PV power station construction process using asset-backed securitization financing feasibility analysis (ii)

Polaris solar PV net news: five, PV power plant project assets securitization financing scheme design:

(A) the transaction subject

1, the originator. Typically, photovoltaic power plant owner, which sponsors for securitised assets. Photovoltaic power plant owner will plant all his rights to the SPV. Means of assignment must be real selling, price must be the principal agency for the transfer of the initial price is determined on the basis of the assessment and final price is decided by the market in the sale of securities.

2, a special-purpose vehicle. Special purposes institutions is securities of assets process in the by sponsors established of actual management for securities of of assets of entity, in legal Shang, special purposes institutions of organization can used company, and partnership and trust, way, specific to station construction assets securities of process in the, special purposes institutions is by station construction units will station assets from himself of financial report in the stripping out zhihou new established of legal Shang of station ownership people.

Need to be aware of is that when the power station when securitization companies and partnerships, SPV’s organization is the Corporation or partnership, this time true sale of securitised assets more clear, transfer of ownership must be clear of the power station to exist as a special purpose vehicle company or a partnership. When the asset-backed securities trust, SPV is a pool of assets, this time you need to find another trustee to manage the asset pool, which can be used by the sponsor to act as the trustee, this time, the SPV set up its form is simply a financial deal with the process.

3, the intermediary. Including accounting firms, law firms, rating agencies, credit rating agencies, credit enhancement mechanism. Intermediaries in the role of main sponsor was commissioned, to asset and capital verification for securitization of assets, evaluate, determine asset prices, development of securitisation programme.

4, underwriter. Dealers are accepting sponsors and special-purpose institutions jointly entrusted to specific or not specific public offering of asset-backed securities intermediaries, such as trust and investment companies, securities firms.

5, investors. Securities for investors is that plant supports the purchaser. When company or partnership is special purpose entities, the investors are shareholders of the company or partnership, when trust property is special purpose entities, investors trust certificates of beneficial owners, and when utility-backed securities for bonds, investors for debt investors. Investors are free to transfer their rights to benefit.

6, and station management people (that assets securities of process in the of Servicers): special purposes institutions of established just for legal Shang on property transfer of needs, from station of operations of angle,, still needs by specific of people to management, here of station management people in station assets securities of launched Shi, can by sponsors that station construction units continues to bear, but Dang assets securities of completed Hou, is to by investors be determines, this relationship similar Yu real estate management in the of property company and owners Zhijian of relationship. Initiator if you want to continue to serve as a station manager who also needs the consent of the investor’s consent. Station Manager in accordance with the trust agreement with the investors management station, charging management compensation, of course, where the trust agreement drafted by the sponsor, ordinary investors choice can only be accepted or rejected.

7, representatives of investors. Asset securitization process using a public offering to raise capital, it also meant that large number of ordinary investors, and when a large number of investors, there must exist a Hitchhiker problem, specific to asset securitization in power station was a station manager’s incentive and constraint problems. When utility-backed security trusts, trust could serve as investor representatives to supervise the Station Manager, and constraints. When utility-backed security bonds or shares, the power manager’s incentive and restraint is in essence an issue of corporate governance, investor’s rights and its relationship with plant managers can be adjusted by the corresponding legal norms.

(Ii) trading programs

First step, determine the assets to be securitized by sponsors. Assets spun off from sponsors to support securities assets issued by entities, in the process of asset securitization of hydropower station construction financing, intended for the securitization of assets is a certain power.

In the process of asset securitization, power station will be stripped from the item unit’s balance sheet and transferred to the body for specific purposes, become the property of the SPV. Of course, the actual operation of the power station can still be managed by the project construction company that sponsors continue to, a special purpose vehicle set up just one accounting method, but when the securitization is completed, the actual management of the power station are to be determined by the investor.

The second step, set up a special purpose vehicle. As the new issue asset-backed securities Corporation or of the holder of the power of partnership. At the time of the SPV as a trust, except the divestiture accounting processing, also needed a special fiduciary body or by the sponsor as a trustee to manage the station.

