MODULE Code:

CENG0090 Financing of Renewable Resource Projects

LEVEL:

Postgraduate, Undergraduate Masters

This paper is suitable for candidates who attended classes for these modules in the following academic year(s):

Year

2024/25

Suitable for all candidates

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CENG0090

Financing of Renewable Resource Projects

Report (50 % of the module).

To be submitted via Moodle before 09:00 on the 26th  of March 2025.

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Investment  in  renewable  assets  requires  the  large-scale  deployment  of  capital, amounting to potentially high risks for the project sponsors. To mitigate these risks, investors   undertake    detailed    due   diligence    to   formulate    a    comprehensive understanding of a project, before making a Final Investment Decision (FID).

You have identified a renewable asset that might be a viable investment opportunity for your company, a project sponsor. You are tasked with providing a final investment proposal for this renewable asset. Based on the information provided below, and your own independent research, you need to critically evaluate the proposal and give a robust explanation as to whether your company should consider investing in the renewable asset.

Your proposal report should incorporate the following considerations to provide a comprehensive project evaluation:

An introduction to the project.

An investment proposal. The  proposal  will  include  your  chosen  investment methodology and propose key financing methods and structures to be used. This will cover aspects such as the key parties involved in the deal, who will finance the deal and how this financing will occur.

Due diligence. Evaluation and discussion of the  proposed  project  characteristics including (but not limited to) technical characteristics, geographic factors, key risks, ESG considerations, and relevant policy considerations to undertake a detailed due diligence for the formulation of an overall assessment. You should critically assess these characteristics, evaluating their impact on the viability of the proposal from an investor standpoint; how might they affect the outcome and are there any mitigations that could be implemented to improve the attractiveness of the proposal from an investor perspective?

A concluding final investment decision.

Additional details

The asset details covering the revenue stream, country of development, and some of the key site details are indicated on the next page, which provides you with a unique problem to discuss. You should evidence any claims  made,  including  the  use  of examples to justify your conclusions.

100 Marks

The project

Basic financial structure for all projects is:

•    Debt to Equity Ratio: 70:30

•    Loan Term: 15 years.

•    Interest Rate Structure:

o Base Rate: Country-specific (e.g., SONIA, EURIBOR)

o Margin: +200 bps (2%)

o Total Interest Rate: Base Rate + Margin

Assets are listed below; your asset corresponds to your value of X:

0 - 2: Solar PV (50 MW): Former agricultural land that is now redundant with previous existing  infrastructure  such  as  access  roads  still  in  good  condition.  There  is  a  grid connection point 3 km away - the local grid is relatively well stabilised by a battery network and has been recently upgraded to increase its capacity. The site has flat topography with no shading issues and excellent solar irradiance ratings. Some seasonal groundwater flooding in 20 % of the site requires elevated mounting systems. The local community is supportive due to proposed sheep grazing between panels, though visual screening needed for nearby heritage site (1 km away). An archaeological survey completed with no findings.

The revenue stream setup is a fixed price PPA over a 25 year lifetime.

3 - 5: Offshore Wind (500 MW): Seabed location 25 km from shore with excellent wind resource. Port facilities require a £ 50 m upgrade for construction and O&M activities. The grid connection requires a new 40 km subsea cable to shore, then a further 15 km onshore to  the  substation.   Marine  mammal  migration  routes  require  seasonal  construction restrictions. Commercial fishing interests are active in the area, but a compensation framework has been agreed. There is a moderate to severe risk of extreme weather events in the area requiring the implementation of increased shoring (10% increased CAPEX over traditional shoring cost) and the use of high shear resistance blades, 25% higher CAPEX than traditional blades.

The revenue stream is a hybrid of a fixed PPA for 15 years, followed by 10 years at market rate with a price floor guarantee at 70 % of the original PPA.

6 - 9: Onshore Wind (100 MW): Upland site with exceptional wind resource across undulating terrain. A grid connection is available 8 km away but requires an upgrade to handle  the  proposed  increased  load.  Access  roads  need  significant  improvement, including two new bridges. A protected bird species nesting nearby requires ongoing monitoring. The local community has provided a mixed response to the proposal; farmers are supportive, but there is opposition from hiking groups due to a popular trail that will require re-routing. Ground conditions are mostly competent rock, with a good bearing capacity. The local grid is frequently imbalanced due to large quantities of rooftop solar in the area.

The revenue stream is a government backed contract for difference over the 25 year lifetime, with a floor and ceiling price incorporated.

The countries under consideration are listed below; your country corresponds to your value of YY:

1 - 20: United Kingdom

21- 40: Australia

41 - 60: Norway

61 - 80: China

81 - 99 (and 00): Spain

If your combination of values gives you Solar PV in Norway, please choose Australia instead.

At the beginning of your coursework, write your student number and the corresponding project and country.

Marks will be awarded in the following areas: