PRICE FORBES & PARTNERS RENEWABLES PRACTICE OVERVIEW · 4 RENEWABLES PRACTICE OVERVIEW RENEWABLES...

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PRICE FORBES & PARTNERSRENEWABLES PRACTICE OVERVIEW

2020

3RENEWABLES PRACTICE OVERVIEW

OUR ETHOS

Price Forbes helps our clients:

D Understand which risks can be mitigated or transferred, and which cannot

D Ensure a robust insurance risk management plan is in place to protect the development critical path and future operations

D Minimise lenders’ Conditions Precedent (CP) delays at Financial Close and Commercial Operations Date (COD)

D Protect the future revenue streams during commercial operations

54 RENEWABLES PRACTICE OVERVIEWRENEWABLES PRACTICE OVERVIEW

OUR BUSINESS

100% Independent

Robust market relationships and a physical presence around the globe

Price ForbesIn-houseService strategy

At Price Forbes we service all aspects of

D Broking D Technical D Risk Engineering D Modelling D Claims D Critical Path Support

Strategically located in the heart of London’s insurance district

Annual premiums placedUSD 1.3bn

Parent companyPart of the Ardonagh Group since June 2017

HAMILTONBERMUDA

LABUANMALAYSIA

DUBAIUAE

OFFICESWORLDWIDE7

SANTIAGOCHILE

LONDONUK

STELLENBOSCHSOUTH AFRICA

JOHANNESBURGSOUTH AFRICA

The Renewables team at Price Forbes is commercially minded and technically skilled, with direct experience in renewable energy project development, Original Equipment Manufacturer (OEM) supply, equity and debt funding, in addition to transactional insurance. We work with globally based clients, helping to agree practical solutions and design the risk strategies. We deal with the local and international insurance markets to negotiate and deliver the best possible terms and pricing.

RENEWABLES TEAM

Price Forbes proprietary wording covering all main classes of renewables

D Wind - Onshore D Wind - Offshore D Solar D Storage & Battery D Hydro D Geothermal D Biomass

Specialist risk management advice

D Equity Investors D Developers & Operators D Lenders &

Lenders Insurance Advisors (LIAs)

D Multilaterals and Development Finance Institutions (DFIs)

D EPC Contractors D Original Equipment

Manufacturers (OEMs) & Infrastructure Suppliers

Niche risks

D Climate and Weather (Parametric Risks)

D Cyber D Currency & Convertibility D Political Risks, Terrorism

& Sabotage D Credit Risks & Contract

Frustration D Professional Indemnity

MaintenanceOperationsConstructionPlanning

Price Forbes clients range from small-scale solar and wind developers through to large-scale national utilities. Our wordings are client-friendly and tailored per risk.

300,000MWOUR GLOBAL POWER PORTFOLIO


CORE STRENGTHS

Proprietary wordings Trusted by insurers, we offer a broader range of cover that we tailor per client and per project. Policy and paperwork delivery within client-friendly Service Level Agreements that align with project development phases and future operations.

Direct project development & OEM experience We understand the challenges of project development; land, regulatory & permitting, social and environmental. On a technical and commercial level Price Forbes is familiar with the critical path, and can articulate the process clearly to insurance carriers.

Lender requirements Long-term relationships with the lenders and multilateral organisations that support project development to help with an informed understanding of their requirements and CPs. We help with preparation and support for project finance, contract negotiations and closing, and project execution.

Complete independence Allows us to forge the strong relationships we enjoy with insurance carriers and specialist brokers around the globe. Local insurance carrier arrangements in place across all regions. A global presence to support relationships with clients at their project and operational locations.

Price Forbes team sector experience

D Solar: over 2.4GW of risks placed and managed

D Wind: over 20GW of risks placed and managed

D Hydro: over 2.5GW of risks placed and managed

D Geothermal: some 500MW of operational risks placed and managed; niche drilling risks and mitigation options understood and can be clearly articulated to carriers

D Strong focus on emerging risks: innovative cyber, weather and storage schemes

NatCat, Data Analytics & Modelling Informed opinion to help reduce uncertainty and support with technical and commercial modelling. Early stage NatCat reports to help with site selection and RMS modelling during feasibility.

