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Henry VehovecBy Henry Vehovec

Mindfirst Senior Associate Rob Sinclair co-wrote this article, which should be of particular interest to entrepreneurs looking to develop and finance solar projects.

As soon as the Feed in Tariff (FIT) program rules were finalized on September 24th, developers of large scale solar projects (larger than 500 KW) jump started their activities in preparation for submitting project applications during the FIT initialization period ending November 30th.

solarWhile some projects appear to be quite far along the development curve with signed product and service supply agreements and financing, many developers are struggling to pull together the financial and technical resources required to submit strong applications. This will certainly limit the number of projects that receive FIT contracts and even those that do may experience significant difficulty in financing and building their projects.

Our involvement in financing clients representing more than 30MW of solar capacity provides unique insights. Early indicators suggest:

  • There are deep pools of equity funding available, from domestic, US, European and Asian sources.
  • Investors take many forms from private individuals, retail investment funds, sovereign wealth funds, and industry players with balance sheet capacity.
  • Debt financing seems to be harder to come by and appears to be focused on medium term paper (3-7 years) at rates ranging from 6%-8%.  This could have long-term negative impacts on equity investors if rates rise as expected.
  • For most projects, debt pricing above 8% would leave very little return for equity investors and at rates above 10% most projects would not be financeable.

The risk averse nature of Canada’s big five banks make them unlikely early leaders. Our expectations are that they will wait out the initialization period and enter the market well into 2010, when the rules governing the program are made clearer and the players in the industry shakeout a bit. In the near term we believe large European debt houses with experience in renewables globally, will be first on the scene as they have existing expertise with structuring deals and identifying the most critical factors for success.

Therefore, it is likely that (like the RESOP program) some early contract winners will flounder due to a lack of financing opening the door for stronger players to consolidate good projects and allow weaker players and projects to fade away. Further compounding the difficulty in financing projects, is uncertainty around the new REA process and the supply of project critical components that meet local content requirements.

If these issues manifest we believe that a significant portion of the contracted system capacity that will be awarded during initialization will become available over the following 18-24 months as proponents fail to meet COD commitments.  This will allow that capacity to be re-allocated to new applicants and provide availability until the next wave of transmission and distribution system upgrades come online in 2013-2015.

Henry is President, Coach and Chief Strategy Officer of  Mindfirst Inc. Visit Henry at Mindfirst.

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Gull River Transformer Station 2009 Rsz

PHOTO CAPTION -Will this transformer have enough capacity to handle the power from your solar project? Photo is copyright Henry Vehovec, permission given to publish on RIC Centre blog.


Henry Vehovec

By Henry Vehovec

Mindfirst has worked with several companies to develop business plans around solar projects and help source funding. Potential solar project developers should have the following elements covered before approaching potential investors:

Solar Project Development Phases

I. Site Assessment

Phase I development objectives typically include the following to yield a full understanding of the project site and interconnect requirements.

  • Site assessment
  • Technology selection
  • Utility interconnection requirements
  • Energy RFP & bid requirements
  • Preliminary financial model

II. Project Design

In Phase II development deliverables include the following

  • Energy Markets Report
  • Facility Gap Analysis
  • Regional Distribution Schema
  • Preliminary Bill of Materials
  • Preliminary T&D and Interconnect Plan
  • Preliminary EPC Plan
  • Evaluate alternate off-taker potential
  • Detailed financial model with sensitivity analysis for go/no-go decision

III. Full Life-cycle Project Cost, Financial Returns and Investment Analysis

Deliverables for Phase III are to create a complete project plan.

  • Finalize project scale
  • Final technology selection and engineering
  • Final Bill of Materials
  • Final procurement and construction plan
  • Final Operations and Maintenance Plan
  • Prepare construction financing proposal
  • Prepare Tax Equity Investor IM
  • Prepare cash equity IM (if necessary)

IV. Pre-Construction

To prepare for on-site construction, Phase IV deliverables include

  • Sub-contractor RFQs and selection recommendations
  • Contracts
  • Bills of Material
  • Purchase Orders
  • Logistics Plan
  • Construction Plan
  • Test Plan
  • Permitting and Interconnection Submissions

V. Construction

During construction, Phase V activities are aimed at meeting both the budget and timeline objectives with On-site Supervision and detailed Construction Support.

VI. Testing & Commissioning

Finally, Phase VI deployment activities include

  • On-site Supervision
  • Testing Support
  • Operations and Maintenance
  • Manual Development and Training

Henry is President, Coach and Chief Strategy Officer of  Mindfirst Inc. Visit Henry at Mindfirst.

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Henry VehovecBy Henry Vehovec

Recent projects at Mindfirst Inc. have exposed us to the benefits of managed IT services. What exactly are managed services? In this case, we are referring to the practice of outsourcing key aspects of a small or medium sized (SME) company’s information technology infrastructure. Essentially managed services offload the burden of maintaining internal systems to a specialized outside provider thereby allowing company management to focus on what they are really good at, what they make money at, that is, their core competency.

Think about never having to worry about slow or spotty internet access. What would it be like to seamlessly be able to access your files from home or remote office location? Wouldn’t it be nice to know that your files were always backed up in a secure offsite location in a data centre designed expressly for that purpose? Would your customers and staff get comfort and advantage from knowing that they would never be down? Wouldn’t it be great to not have to worry about scaling your systems, compatibility issues, system upgrades or hiring additional support people? These are the kind of benefits that are possible through managed services.

Managed ITManaged services are about creating effective business solutions that increase revenue, productivity and performance and can scale for the long term. Managed services are about IT infrastructure being accountable to business goals and objectives rather than technology speeds and feeds that do not necessarily mesh with business targets.

When should a company look at managed services? Can a company be too big or too small for managed services? Certainly the largest corporations can justify their own data centres and dedicated IT staff. Studies have found that SMEs with headcounts of approximately 1,000 employees or less can have IT infrastructures similar in security, performance, redundancy and capacity to that of much larger companies at a fraction of the cost. At the small end, companies with as few as five employees and revenues could consider outsourcing. In some instances, pre-revenue companies with mission critical programming objectives should also be considering managed services.

Mindfirst has recently been examining carbon footprint benefits of various IT infrastructure, telecommunications, telepresence and videoconferencing solutions. As part of this project we have found that there are considerable efficiencies to be gained via implementation of managed services solutions. We are developing models and decision making tools that will help organizations make these increasingly complex IT decisions and determine if managed services are right for them. Stay tuned to future editions of this blog or contact us directly if you are interested in learning more.

Henry is President, Coach and Chief Strategy Officer of  Mindfirst Inc. Visit Henry at Mindfirst.



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