The Insurance-Debt Nexus: How can risk policy help make tidal power bankable?

International Tidal Energy Summit 23rd Nov 2016

Some Definitions…

Business Interruption Insurance: A form of insurance coverage that replaces business income lost as a result of an event that interrupts the operations of the business.

Project Finance: The financing of long-term infrastructure projects in which debt to finance the project is paid back from the cash flow generated by the project.

Nexus: A focal point linking two of more things.

joe.hulm@oceanenergyadvisors.com M: +44 777 55 22 913

How can risk policy help make tidal power bankable?

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* An interested party only at this stage

Project Development Advisory

Technology

Finance

Policy

v

Small and Fixed

Small and Floating

Big and Fixed

Big and Floating

Industrial Evolution for profit, people and planet

Financially sound

Socially acceptable

Environmentally benign

Clearly expressed

Policy

Insurance

Debt

Equity

The Insurance-Debt Nexus – MSc research landscape

© Ocean Energy Advisors Ltd.

* Informal conversation only following DECC/BIS merger

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Research Aim

‘Explore how public support could enable the insurance sector to underwrite business interruption insurance, so that project developers can raise capital through project finance.’

Research Objectives

1) Finance

2) Insurance

3) Policy

Implications and Further Work

Research Objective 1 (Finance) hat

‘Is there an opportunity for project finance to enable project developers to raise capital for tidal stream power?’

• Most conventional line of questioning

• More bankable = More investable

• Other benefits: cost of capital; off-balance sheet; prestige by association

YES-SURE

Research Objective 2 (Insurance) hat

‘Is there an opportunity for business interruption insurance to enable lenders to provide project finance for tidal stream power?’

• Generally supported, although narrowness of scope

• Efficacy insurance, Delay in start-up, Professional indemnity insurance

• Annuity profile of an infrastructure asset?

YES-AND

Research Objective 3 (Policy) hat

‘Is there an opportunity for public support to enable insurers to underwrite business interruption insurance for tidal stream power?’

• Best tested empirically, learning through doing

• Range of opinion from insurers, political bias?

• Scant confidence in a ‘go it alone’ strategy for UK tidal

YES-BUT

Phase 1 Complete – Thank You!

* Provided informal feedback on full draft of Master’s thesis

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Action Plan 3 Demonstration & Pre-Commercial: EU Insurance and Guarantee Fund to underwrite project risks.

Phase 1:

Concept

2016

• MSc EETE / OEA

Phase 2:

Development

2017

• ORE Catapult * / OEA

• RRA / Aether Energy

Phase 3:

Delivery

2018+

• PTEC *

• MeyGen *

• Irish Sea

• Bay of Fundy

• Raz Blanchard

* An interested party only at this stage

oceanenergyadvisors.com OEAdvisors