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Published byMelvin Jacobs Modified over 9 years ago
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May 30, 2005 Investing in Canadian Power Markets A Sponsor’s Perspective on Debt Financing
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2 1Who is Macquarie? 2Debt Financing Options for Power Projects in Canada 3Conclusions Overview
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3 Who is Macquarie?
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4 Macquarie is an Australian-based global investment bank with a specialist focus on infrastructure Key statistics Market capitalisation$10.0bn + Total assets$85.0bn + Direct infrastructure equity under management$25.0bn + Credit RatingA(S&P) / A2 (Moody’s) Employees> 6,500 Focus on Infrastructure Macquarie has three main focuses in respect of infrastructure: Infrastructure Funds Management – Manages over $25 billion of infrastructure equity worldwide Principal – Invests on its own advice Advisor – One of the largest global advisory teams dedicated to infrastructure
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5 Macquarie - Managed Infrastructure in North America
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6 Macquarie Funds in Canada Macquarie manages two infrastructure funds in Canada Macquarie Essential Assets Partnership (“MEAP”) North America’s first unlisted infrastructure fund Targets regulated utility assets and investments with similar characteristics AltaLink LP (15% stake) $644M rate base - North America’s first independent electricity transmission network Michigan Electric Transmission Company LLC (42.4%) US$360M rate base – 5,400 miles of transmission lines serving southern Michigan Duke Point Power Limited Partnership (60%) Constructing a 296 MW combined cycle power plant on Vancouver Island Total commitments of $460 million finalised in May 2004 Macquarie Power Income Fund (“MPT”) Focused on operating power generation assets in North America Listed on the Toronto Stock Exchange as of April 30, 2004 (trading ticker MPT) Seed asset is the 156 MW Cardinal Power Station Market capitalization of ~ $235 million
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7 Debt Financing Options for Power Projects in Canada
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8 Historical Non-Utility Investment Until recently, there have been low levels of non-utility investment in (and financing of) power projects in Canada Limited number of new facilities have been built – uncertainty around power markets in deregulated (and partially-deregulated) markets Larger merchant (or partial) merchant facilities have been financed on balance sheet Most transactions have been the result of partnerships with, or power purchase agreements tendered by, incumbent government-owned utilities Some projects have been financed on the strength of contracts from industrial offtakers, power marketers or transmission authorities (transmission support services) As a result of this low activity, a number of Canadian lenders scaled down their power financing presence – a number of U.S. and international players withdrew YearTransactionDescription 2005Pingston Power (BC): 45 MW hydroelectric$70M capital markets 2004Lake Superior Power (ON): 110 MW cogeneration$77M capital markets 2003Arrow Lakes (BC): 185 MW hydroelectric station$100M capital markets 2002Cory (SK): 228 MW cogeneration$244M bank and capital markets 2002Brighton Beach (ON): 580 MW combined cycle$403M bank and institutional 2001Muskeg River (AB): 170 MW cogeneration$159M bank and institutional 2001Scotford (AB): 150 MW cogeneration$121M bank and institutional 1999Joffre (AB): 480 MW cogeneration$286M bank and institutional 1999Island (BC): 260 MW combined cycle$202M bank and capital markets
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9 Resurgence of Non-Utility Investment Activity in the power financing sector has increased significantly in the last year Large new “renewables” commitments in Ontario and Quebec – over 2,000 MW Ontario completed a tender for 2,500 MW of new power generation RFP’s are intended to be “financing friendly” and attract private sector investment Scale and implementation of Ontario’s programs has attracted the attention of both Canadian and international lenders Canadian lenders have quickly ramped up their activities in the power sector European and Japanese lenders have begun to focus on opportunities in Canada Financing alternatives for Canadian projects has increased significantly in the last year alone – additional funders and structures Debt financing options in the Canadian marketplace include “True” Private placements – typically with Canadian life companies “Public-style” private placements – broadly-marketed Canadian and European lenders
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10 Review of Financing Options Different financing options are available at different stages of a power project’s life cycle TypeBid (Committed)ConstructionTerm Bank Financing Limited number of Canadian banks capable of lead underwriting committed, non-recourse financing European banks capable of leading smaller transactions Bank financing terms will typically require broad syndication prior to commercial operations For Canadian banks, significantly reduced availability of financing beyond 5-7 years Institutional Debt Financing Potential to pre-arrange committed financing with specified institutions Capacity constraints Larger transactions may required accessing US$ market “Make-whole” payments required to be paid prior to refinancing a project Reduced capacity constraints Public Markets Debt Financing Not available Limited market pre-COD without completion guarantees Significant capacity Additional disclosure requirements
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11 Conclusions
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12 Conclusions Range of options (and depth of market) for debt financing has increased substantially over the last year Increased focus by Canadian lenders Introduction of European lenders brings increased options and significant experience with renewable energy (wind) Terms and pricing can be materially different between financing options Important to have long-term financing plan thought through prior to entering into debt financing arrangements “Different horses for different (race) courses” – there is no one best solution
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