Project Finance Credit Memo

Credit Memorandum

Executive Summary This credit memorandum presents the financial and risk analysis of the wind power project in Turkey, recommends if the project should proceed and proposes the financial structure. The project participants, roles, experiences and capabilities have been analyzed and the sponsor, operator, wind turbine supplier and the balance of plant developer all show experience in the wind power generation and project development. The background information including the country, energy sector, electricity market and the regulatory framework in Turkey have been studied and Turkey shows extremely strong potential in the economic and energy demand growth. Meanwhile, the electricity market is highly potential due to the privatization, deregulation and the outpacing electricity demand growth over the supply. The history of wind capacity also reveals strong records to sustain the commercial scale. Furthermore, the all-in-cost is lower than many of other technologies, showing the high potential in this project. Due to the volatility of the cash flows from the major maintenance occurring every 5 years, decreasing cash flows in the early phase of the project and the lack of payment restriction, it is recommended that the project has to establish the major maintenance reserve fund, impose the dividend restriction and change the amortization profile to stabilize the cash flows, maintain the debt service coverage and decrease the debt service burden in the early stage of project. Furthermore, the sensitivity analysis of a variety of risks, the breakeven analysis of price and volume and the liquidated damage assessment have been performed in the credit memorandum

Overview of the Project Participants Sponsor and Operator The project sponsor is Iberdrola Renewables and will commit equity sponsorship in the project. Iberdrola Renewables is the second largest wind operator in the US and has a history of operation for more than one hundred years. It operates...