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Economic, Financial Analysis & Modelling of Geothermal Energy
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- Completion Certificate
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Highlights
Delivered In-Person
Intermediate level
Description
About this Training Course
This 3-day course will address a variety of contract and loan structuring issues associated with geothermal energy projects as well as comparison with solar, wind and battery storage. The course is designed to investigate how various project finance techniques and contract structures can be used to achieve a competitive power prices while maintaining a satisfactory equity return. Distinctive project finance features of power facilities that depend on geothermal, wind, hydro or solar resources will be evaluated with financial models.
The course will cover economic analysis of exploration and development of geothermal facilities and how to incorporate probability of failure and success into an IRR framework. Subsequent sessions will address the theory underlying liquidated damages for delay, and performance as well as design of other incentives that is inherent in different contract structures. Nuanced project finance issues associated with structuring debt for renewable projects will be discussed including under what conditions the DSCR drives debt capacity and when the debt to capital ratio is instrumental.
The course will be taught with a combination of theoretical discussions, term sheet review and focused financial models.
TRAINING OBJECTIVES
Upon completion of the course, the participants will be able to:
Evaluate the economic risks that arise from uncertainty associated with drilling exploration wells and development wells for geothermal projects.
Analyse the theoretical issues with computing LCOE for geothermal projects compared to other renewable and non-renewable resources and the importance of cost of capital for renewable projects.
Understand differences in contract structures for renewable projects and dispatchable projects and how a single price structure can distort incentives for efficient construction and operation.
Understand components of financing that influence the bid price required to meet a required rate of return on equity and can result in relatively low prices with reasonable returns.
Understand the importance of debt sizing constraints and what strategies are relevant when the debt to capital constraint applies relative to when the debt service coverage ratio drives the debt size.
Understand how to compute P50, P90 and P99 for different projects driven by resource risk.
Understand the difference between mean reverting resource variation and estimation mistakes that do not correct as the basis for 1-year P90 and 10-year P90.
Understand under what conditions debt sculpting can affect returns and how synthetic sculpting can be used to increase returns when the DSCR constraint applies.
Understand the theory of credit spreads, variable rate debt and interest rates in different currencies and compute the implied probability of default that in inherent in credit spreads.
Understand how to evaluate the costs to equity investors and the benefits to lenders for various credit enhancements including DSRA accounts, cash flow sweeps and covenants.
TARGET AUDIENCE
Geothermal energy developers – Project managers, financial analysts, procurement managers at companies developing geothermal power plants need these financial modelling skills.
Geothermal investors – Analysts and fund managers at infrastructure funds, private equity firms, and banks that invest in and finance geothermal projects.
Energy sector consultants – Consultants working in geothermal energy, such as on project feasibility studies, require financial analysis and modelling abilities.
Energy investment bankers – Investment bankers that work on geothermal energy M&A, project financing deals need modelling expertise.
Energy market regulators – Regulators that oversee geothermal power markets and set tariffs/incentives need cost analysis capabilities.
Energy policy analysts – At government agencies, think tanks and NGOs analyzing and making policy recommendations around geothermal energy.
Accountants & auditors – Involved in assurance and advisory services for geothermal power companies.
Insurance professionals – Underwriters and risk analysts for geothermal project insurance products need modelling skills.
Legal professionals – Lawyers working on geothermal project contracts, financing, regulation require some financial analysis abilities.
COURSE LEVEL
Intermediate
TRAINING METHODS
The training course is presented in an interactive workshop format that allows discussion. The course will be delivered through analysis of case studies and running examples of problems.
Course Duration: 3 days in total (21 hours).
The training instructor relies on a highly interactive training method to enhance the learning process. This method ensures that all participants gain a complete understanding of all the topics covered. The training environment is highly stimulating, challenging, and effective because the participants will learn by case studies which will allow them to apply the material taught in their own organization.
Training Schedule
0830 – Registration
0900 – Start of training
1030 – Morning Break
1045 – Training recommences
1230 – Lunch Break
1330 – Training recommences
1515 – Evening break
1530 – Training recommences
1700 – End of Training
TRAINER
Your expert course leader provides financial and economic consulting services to a variety of clients, he teaches professional development courses in an assortment of modelling topics (project finance, M&A, and energy). He is passionate about teaching in Africa, South America, Asia and Europe. Many of the unique analytical concepts and modelling techniques he has developed have arisen from discussion with participants in his courses. He has taught customized courses for MIT’s Sloan Business School, Bank Paribas, Shell Oil, Society General, General Electric, HSBC, GDF Suez, Citibank, CIMB, Lind Lakers, Saudi Aramco and many other energy and industrial clients. His consulting activities include developing complex project finance, corporate and simulation models, providing expert testimony on financial and economic issues before energy regulatory agencies, and advisory services to support merger and acquisition projects.
Our key course expert has written a textbook titled Corporate and Project Finance Modelling, Theory and Practice published by Wiley Finance. The book introduces unique modelling techniques that address many complex issues that are not typically used by even the most experienced financial analysts. For example, it describes how to build user-defined functions to solve circular logic without cumbersome copy and paste macros; how to write function that derives the ratio of EV/EBITDA accounting for asset life, historical growth, taxes, return on investment, and cost of capital; and how to efficiently solve many project finance issues related to debt structuring. He is in the process of writing a second book that describes a series of valuation and analytical mistakes made in finance. This book uses many case studies from Harvard Business School that were thought to represent effective business strategies and later turned into valuation nightmares.
Over the course of his career our key course expert has been involved in formulating significant government policy related to electricity deregulation; he has prepared models and analyses for many clients around the world; he has evaluated energy purchasing decisions for many corporations; and, he has provided advice on corporate strategy. His projects include development of a biomass plant, analysis and advisory work for purchase of electricity generation, distribution and transmission assets by the City of Chicago, formulation of rate policy for major metro systems and street lighting networks, advocacy testimony on behalf of low income consumers, risk analysis for toll roads, and evaluation of solar and wind projects. He has constructed many advisory analyses for project finance and merger and acquisition transactions.
Lastly, our key course expert was formerly Vice President at the First National Bank of Chicago where he directed analysis of energy loans and also created financial modelling techniques used in advisory projects. He received an MBA specializing in econometrics (with honours) from the University of Chicago and a BSc in Finance from the University of Illinois (with highest university honours).
POST TRAINING COACHING SUPPORT (OPTIONAL)
To further optimise your learning experience from our courses, we also offer individualized “One to One” coaching support for 2 hours post training. We can help improve your competence in your chosen area of interest, based on your learning needs and available hours. This is a great opportunity to improve your capability and confidence in a particular area of expertise. It will be delivered over a secure video conference call by one of our senior trainers. They will work with you to create a tailor-made coaching program that will help you achieve your goals faster.
Request for further information post training support and fees applicable
About The Provider
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