Download Macquarie Group - The Energy Roundtable

Investing in Canadian
Power Markets
A Sponsor’s Perspective
on Debt Financing
May 30, 2005
Overview
1
Who is Macquarie?
2
Debt Financing Options for Power Projects in Canada
3
Conclusions
2
Who is Macquarie?
3
Who is Macquarie?
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
Vancouver 
Toronto
Chicago 
Seattle 
 New York
San Jose
Memphis


Los Angeles

South Carolina
San Diego Houston

Jupiter
Dublin
   Frankfurt
London
 Munich
Paris  Vienna
Geneva
Beijing
Tianjin    Tokyo
Seoul
Taiwan
 Hong
Kong
Bangkok 
Manilla
Kuala Lumpur 
Labuan
Singapore 
Bahrain

$25.0bn +
Shanghai
Jakarta
 Credit Rating
A(S&P) / A2 (Moody’s)
 Employees

Sao Paulo
Cape Town 
 Johannesburg
> 6,500
 Brisbane
Perth 
Sydney
 
Adelaide 
Auckland
 Wellington
Melbourne
Christchurch
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
6 mths to 30 Sep
12 mths to 31 Mar
320
280
240
200
160
120
80
40
0
92 93
94 95 96
97 98 99
00 01 02
03 04
4
Macquarie - Managed Infrastructure
in North America
AltaLink
METC
 Alberta Electricity Transmission
Grid
 C$800 million
 Seed asset for MEAP
 Michigan Electricity
Transmission Corp
 US$450 million
 MEAP is a major equity
participant
Atlantic Aviation
 12 FBO’s
 US$292 million
 Owned by Macquarie
Infrastructure Company
AvPorts
 Airport management and FBO
operations
 US$80 million
 Owned by Macquarie
Infrastructure Company
Cardinal Power
 C$247 million
 Seed asset for Macquarie
Power Income Fund
 156 MW cogen facility in
Cardinal, ON
Chicago Skyway
 7.8 mile operating tollroad in
Chicago metropolitan
 US$1.82 billion
 Macquarie Infrastructure
Group/Cintra JV Consortium
Detroit-Windsor Tunnel
 Tolled Border Tunnel
 US$90 million
 Macquarie Global Infrastructure
Fund sole equity participant
Path 15
 Upgrade of Southern Californian
electricity transmission grid
 US$220 million
 Development equity from MP
Structure Finance Fund (an affiliate
of Macquarie)
PCAA/Avistar Airport Car
Parks
 Off-site airport car parking
assets
 US$193 million
 Macquarie Infrastructure
Company majority owner
SR125 Toll Road
 Greenfield Toll Road in San
Diego
 US$900 million
 Macquarie Infrastructure
Group sole equity participant
Thermal Chicago
 District Energy assets located
in Chicago and Las Vegas
 US$164 million
 Owned by Macquarie
Infrastructure Company
407ETR Toll Road
 70 mile toll road in Toronto
 US$1.8 billion
 99 year concession
 Macquarie Infrastructure Group
holds 43% stake
5
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
6
Debt Financing Options for
Power Projects in Canada
7
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
Year
Transaction
Description
2005
Pingston Power (BC): 45 MW hydroelectric
$70M capital markets
2004
Lake Superior Power (ON): 110 MW cogeneration
$77M capital markets
2003
Arrow Lakes (BC): 185 MW hydroelectric station
$100M capital markets
2002
Cory (SK): 228 MW cogeneration
$244M bank and capital markets
2002
Brighton Beach (ON): 580 MW combined cycle
$403M bank and institutional
2001
Muskeg River (AB): 170 MW cogeneration
$159M bank and institutional
2001
Scotford (AB): 150 MW cogeneration
$121M bank and institutional
1999
Joffre (AB): 480 MW cogeneration
$286M bank and institutional
1999
Island (BC): 260 MW combined cycle
$202M bank and capital markets
8



Resurgence of Non-Utility
Investment
Activity in the power financing sector has increased significantly in the last year

Large new “renewables” commitments in Ontario and Quebec – over 2,000 MW

Ontario completed a tender for 2,500 MW of new power generation

RFP’s are intended to be “financing friendly” and attract private sector investment
Scale and implementation of Ontario’s programs has attracted the attention of both Canadian and
international lenders

Canadian lenders have quickly ramped up their activities in the power sector

European and Japanese lenders have begun to focus on opportunities in Canada

Financing alternatives for Canadian projects has increased significantly in the last year
alone – additional funders and structures
Debt financing options in the Canadian marketplace include

“True” Private placements – typically with Canadian life companies

“Public-style” private placements – broadly-marketed

Canadian and European lenders
9
Review of Financing Options

Different financing options are available at different stages of a power project’s life cycle
Type
Bid (Committed)
Construction
Bank
Financing
 Limited number of
 Bank financing terms will  For Canadian banks,
Canadian banks capable
of lead underwriting
committed, non-recourse
financing
typically require broad
syndication prior to
commercial operations
Term
significantly reduced
availability of financing
beyond 5-7 years
 European banks capable
of leading smaller
transactions
Institutional
Debt
Financing
 Potential to pre-arrange
 Capacity constraints
 Reduced capacity constraints
committed financing with  Larger transactions may
specified institutions
required accessing US$
market
 “Make-whole” payments
required to be paid prior
to refinancing a project
Public
Markets Debt
Financing
 Not available
 Limited market pre-COD  Significant capacity
without completion
 Additional disclosure
guarantees
requirements
10
Conclusions
11
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
12