Women in Energy Conference Mariame McIntosh Robinson FINANCING YOUR ENERGY PROJECT

Session Objectives Highlight main sources of capital for Jamaican entrepreneurs Share best practices on how to raise capital Discuss risks and pitfalls to avoid 2

Lifecycle of a business: Entrepreneur’s viewpoint Concept formation Business plan Capital raise Build team Development & planning Start operations Finance growth Exit

Multiple sources of capital for private companies 4 SourceDescriptionProsConsEasy in JA? Personal funds Savings, credit cards Easy access Increases personal liability and risk profile Family/ friends Cash from relatives, friends Easy access with favorable terms Little governance May damage personal relationships High Net Worth Individuals Cash from individuals with net worth > US$1M Larger check size Access without track record Onerous terms Bank loan Loan from commercial or development bank Lower cost financing than equity Lengthy process Difficult without track record Trade partner Supplier financing Better cash flow management in early period May negatively affect negotiations in longer- term Venture capital Cash from VC fund for equity Business growth assistance Less cash flow impact early on Dilution; onerous terms Private equity Cash from PE fund for equity Business growth assistance Less cash flow impact early on Dilution; onerous terms

Investors are typically looking for… 1.Sources and uses of funds Costs and potential sources of capital 1.Clear, well-developed business plan Must include reasons for why this business will “win” vs. others Financial projections/ valuation 1 1.Risks and risk mitigating strategies 2 1.Strong management team 3 1.Management “skin in the game” 4 5

The negotiations to raise capital EntrepreneurInvestor Goal: finance business where risk matches reward Considerations: valuation; protective shareholder rights and provisions; security/ capital preservation; exit Goal: raise funds before business is cash flow positive without giving away too much of business Considerations: valuation, security, how much equity to give up vs. Understanding what capital providers/investors are looking for can help entrepreneurs be more successful in negotiations to raise capital

Key business terms for consideration Confidentiality: do you have an NDA? At what point does it make sense to send? Valuation: What is your business valued at? What methods will you use? Security: are you looking for debt or equity? What instrument? Covenants: how restrictive will the negative covenants be? Governance: who will be on your Board of Directors? How will decisions get made? Project costs: what will the use of funds be? Reporting/information requirements: what are reporting/ information requirements?

How to get a business loan In order to access a business loan you should have the following information: Cash flow projections Bank statements In-house financials Business plan Collateral Terms of the loan Commitment fees Interest rates Possibility of a moratorium 8

Process flow for a business loan

Pitfalls to avoid when raising capital Can result in NO capital raised Too much focus on idea and little on mgmt Having too many lenders or investors Poor cash flow mgmt Half baked business plan Failing to get proper legal agreements Not asking for enough money