Top ROI For Community Power by Ingo Koenig Presented at the Green Energy Act Finance Forum on January 29th, 2010

1. The Value Factory ™
Top ROI for community power
Presented by Dr. Ingo Koenig
Toronto, 29th of January 2010

2. AGENDA
! What is community power (in Europe)?
! Why does community power generate superior returns?
! Risks?
! Lessons for Ontario
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3. Wind energy value chain
Initiate Build Operate
and Develop and construct and Maintain
" Find suitable land " Public " Financing " Construction " Run " Sell energy
" Set-up technology support " Refund " Maintain
" Procure relevant scheme/
permits buyers
Community power makes a difference!
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02/02/2010

4. Wind power is leading new power
generation capacity in Europe
New power capacity in Europe 2008
18%
2%
10%
29%
6%
3%
0%
36%
Wind power Gas PV Oil Coal Hydro Nuclear
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5. Community power in Europe is....
Definition: A community wind farm is a consequent financial,
conceptual and organisational participation of citizens (local
community) in a wind farm.
 Exclusive investment and participation of
people living in the vicinity of the farm
 Management is done by local investors
Rigid
Community  Investment and participation of people
wind farms living in the vicinity of the farm, but also
from outside the community with max.
participation (e.g. $50,000)
Relaxed  Management is done by local investors
or professional service firms
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6. Legal Structure and Taxes
A German "GmbH & Co. KG" is a limited partnership in which the general
partner is a GmbH, a private limited company.
General Partner Limited partners
(GmbH) (Kommanditist)
 Limited partners can deduct losses whenever they
occur in personal tax statement!
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7. Financing
Debt: Private commercial banks, state owned banks with preferable rates
Equity: At first: Individual investors via closed funds, medium sized investment
groups, cooperatives; now utilities and larger cooperation, insurance companies
120%
100%
80% State sponsored
60% loans
Commercial banks
40%
20% Equity
0%
Community power Absantee
investors
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8. AGENDA
! What is community power (in Europe)?
! Why does community power generate superior returns?
! Risks?
! Lessons for Ontario
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9. Community power in Europe is more
profitable because...
" High personal involvement keeps “soft costs” low
(5-10% of investment compared to 15-40%
investment)
300
" High personal involvement improves information 295
flow, and peer pressure lead to short repair reaction 290
times and therefore higher availability and 285
revenues 280
Community
power
275 Other farms
" Lower land leases as everybody is a community
270
member (3% vs. 6%)
265
" Improved understanding in community leads to 260
faster permitting process; from push to pull (They 255
do not have to accept the park, they now want it!) Total payback
" Equity is relatively inexpensive, you do not deal
with professional investors and very expensive due
diligence processes
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10. Community power has other benefits than
an improved ROI
Local multiplier effect benefits everyone
" Every local dollar invested results in a minimum of 3 times the benefit
to the local community <--> If an external developer owns and controls
the project these benefits are lost
" Re-Powering of machines becomes much easier in the future
" Municipal, provincial taxes stay locally
Jobs
" ~ 110,000 new jobs have been created in Europe
" Potential construction jobs and training for local community
" Two local positions per project created to administer and maintain the
project and coordinate owners and finances
" Service personnel is regionally based (accountant, lawyers,
maintenance, etc.)
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11. AGENDA
! What is community power (in Europe)?
! Why does community power generate superior returns?
! Risks?
! Lessons for Ontario
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12. Community power has risks...
General risks:
! High investment, but
Specific risks:
 No planning
! Limits to financing consent/permits
e.g. for off-shore  Grid access delayed or
too costly if additional
projects infrastructure is
required
! Depending on
Risks
! Unprofitable project,
number of investors, because
decision making can  Analysis (e.g. wind
forecast) was too
be difficult and exit
optimistic
can be even more  Operations and
difficult maintenance becomes
too expensive
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13. …that can be mitigated
" Create a network of support and
knowledge
" Learn from comparable projects
" Employ experts as required
" Ensure access to sufficient capital
" Make allowances for bad wind years
" Choose your partners carefully
" Make long term maintenance contracts
with availability guarantees
" Get as much community involvement as
possible (partners and owners)
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14. AGENDA
! What is community power (in Europe)?
! Why does community power generate superior returns?
! Risks?
! Lessons for Ontario
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15. Lessons for Ontario...
! Make wind power a grass-roots movement by
including as many Ontarians as possible in the set-up
of farms, funds, and their future.
! The GEA and its Feed-in-tariffs are very strong
incentives to start the movement.
! Educate finance community, it is a profitable low-risk
investment.
! Do it yourself , do not let big developers “shave” the
profitability by including to many “soft costs”.
Ontarians become wind power entrepreneurs!!!
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16. Thank you for your attention!
www.koenigconsultants.ca
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