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Title:	FIT Contract - Term
Submitted By:	Mike Crawley
Date:	6/26/2009
Document Text:	Debt financing has become increasingly challenging for renewable energy projects. There has been much attention paid to historically high credit spreads/margins and the rapid escalation of lender fees. These certainly have negatively impacted project economics. However, lenders now are also forcing borrowers to accept less favourable terms and conditions. One example is that institutional lenders are now forcing borrowers to draw down 100% of the facility at the start of construction instead of as required through construction. Another example is that bank lenders are shortening amortizations on OPA PPA projects from 20 years back to 17 or 18 years as they now look for a two or three year 'tail' on financings. This has a significantly negative impact on leveraged equity returns and was not contemplated in the OPA's modelling on FIT pricing for wind power projects. Given that wind power projects will typically operate beyong 20 years, it is suggested that a 25 year wind power PPA be offered instead. This would likely allow banks to amortize financing to at least 20 years and improve project economics. The impact on the rate payer will not be substantial since these projects would likely be re-contracted in some form and with the FIT price only 20% indexed the contracted price should be attractive in 20 years.