Local expertise In-country support in Europe, sub-Saharan Africa, MENA, South East Asia and Latin America where the Renewables team has broadest experience and Price Forbes has a physical presence, backed up with a 350-strong team in London for the Lloyd’s and European markets.

Claims management A leading team, offering integrated claims support in the form of an in-house, dedicated claims representative.


PROJECT FEASIBILITY

KEY CONSIDERATIONS IN THE PROJECT RISK CHAIN

Assess property rights, title & land use

Agree concession rights & Reinsurance Action Plan (RAP) if required

Undertake initial site surveys

Owners Engineers appointed

EPC contracting chain underway

Connection & evacuation arrangements assessed for DSU and BI

Land issues and other potential Third Party Liability claims assessed

Infrastructure logistics & supply chain assessed

Assess Risk Management Strategy

Reach Financial Close

Full engagement with equity sponsors & project finance partners – lender agreements issued

PPA & Implementation Agreement (IA) finalised

Resource risks modelled

E&O litigation cost risks

Ensure competitive process in place for selection of international & local risk carriers

Engage with Lenders’ advisors

Agree Risk Management Strategy

Construct Project, Reach COD

Construction contractor sub-contractors bids

Main contractor retains responsibility for quality of all work and coordination of sub-contractors

DMaster Schedule

Poor sub-contractor selection/management resulting in delays, design defects, cost overruns resulting in financing pressure

Is there a clear distinction of roles & responsibilities?

Are stakeholders aligned? (off-take counterparty & distribution)

Risk Management Implemented; Enable Claims Processing

Assess strengths and weaknesses of the project; does it fit the business model?

Assess Power Purchase Agreement (PPA) and other regulatory, environmental & permitting frameworks

Assess connection & evacuation scenario

Director & Officer risks

Assess PPA / counterparty risks

Political uncertainties assessed; sabotage, political violence & currency risks

Environmental pollution & Environmental risks assessed

Construction contractor sub-contractors bids

Engage with competent partners to support:

DDesign

DConstruction

DEngineering

Political, Currency and Credit risk mitigation options finalised

Marine & Cargo, Construction, Operations & Third Party Liability options finalised

Delay in Start Up and Business Interruption cover negotiated

DConstruction Supervision

DSafety Management

DQuality Assurance & Inspection

Exit options negotiated if required

Implement Owner Controlled Insurance Programme (OCIP)

DMarine & Cargo

DConstruction & Operations

DDelay in Start Up & Business interruption

DNatCat & Climate Risks cover

Implement O&M Contracts, Exit Options Finalised

Independent engineers certify completion:

DCompletion of commissioning

DOperational & Maintenance procedures

DDry commissioning

DWet commissioning

D Lessons learned

DHandover & close out

DRefinance/exit

Enable Operational Risk Management, Liabilities & Business Interruption

Is counterparty ready to receive power & is suitable credit risk cover in place?

Are unexpected NatCat events covered?

Are resource/climate risks covered?

Unexpected plant peril event, i.e. explosion/fire

Is cover in place to deal with change in political climate that could lead to delay or expropriation?

Are Cyber & Terror risks leading to business interruption covered?

PROJECT CONSTRUCTION

PROJECT CONCEPT & INITIAL

APPRAISAL

COMMERCIAL OPERATIONS

Critical Path Process Underway


PRIMARY DRIVERS FOR INSURANCE PRICING

Geographical

D Low NatCat risks

D Good ground conditions & site accessibility

D Country security & culture

D Good local relationships

Technology

D Non/low prototypical aspects

D Proven quality assurance & quality control

D Reliable supply chain

D Well documented approvals

D Robust warranties

D Sound health & safety processes with quality detection systems & preventative measures

Experience

D Proven track record in similar projects

D Company culture

D Financial strength

D Good claims record

D Proven quality assurance & quality control processes

D Proven execution skills along the risk chain

Grid Connection

D Distance to connection points

D Age and condition of grid

D Maintenance programme

D Redundancy & availability measures

D Quality of supply chain

Risk Management

D Reliable risk matrices/project management & operational procedures

D Proven quality assurance/quality control for construction and operations

D Sourcing of spare parts

D Site storage procedures

D Extent of PML, EML & NLE (see definitions)

DEFINITIONSPML (Probable Maximum Loss): The maximum loss that an insurer would be expected to incur on a policy. The probable maximum loss represents the incident that triggers the loss takes place in the worst place and at the worst time.