SPV’s members at the time established by the sponsor to determine, when the asset-backed securitization is completed, should be transferred to the investors or by investors to determine their specific management and operating personnel.

The third step, the transfer of assets. For assets support securities of station must from sponsors of balance sheet in the stripping, zhihou also must will station of property transfer to as special purposes institutions of company or partnership, dang station support securities used trust way Shi, if trustee people is sponsors zhiwai of other subject, on can observation to assets of transfer process, but if trustee people is sponsors itself Shi, assets of transfer only performance for accounting processing means just, certainly, this accounting processing way must meet trust method in the on declared trust of requirements.

The fourth step, developing Securitisation Programme. Accounting firm commissioned by the sponsor, appraisal firms, credit rating agencies, credit enhancement institutions and law firms and other intermediaries to assets plant assets to develop securitisation programme, determine the issue price.

The fifth step, credit enhancement. To assess the plant’s value and credit enhancement, including credit rating and collateral.

The sixth step, plant-backed securities for sale. Promoter commissioned a professional securities underwriter, usually securities companies or trust and investment companies, in whole or in part by a special purpose vehicle to specific investors or the public utility-backed securities sales. At the current funding requirements in terms of size, the author suggests that distributed utility-backed securities private offering ways, while the large ground station support for public offering of securities available for sale are ways.

The seventh step, pay for the price. Securities underwriter to sell securities to investors obtained price, after deducting the commissions shall be made in full to the SPV or promoters (specifically pay be determined by the underwriting agreement), at this point, the sponsors that all interests in power plant construction company dropped out of the power plant.

The seventh step, securitization of assets (power plants) management. Special purpose institution may authorize the sponsor continues to manage the station, and pay management remuneration can also entrust his Station Manager (this relationship is similar to relationships between building owners and property management companies, special purpose entities equivalent to owners, Station Manager is equivalent to the property company).

The eighth step, investment income payments. Station Manager is responsible for the day-to-day management of the power station and transmission enterprises or other electricity companies charge, according to the conventions with a special purpose company or trust and investment institutions will deliver electricity directly to a special purpose vehicle. Conventions of the SPV according to utility-backed securities to investors, investment income or return the amount invested. Meanwhile, the SPV as an investor on behalf of the supervision and inspection of power plant manager of power plant management and benefits administration.

Nineth, termination of asset securitization. For an agreed period of asset securitization project, after the expiration of the term, special purpose entities in accordance with the contract after having liquidated all investment income and principal payments to investors, power station can be returned to the sponsor.

(C) asset securitization in the PV power plant project in the future.

If the asset securitization in the PV power station construction project be successful, can greatly alleviate the financial pressures of PV cell and module manufacturing enterprises, necessarily more broad prospects for development of the photovoltaic industry in the future.

(D) the difference in asset securitization and energy management contract associated with it.

At present, in the process of development of new energy use, there are a wide range of financing, is energy management contract. In the author’s communication with station construction project staff found on energy performance contracting and asset securitization on the difference and relationship between the misunderstanding still exist, there is a need here for a simple analysis.

Brief introduction of energy management contract. So-called energy management contract, in fact, as a way to help finance new energy equipment provider looking for a market structure, including at least four subjects: using units, project construction and new energy equipment providers, providers of capital (for ease of understanding, following the case of PV power station construction).

Processes include:

1, PV power station construction unit (usually by the photovoltaic power plant construction and equipment manufacturers to establish or entrust) and capital services (in standard energy performance contracting process, often referred to as energy-saving service providers) the signing of an agreement from the capital would be granted sufficient capital support.

2, photovoltaic power plant-building unit in capital would be granted financial support to photovoltaic power plant construction and equipment manufacturers to buy PV power station construction equipment.

3, PV power plant construction construction of photovoltaic power plants. (In standard of contract energy management structure in the, new energy equipment units first must and with can units reached consistent views, party can starts construction, but for PV station construction,, to currently of policy environment view, only needs made national competent organ of related license can, as with can units (for PV station,, main is grid representative of national) of agreed, currently to quota of way gets, can side construction side applications, if cannot gets grid of agreed, PV station built Hou, If there are other uses can still be used).

