K2SP 3170 - Energy Financing

This lecture will provide students with factual elements to help them to better understand the specificities of the energy sector, with a focus on the transition which is underway globally (i.e., transformation of the global energy sector from fossil-based to zero-carbon). ► The objectives for this course are that students should meet the following: - Identify the various stakeholders in the energy space, along with their role in the market, their constraints, and their objectives, along with trends and challenges affecting these stakeholders - Understand and be able to explain how to create a project that can be financeable (development phase) - Understand and be able to describe and apply a “standard” project finance setup to a relevant opportunity (financing phase). This means being able to understand and explain how the financing structure works, and why it is structured the way it is - Identify risks and propose avoidance/mitigation solutions during the development and financing phases - Ability to build a simple financial model for an energy project ► Sessions will focus on: - The energy sector (focus on electricity sector), its various players and their respective financing needs (debt, equity) - Project development process - The banking sector and the various products and financing schemes proposed by banks to energy sector players, focusing on renewable energy projects and project finance ► Sessions will not focus on: - Studying public policies that underpin the development of this sector; - Crowdfunding

Aurélie DETHAN,Pierre FLIN,Kevin FELDMAN

Cours magistral seul

English

► The concepts developed in this course are usually new to most students and may therefore require more involvement from them. We invite students to read the mandatory readings before session 2 to start getting familiar with the topic. All the concepts will be explained in class. Also, it is highly recommended to study the contents of the previous session from one session to the others. In any case, the mandatory readings shall be studied for knowledge consolidation purposes. ► Regarding the role-playing case study, students are allowed to inspire themselves from real projects. The course is dense but by starting to prepare the case studies from the beginning of the semester, students will be able to gradually consolidate the concepts and illustrate them as part of the case study. We therefore expect the students to prepare the case study all along the semester to ensure quality and fluidity of the presentation. The lecturers welcome questions by email in the course of the semester or side discussions after class for those students who feel the need for extra clarifications. Further, should students need some clarifications to better prepare their case study, each group is offered the opportunity to have a 30 min discussion with one of the lecturers.

► Basics in financing and accounting. Students who are interested in the class but who don't have any finance background are most welcome but will need to catch-up on finance topics all along the semester. Specifically, students should come to the course already familiar with the key concepts of Internal Rate or Return and Net Present Value ► The mandatory readings below already provide materials for efficient catch-up on these topics. ► Baccalaureate equivalent level of math to understand the basic formulas that are included in any finance contracts for these projects.

Autumn 2022-2023

► Active participation & press review: 20% ► Group role playing case study: 80% Press review: each week, all students will prepare a 5 min max press review on one topic they identified in the press in relation with the main subject of this class of the week or more generally on energy financing. Two/Three students will be randomly chosen to present to the class their respective selected press articles and the other students are expected to react to the presentation and debate the topic with the presenter for max 10 min for each topic. Role-playing case study: students will be split in groups. Each group will work on one of the suggested topics (to be shared by the lecturers after the first sessions have taken place), which will be an oral presentation lasting 20 min followed by up to 20 min of Q&A from the class and the lecturers. Groups will be organised in September to leave enough time to each of them to work on their respective case. Students will be assessed on the quality of the project they have built, relevance of their intervention during the presentation, risk analysis and rationale for the ultimate decision to invest in /lend to /develop the project. Form and substance will both play a role. No supporting material will be provided to build the scenarios. It is the responsibility of the students to research the topic and then use inspiration from real life examples to build their own scenario within the topic they will select.

► The program will be a combination of lectures sessions and interaction sessions: - The lecture sessions will be dedicated to providing the students with the academic fundamentals and market illustrations related to each topic. During those academic sessions, interactions will be limited to Q&A from the students, i.e. students should not expect group work during the academic sessions. That being said, classes shall be as interactive as possible. Students usually have diverse backgrounds that can adequately complement each other. Active participation and collaboration between the students are therefore highly recommended for the benefit of the class. - The press reviews and the case studies will constitute the interaction activities. ► For the avoidance of doubt, attendance to the case studies of the fellow classmates is mandatory: - These sessions are used for knowledge consolidation on topics which will have been less studied in details by the other groups - The lecturers will challenge the students at the end of the case study. As it is an oral exam, part of the questions is generally asked to give the student the opportunity to correct inaccuracies that may have been said during the case study (if any) on topics that were discussed during class. Some case studies open doors to discussing topics a bit further with class, and the lecturers will use that opportunity to ask further questions and see how students react to them. In such cases, the lecturers don't expect a clear cut and fully accurate answer, as the topic may not have been studied, but the ability of the student to build a sound reasoning on the spot will be taken into account as a bonus. There will be no negative impact otherwise. Finally, feedback on the case study will be provided at the end of each case study by the lecturers, both on content and form for the benefit of the full class