Transaction Model Explanation

Commercial Structure of the Transaction

  • The deal involves three sites: Linwood, Stanley, and Middleton Farm.
  • Two sites are battery energy storage systems (BESS), and one is solar.
  • All three sites need to be constructed, requiring financing.
  • Funding will be a combination of debt and equity at the HoldCo level.
  • An investor will come in alongside BSL, with BSL potentially having a commitment fee for participation.

Model Structure and Tabs

  • Middleton Farm: Modelled on an asset level.
  • Portfolio (HoldCo): Includes all three assets.
  • Rationale for Separate Modelling: Each asset needs to have the ability to size the debt at each asset level, then roll that up into a portfolio view.
  • Debt Quantum: Contracted at the HoldCo level, then flows down to the OpCos to cover funding requirements, then cash flows generated at the OpCo level service HoldCo debt.

Hierarchical Structure

  • HoldCo at the top.
  • Three OpCos (one for each asset) below.
  • Debt is sized at the HoldCo level and pushed down to the asset levels.
  • OpCos service the debt, paying interest and covering amounts based on gearing amounts.
  • Cash repayments from OpCos go up to HoldCo to repay debt.
  • The asset level captures tax pools and depreciation.

Model Mechanics

  • One engine is used, and inputs are pushed through.
  • The model includes an asset sheet and a portfolio sheet, with a toggle to control which asset is viewed.
  • The portfolio macro cycles through each asset, updates assumptions, solves the debt, and pastes data into a storage tab.

Demonstration

  • Asset-level assumptions and HoldCo-level inputs are present.
  • The toggle controls the asset being viewed (Linwood = 1, Stanley = 2, Middleton Farm = 3, etc.).
  • Asset-specific inputs are updated, including timing, outputs, standalone/solar status, BESS assumptions, degradation cycles, costs, repowering, revenue, and OpEx.
  • Inputs feed into the "calcs asset" tab, which outputs into the asset-level financial statements (AFS).
  • The portfolio is initially blank and shows the funding for the selected asset only.
  • The portfolio macro solves all assets, pastes them, and solves HoldCo tax and workings.
  • The consolidated AFS and Income Financial Statements (IFS) may be removed.

Debt Structure

  • Previously, debt rolled up from asset sheets to the portfolio sheet, mirroring a senior bridge loan into senior debt (refi at end of construction).
  • Operating site assumptions need to mirror HoldCo-level assumptions for the refi.

Funding Coverage

  • Asset sheets (Linwood, Stanley, Middleton) have different cash flows and operating assumptions, leading to different levels of cash flow after debt service (CFADS).
  • DSCR (Debt Service Coverage Ratio) is applied using 1.4x contracted and 1.8x beyond contract.
  • Portfolio sums funding amounts from OpCo sheets using storage tabs (start and end).
  • HoldCo sheet receives dividends and shareholder loan repayments from the portfolio.
  • HoldCo provides senior debt, cash injections, and equity injections to the portfolio.

Model Layout Detailed

  • Input C: Control assumptions for each asset.
  • TS Assets: Time series asset inputs such as price curves, CapEx profiles, maintenance cost profiles, and revenue profiles.
  • Scenarios: For running scenarios (seldom used).
  • Monthly CapEx profiles: Used for TS Assets
  • For revenue, different capacities and allocations (for BESS) are split with PPA details and allocation periods.
  • Funding workings and debt inputs similar to a single model.
  • DSRA (Debt Service Reserve Account), DSRF (Debt Service Reserve Fund), MRA (Major Repair Account), MMRA (Major Maintenance Reserve Account): Reserves are cash pre-funding cash.
  • Returns, balance sheet, and input tracker are included.
  • Input Tracker allows changing one input without running the whole model (using the "change only" macro).

Debt Instruments and Repayment for Asset Financing

  • Debt structure considers the RTB (Ready to Build) status and grid offers for each site.
  • Full commitment upfront leads to commitment fees on the full loan amount for the entire construction period.
  • Stanley and Linwood: Facility to cover CapEx due to long lead times for batteries.
  • Potential Structures:
    • Accordion: Facility expands as conditions are met.
    • Multi-tranche Facility: Funding committed upon meeting conditions for each tranche.
  • Once drawn, it will all be one loan, with debt sitting at the HoldCo level and leverage respective to each site.

Milestones and Funding

  • Funding isn't strictly tied to asset milestones but to broader project progress.
  • Linwood and Stanley: At RTB and starting construction upon grid offers.
  • Middleton Farm: Still in planning; debt drawdown is undesirable without a grid offer.
  • Drawing down too early leads to commitment fees without construction progress.
  • The exact facility structure depends on lender preferences: club deal, multi-tranche, accordion, etc.

Action points

  • Get comfortable with the model and run through it.
  • Extract a graph for the info doc showing cumulative total funding requirements per tranche and asset.
  • Review Model with Theo re technicals.
  • Benchmark asset AFS and IFS by cycling through assets, taking a year, and calculating pound per megawatt amounts for revenue streams, operating costs (variable and fixed), and operating margin/EBIT/EBITDA for each and generate a summary table.
  • Awaiting another version from China/India with presentation changes.