Download 1. General Economic and Financial Environment Current view of the

Project and Structured Finance Unit
Structuring Standards for Cash Flow Based Financing
AGENDA
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5.
General Economic and Financial Environment
Unicredit Bulbank‘s Strategy in respect to RES in today
environment
Structuring Requirements for Project Financings
Policy Standards of UniCredit Group
Selected transactions
UniCredit Bulbank Information
1. General Economic and Financial Environment
After having plummeted in the 4Q2008 Bulgarian economy is set to slide into recession.
Growth rate of GDP on demand side in % (yoy 2006-2012)
Growth rate (in %)
Domestic Demand
Private Consumption
Government consumption
GFCF
External demand
Export
Import
GDP real
2006
2007
2008
2009f
2010f
2011f
2012f
8.5%
-2.5%
14.7%
5.1%
3.4%
21.7%
4.5% -2.0%
-1.4% -0.1%
20.4% -14.0%
-1.4%
0.4%
-7.6%
1.0%
1.0%
-3.0%
3.0%
2.0%
-1.5%
8.7%
14.0%
6.3%
5.2%
9.9%
6.2%
2.9%
4.9%
6.0%
-2.3%
-4.8%
-0.9%
1.5%
-2.0%
2.3%
4.7%
0.5%
4.2%
-11.6%
-12.2%
-3.0%
Source: NSI and UniCredit Bulbank forecasts
 Opposite to many other EU countries the global recession hit Bulgarian economy with a considerable
time lag. Only in 4Q/08 economy slowed down markedly to 3.7% yoy from 7% yoy in the first 9M/08.
 Given weak external demand and shortage of foreign capital inflows the Bulgarian economy will unlikely
avoid recession.
 Our central projection envisages annualized GDP growth to fall into the negative territory for six
consecutive quarters, starting from 2Q/09.
 Fixed investments is set to drop severely (by real 18.4% yoy subtracting 6.1 pp of GDP) in response to
the more difficult access to financing and looming risks of spare production capacities in the post crisis
world.
1. General Economic and Financial Environment
CA gap shrink, but capital inflows dry-up even faster.
Private Capital Inflows Dropped Sharply
60%
45.6%
34.4%
47.1%
30.5%
27.2%
22.6%
27.6%
12.8%
15.5%
20%
20.9%
Other Capital Flow s / GDP
Q4`08
Q3`08
Q2`08
Q1`08
Q4`07
Q3`07
Q2`07
Q1`07
Q3`06
Q2`06
Q1`06
Q4`05
Q2`05
Q1`05
FDI / GDP
Q3`05
6.9%
0%
-20%
47.8%
38.5%
36.9%
37.6%
Q4`06
40%
50.4%
Total Capital Flow s / GDP
Source: BNB
 In the 1Q/09 private capital inflows failed to finance CA deficit causing official reserves to fall by 7%.
 The large private non-financial sector external debt remains a key source of vulnerability. We think that
significant share of this debt will be rolled over, but nevertheless automatic re-financing can no longer be
expected in the context of the ongoing deleveraging process and given that industrialized nations are
crowding out emerging economies from the competition for global savings.
 On a more positive note, the balance of payment risk that Bulgarian economy faces is significantly
alleviated by the strong debt metrics of the public sector. If needed the very strong balance sheet of the
public sector will allow authorities to borrow, without threatening Bulgaria’s creditworthiness.
1. General Economic and Financial Environment
Repricing of Risks
 High Prices
on Country Risks
 Higher Financing Costs
for RES Projects in SEE
 Currently Limited Credit
Liquidity in SEE
1. General Economic and Financial Environment
Current view of the CDS of Bulgaria
2. Unicredit Bulbank’s Strategy towards RES in today
environment - General Standards and Frame Requirements
UCB continue with its’ pro-active, but selective
approach in respect to Projects in Renewable Energy
Responsible structure for origination, arrangement and due
diligence of Project Finance Transaction within Unicredit Bulbank AD:
Project and Structure Finance Unit
Competence: local arranging unit for small/mid-sized local
transactions (E2m-E50m), supporting local unit to UniCredit Group for
larger deals (>E50m)
3. Structuring Parameters
General Standards and Frame Requirements
 Equity requirements: depending on Cash Flow strength and shall ensure stress
scenarios debt service by the lowest power generation output. Taking into
consideration lower Risk appetite, based on the today economic environment, at
least 30% equity contribution is required
 Technologies: proved technologies with track records
 Sponsor: industry experienced, with completed projects in the RES
 Grace: depending on the Project and technology
 Maturity: 10 – 15 Years, depends on the technology and Cash Flow availability
 Pricing: dependent on the market conditions, limited sources from EIB and EBRD
3. Structuring Parameters
General Standards and Frame Requirements
 Collateral: Typical for such kind of PF transactions granting access to
all assets and rights of the SPV with the aim to secure the Project as
whole
 Availability of the source and Technical risks: Competent External
Appraisal
 Legal Risks: External Legal Due Diligence
 Minimum Debt Service Cover Ratio (DSCR)
 1,25x for PV
 1,20x for Hydro
 1,25x for Wind
 Calculation: “Annual debt service of principal + interest” / “Available
Cash Flow” (EBITDA)
3. Structuring Parameters
General Standards and Frame Requirements
 Debt Reserve Account
 Accumulation of FREE CASH FLOW (remaining after payment of
operative expenses and debt service)
 Mandatory for all Cash Flow based financings
 Equal to 6 months debt service
 No disbursement of profit prior to full accumulation
 Account held with UCB & pledged to UCB
 Maintenance Reserve Account
 Mandatory, if no full-service agreement exists (i.e. guaranteed
performance & availability subject to cash flow projections)
3. Structuring Parameters
General Standards
 Monitoring: Quarterly/semi annual technical and commercial reports
from the project
 Insurance
 Construction all risk
 Third party liability
 Property damage
 Machinery breakdown
 Business interruption
4. Selected Transactions >EUR 2 mln for 2007 - 2008 (UniCredit
Bulbank as an Arranger and/or an Underwriter):
 Up to 20 MEUR from a total of 198 MEUR Senior facilities + 25 VAT
facility for development of 156MW Wind Farm, Kavarna, Bulgaria, with
Key Sponsor AES (USA), MLA EBRD/IFC/UCMIB – closed transaction;
 Up to 20 MEUR of total 54 MEUR (MLA EBRD/BA-CA) – Small Hydro
Power Plants Cascade for VEZ Svoge (Petrovilla Group, Italy) with total
installed capacity of 25 MW – completed transaction;
 Up to 9.5 MEUR Investment Loan + L/G limit – Hydro Power Plant with
installed capacity of 8.7 MW – completed transaction;
 Up to 7 MEUR investment loan + VAT limit – Small Hydro Power Plant
with installed capacity of 3.8 MW – mandated transaction;
 Up to 3.174 MEUR for a Small Hydro PP with installed capacity of 3.484
MW - completed transaction;
5. UniCredit Bulbank Information
Contacts of Project and Structured Finance Unit
THANK YOU FOR YOUR ATTENTION!
Maya Alexova
(+359 2) 923-2185
[email protected]
Valentina Rashkova
(+359 2) 923-2964
[email protected]
Svetoslav Mitrev
(+359 2) 923-2213
[email protected]