EML (Estimated Maximum Loss): An estimate of the monetary loss, which could be sustained by insurers on a single risk as a result of a single fire or explosion, considered to be within the realms of probability. The estimate ignores such remote coincidences and catastrophes as may be possibilities but which still remain unlikely.

NLE (Normal Loss Expectancy): The amount of loss an insurance company expects to incur during normal conditions. Normal loss expectancy represents the amount of loss an insurer may face if, despite all risk mitigation systems and processes working properly, damages still occur.

ACHIEVING BANKABILITY

Lender requirements are driving an increased focus on risk mitigation and control. The ability to accurately scope, benchmark and sell project exposure is key to the negotiation of competitive insurance terms, the right levels of coverage and ultimately, lender comfort.

Lenders appreciate and see value in the way a project team handles risk management, not just with contractors and sub-contractors, but through the entire process. The risk chain can be complex, but the project sponsors and their lenders need clarity.

CASE STUDY

Helping a project become bankable is at the heart of our ethos. We understand project stakeholders will have layered, and often different, areas of exposure. Our team is familiar with commercial, technological and regulatory challenges, and the impact these may have on the funding structure.

We design programmes to help to satisfy the requirements of investors and lending institutions globally.

Our Renewables team has diverse experience, with people that have worked for global technology providers, project developers and institutional funders.

THE CHALLENGE PRICE FORBES SOLUTION

Support by way of a back up to the warranties provided by the manufacturing

division, both during construction and for a fixed period after COD. This provides lender comfort and reduces exposure to the group

overall.

The client, a vertically integrated OEM needs to satisfy internal risk processes and fulfil lender requirements for a project where it will be the manufacturer, installer, lead

contractor and owner/operator.

FINANCIAL CLOSE


CONTINGENT RISK EXPOSURESENSURING REVENUE STREAMS ARE PROTECTED

The single biggest risk can come from non-owned assets.

GRID NETWORKFIRST NON-OWNED

TRANSFORMER

SITETRANSFORMER

CBI Contingent Business InterruptionOwnership of assets

Cable

Cable/ Transmission

Facilities

Cables

Power Project

PD Property DamagesBI Business Interruption

Contingent risks can pose a major threat, both to project construction and commercial operations. We recognise the interface and potential schedule gaps between the project assets ‘inside the gate’ and the non-owned ‘outside the gate’ facilities. We advise on how to protect against the delays and interruptions that can impact heavily on project schedules and revenue streams.

POLITICAL & EMERGING RISKSANTICIPATING UNCERTAINTY

Increased exposure to Political and Credit Risks has become a significant reality for companies and financial institutions trading and investing cross border. Specialist insurance products are available to mitigate these exposures which can enable the confident pursuit of high return opportunities in developed economies as well as frontier markets such as Africa, the Middle East, Asia and Latin America.

The Price Forbes Political and Credit Risk team has the capability and expertise required to deliver effective and competitive solutions for clients looking to manage and protect their capital while preserving shareholder value.

D Equity investments and shareholder debt as well as Project and Corporate Finance transactions

D Contractor’s plant and equipment

D Emergency and temporary power installations

CAUSES OF LOSS COVERED INCLUDE:

D Counterparty Default D Confiscation, Expropriation, Nationalization

D Abrogation of operating licences and concession agreements etc.

