1

Basis risk of hedging

1

Insufficient wind Sufficient wind Excessive wind

Turbine operation normal

=> Yes Payout No payout Payout

=> No Payout No payout Payout

Transmission constraint

=> Yes Payout No payout Payout

=> No Payout No payout Payout

There is basis risk in two directions

Power production affected by factors other than wind

There will be a payout although it would not be possible to produce

2

Monthly payouts during course of time

Implicit monthly production (based on Index) 1) Above red line (Put Strike) monthly production is sufficient and there will be no payout

2) Between red and green lines - difference between red line (Put Strike) and green line (Production) will be paid out (shortfall x feed-in tariff)

3) Below the blue line (Exit) there is no further payout (Maximum payout reached)

Pro

duct

ion (

MW

h)

Jan

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

PutStrike

Exit

Production > Put Strike = No Payout

Production < Put Strike = Payout

No additional payout below blue line (maximum payout reached)

Alternative: Put-Option on Annual Production

Annual Production

Payout

Put Strike

0Option Premium

Option payoff

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

Exit

Premium

Dec

Put Strike

Put Limit

3

Testing the value of the hedge

Assumptions

Project Size 102 MW

Wind Resource

P50

2,472 Eqv. Hours / Year

P75

2,226 Eqv. Hours / Year

P90

2,039 Eqv. Hours / Year

P95

1,927 Eqv. Hours / YearProject Costs 117.30 EUR MM

Project Life

20 YearsTotal Costs 124.45 EUR MM

Leverage

75:25

Total Debt

93.33 EUR MM

Debt Tenor

17 Years

Margin 400

Basis Points (above EURIBOR)

Wind farm developed by mid-size sponsor in Spain.

‑ The project is located in a reasonable spot (good wind resource)

‑ Costs are in line with market conditions

ResultsP50Equity IRR 13.48%NPV @ 8% 22.508EUR MMMinimum DSCR 1.53x

P75Equity IRR 10.71%NPV @ 8% 11.227EUR MMMinimum DSCR 1.41x

P95Equity IRR 7.43%NPV @ 8% -2.349EUR MMMinimum DSCR 1.26x

4

Even if only benefits is intangible one of reducing risk of financial distress, costs is relatively low.

Impact of adding Wind Protection on the project's economics

ResultsP50Equity IRR 13.17%NPV @ 8% 21.514EUR MMMinimum DSCR 1.50x

P75Equity IRR 10.44%NPV @ 8% 10.236EUR MMMinimum DSCR 1.38xEven with the associated costs of wind protection in place, the economics of the project are not greatly affected.

Put Option on Wind Power Index• Strike at (P75)• 5 years• 10 EUR MM limit• Premium 1.5 EUR MM1

Buying wind protection

Wind protection in place 75% / 25%

ResultsP50Equity IRR 13.48%NPV @ 8% 22.508EUR MMMinimum DSCR 1.53x

P75Equity IRR 10.71%NPV @ 8% 11.227EUR MMMinimum DSCR 1.41x

No protection in place 75% / 25%

1 Rough estimation

5

Potential benefits of Wind Protection.

ResultsP50Equity IRR 14.87%NPV @ 8% 24.362EUR MMMinimum DSCR 1.41x

P75Equity IRR 11.63%NPV @ 8% 13.058EUR MMMinimum DSCR 1.30x

Wind protection in place + change in Capital Structure 80:20

ResultsP50Equity IRR 13.81%NPV @ 8% 23.776EUR MMMinimum DSCR 1.54x

P75Equity IRR 11.03%NPV @ 8% 12.480EUR MMMinimum DSCR 1.42x

Wind protection in place + reduction in margin of 50 basis points

By placing a floor on the production, the debt capacity of the project increases; lowering capital costs and improving the economics of the project.

With protection in place, lenders may also reduce spreads.

6

Protection creates value across the capital structure

NPV (8%) Before protection

Leverage Lower margins Debt reserve reduction

Total15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

22.5

1.85

2.42

0.25

EUR MM

Totalbenefit

4.52