) 
• Cutting the annual installation target for 2013 to 2.5 GW from 3.5 GW
• Much worse, introducing charges of about Eur0.044 per kWh on consumers that generate solar for their own use rather than sell it directly back to the grid.

The government will vote on the reform on April 8 and if approved, the proposals will be adopted as new legislation on August 1.

Source: BSW-Solar press release & Clean Energy Pipeline