D Selective Discrimination and Creeping Expropriation

D Inability to export including Export/Import Licence Cancellation and Sanctions/Embargo by multi-laterals such as the UN / EU / AU / ASEAN

D Political Violence and War

D Forced Abandonment D Forced Divestiture

D Repudiation/Frustration of offtake and supply contracts

D Currency Inconvertibility or Exchange Transfer moratorium including Forced Repatriation of Funds


DATA AND ANALYTICSUNDERSTANDING THE TRUE COST OF RISK

Client data is increasingly scrutinised for its completeness and robustness of detail. The financial markets demand quality analytics; investors and lenders need to accurately assess predictability and yield potentials. Insurers and Reinsurers need to analyse and understand client loss data in order to better understand risk outcomes.

Project stakeholders are increasingly investing in better analytics at an early stage to more precisely assess potential outcomes and reduce uncertainty for investors and lenders.

Financial models can be combined with resource, NatCat and degradation modelling to demonstrate variable scenarios and to better pinpoint the risk profile of a project. Computational fluid dynamics (CFD) can be incorporated to better understand potential yields for wind farm projects or geothermal reservoirs. Reduced uncertainty leads to higher predictability ratios, resulting in reduced project finance, insurance and operational costs - less exposure for the project sponsors.

Our Data Solutions team has decades of experience in evaluating client data and providing both insight to and evaluation of large insurance and reinsurance risks. We work with leading project management and engineering groups to help evaluate, assess and more effectively risk manage the projects and operations of our clients.

Reduced Project Costs

DegradationData

NatCatData

ResourceData

LEADING CLAIMS TEAMINTEGRATED & THOROUGH CLAIMS SUPPORT

Lloyd’s of London statistics show Price Forbes to be consistently above the market average for claims transactions, advices and settlement times amongst the 29 major Lloyd’s brokers monitored. We have a 30 strong, in-house claims team with deep-rooted experience of power and utility engineering risks. We are a strong advocate of expediting the entire claims management process as understanding the process enables us to provide an effective strategy to maximise the recovery.

The team will assist in compiling the relevant documentation to support the claim process and provide technical advice to you with regard to claims, including production of claims reports, loss analysis, recording statistics and maintenance of aggregates:

D Intervention and resolution of issues with adjusters and carriers

D Assistance in negotiating with insurers’ representatives

D Claim strategy reviews

D Litigation management to assist in the selection of outside counsel, development of procedural guidelines, case monitoring

CLAIM REPORTED

COVER ANALYSIS & STRATEGY

NEGOTIATE & RESOLVE

CLAIM SETTLED

JUSTIFICATION & AGREEMENT

RENEWABLES PRACTICE OVERVIEW

AND INFRASTRUCTURERENEWABLE ENERGY

Price Forbes & Partners Limited2 Minster Court, Mincing Lane, London EC3R 7PD+44 (0)20 7204 8400

Copyright Price Forbes & Partners Limited 2020Registered in England number 5734247. Registered office as abovePrice Forbes & Partners Ltd is a Lloyd’s broker and is authorised and regulated by the Financial Conduct Authority www.priceforbes.com

Poul Bach HansenHead of Renewable EnergyT +44 (0) 20 7105 3010E [email protected]

Huw TurnerDirector, Renewable EnergyT +44 (0) 20 7105 3046E [email protected]

Sam Northcote-GreenAssociate DirectorT +44 (0) 20 7105 3058E [email protected]

Sam CrawfordAccount ExecutiveT +44 (0) 20 7648 5632E [email protected]

Dillon PatelTechnicianT +44 (0) 20 7015 2718E [email protected]

Kayleigh PrenticeAccount HandlerT +44 (0) 20 7648 5679E [email protected]

Guy ThurlowExecutive Director, Terrorism & Political RisksT +44 (0) 20 7204 8465E [email protected]

Anthony FoleyDeputy Head of ClaimsT +44 (0) 20 7648 5678E [email protected]

PFP 216 01/20

PRICE FORBES & PARTNERS RENEWABLES PRACTICE OVERVIEW · 4 RENEWABLES PRACTICE OVERVIEW RENEWABLES...

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