4 upon completion of the power station construction, power plant construction that is in units of power station operation and management capacity to power the unit charge. (And General of contract energy management different of at is, General of contract energy management structure in the, new energy price of determines by with can units and new energy using equipment units in old energy using way annual paid cost of based Shang consultations determines, new energy construction cost and old energy using way by paid of cost Zhijian of difference is station construction units to capital Servicers reimbursement capital and profit of sources, and in PV station construction in the, does not exists new energy using way on old energy using way of alternative problem Currently, photovoltaic power price set by the national unity)

5, power station construction unit to obtain electricity from electricity enterprises in accordance with the contract terms and payments to capital providers to repay capital and profits.

6, after the period of contract energy management, power plant in accordance with the contract belong. (Standard contract energy management structure and the difference is, after the expiration of contract energy management standards, new energy transfer of right to ownership or management device to using units, and in the construction of PV plants, using units are actually power and, therefore, no question of surrender)

Overall, the structural design of energy management contract from the standpoint of using units, did have a certain degree of financing function, using units will pay less or no cost under the condition of energy-using equipment, but this function is just a byproduct of financing, contract energy management design’s primary objective is to help new energy equipment provider looking for a market.

From the above brief review of contract energy management process, we can see that energy management mode suitable for power plant construction stage of the contract, that is to say, the main coordinating units of electricity, power plant construction, equipment providers, and the interests of capital providers among the four main. For the purposes of their operation, mainly help looking for new energy equipment provider market, the most important thing is, in the course of contract energy management modes of operation, the existence of capital providers is sure, not energy patterns to solve problems.

Asset securitization to solve the problem: power station has been completed, capital providers how to recover the investment issues (energy management contract applicable to the structure and photovoltaic power plant construction costs of the project payback period have similarities, a longer duration). Or to find new capital construction capital problems, namely has built power station as an encumbered asset to ordinary investors in securities financing issue.

To sum up, contract energy management and asset securitization are two comprises a main structure, rights and obligations, as well as the way to solve the problem of financing that is different, but in practice can be used independently, but also can be used in conjunction.

Six, there is a risk

According to the maturity of the domestic and international experience, PV power station construction process using asset-backed securitization financing to virtually no risk, for now, the only risk is that the policy risks, such policies risk refers to electricity price risk, after all, for now, PV power station’s profits would still have to rely on policy support.

Seven, Government’s role in the securitization process

For perfect mature of market national,, Government gradually exit market, Government on assets securities of of regulatory just limited to to public raised way financing Shi of information forced disclosure of regulatory, but for emerging market national,, assets securities of of experience still less, this a financing mode of promotion still needs Government of vigorously support, and Government of support way is main is through provides credit guarantees of way to achieved, certainly, here of guarantees does not must requirements to national credit to provides guarantees, Restrictions based on law on State-guaranteed, such credit guarantees mainly on asset-backed securities could consider establishing separate legal status of State-owned security company to carry it out.

Eight, need to be aware of the issues

1, special purpose entities accounting issues

2, the duties of special purpose vehicle

3, investor rights protection issues

4, the resale of the asset-backed securities issue (the liquidity of securities issues)

5, the originator and investor relations

6, relationship between the promoter and the special-purpose structures. Formal management and de facto control.

7, mortgages and sold judgments. Corporate property changes, the principal change investors total, property rights transfer system, registration and transfer of possession.

8, offering securities pricing mechanisms, to prevent tunneling under suspicion.

9, sponsor income includes proceeds of sale of securities, asset management, asset’s future cash flows derived from the proceeds.

10, true selling of the assignee, special purpose entities, which can be a subject of an independent existence on behalf of investors, companies, partnerships, or entrust the trust company to act as.

11, a special purpose vehicle company and partnership of the qualification requirements.

12, the duties of special purpose entities.

13, a special purpose vehicle tax considerations and cost considerations in the selection process.

14, double-layer management right in the trust law issue. Separation of ownership and management.

Read more: v power station construction using asset-backed securitization financing feasibility analysis (I)

Original title: photovoltaic power plant construction process using asset-backed securitization financing feasibility analysis (ii)

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