Global Renewable Energy Fund
Supplemental Information
Question:
How is the term "highly developmental" defined? For example, would the Fund be classified as "highly developmental" if it uses its capital in two complementary ways:
1) to finance various engineering, economic, and environmental studies that are required by regulators prior to the granting of necessary licenses and permits to renewable energy project sponsors? and,
2) to provide debt and equity for renewable energy projects that have obtained the necessary licenses and permits and are, hence, entering the construction phase?
Answer:
"Developmental impact" is evaluated from the perspective of the social and economic effects of a project and the extent to which it is likely to have positive host country development benefits. OPIC will evaluate the developmental impact of an investment fund based on a variety of factors such as the potential for employment generation, local enterprise stimulation, social effects, infrastructure development, technology and knowledge transfer, and others.
Question:
Is there flexibility in the cash waterfall as long as the debt/equity ratio is maintained, i.e. is the subordination/preference among equity investors OK to OPIC?
Answer:
OPIC’s capital can work in a pro rata manner between OPIC debt and equity, as described in the answer to the following question. Beyond that, as a general matter, OPIC is not concerned with the relative subordination relationships among equity investors. For funds with non-traditional (GP/LP) structures, however, we urge that proposals go into as much detail as possible so that OPIC can fully and accurately assess whether the proposed structure will fit with OPIC’s product.
Question:
Is it OK to OPIC that private investors will be fully repaid and out from the fund before OPIC will be fully repaid?
Answer:
OPIC can allow for equity investors to receive distributions on a pro rata basis with OPIC, under a "Waterfall" formula generally described below, but would not be willing to agree to any class of equity investor being fully repaid prior to the repayment of all OPIC outstanding debt.
Proceeds from exited investments may be used in the following general priority in the earlier years of the fund:
a) to pay expenses of the fund;
b) to provide for reserves for future fund expenses;
c) to fund investments;
d) to make tax distributions to equity investors; and,
e) to make payments on OPIC-guaranteed loans along with applicable premiums. After providing for the foregoing, an OPIC-supported fund may, during the early years of a fund's life (typically, the first seven years of a ten year fund), make concurrent distributions to equity and debt participants in a fund, on a pro rata basis, as long as a negotiated prescribed debt to equity ratio is maintained. During the later years of a fund's life, and to the extent that OPIC-guaranteed loans and interest have not been satisfied, distributions are required first to be made to meet those obligations.
Should the proscribed debt to equity ratio not be maintained, OPIC would receive all fund distributions until the ratio is met.
Again, for funds with non-traditional (GP/LP) structures, we urge that proposals go into as much detail as possible so that OPIC can fully and accurately assess whether the proposed structure will fit with OPIC’s product.
Question:
Does or has your fund invested in any biofuels projects or companies anywhere in the world? We are about to launch a very substantial project in Canada.
Answer:
As a U.S. Government agency, OPIC must ensure that its activities do not have adverse effects on the U.S. economy or on American companies. OPIC has undertaken a thorough review of the industry and has determined that at this time it is not possible to support certain biofuels projects. Specifically, OPIC cannot support foreign biofuels producers that export to the U.S., or projects in countries that are export markets for American companies. However, OPIC may consider biofuels or biodiesel projects that produce for domestic consumption in emerging economies and that do not export to the United States.
Because OPIC has a developmental mandate, it can only support investments in OPIC-eligible emerging economies. OPIC funds cannot be used in Canada because it is not an emerging economy, and is therefore not OPIC-eligible.
Question:
Will OPIC consider Investment Funds that make investments in the U.S. in U.S. companies that are targeting expansion in regions like Asia?
Answer:
To qualify for OPIC support, the investment fund must make investments in portfolio companies that operate in OPIC-eligible countries and have a majority of their assets in or derive a majority of their revenues from those operations. In addition, the proceeds of the fund's investment should be used in the OPIC eligible countries. A local portfolio company could be a subsidiary a U.S. company and satisfy these requirements.
Question:
1) Please further explain the certification process to prove that neither the fund manager nor any of its affiliates have engaged in "discouraged transactions". For the purpose of the proposal, is it sufficient to simply say we are confident that we can pass such a certification process?
2) According to the Overview of the Call for Proposals, OPIC is looking for private equity funds, "that plan to invest approximately half of its or their capital in companies or projects within the Renewable Energy sector."
The language in the FAQ section Specific Renewable Energy Sectors includes "related energy and environmental sustainability sectors, including, but not limited to, energy efficiency products, systems and equipment, emissions control and treatment, wastewater treatment and waste management."
Our fund plans to invest 50% of the total funds raised into renewable energy, energy efficiency (including taking over a polluting power plant and making it more efficient (possibly through carbon sequestration), waste water and water systems, forestry to earn voluntary carbon credits, and roads that are proven to reduce carbon emissions by independent specialists. Please confirm the above areas of investment would qualify for OPIC's fund-allocation requirement.
Answer:
For the proposal submission, it will be sufficient for the sponsor(s) or fund manager to state that neither it, nor any of its affiliates, have engaged in "discouraged transactions", and as such could pass such a certification process.
As part of the Call criteria, OPIC has requested that fund managers consider in their strategy that approximately half of a fund's investments are expected to be invested with projects or companies in renewable energy sectors, which are broadly defined in the Call's criteria at http://www.opic.gov/investment/proposals/global_energy_2008/overview.asp.
The remainder of a fund could invest in other sustainability sectors that generate other environmental benefits, examples of which you have described. The primary purpose of the Call is to promote the development, investment and implementation of clean energy projects and companies in OPIC-eligible countries in the developing world.
Question:
The countries approved under geographic focus do not include Africa, except insofar as construed to be part of the MENA region. Is it really the intention to exclude Saharan and sub-Saharan Africa? If so, can you explain why?
Answer:
OPIC is a strong supporter of private investment in Africa. In fact, in the last few years OPIC has issued a number of calls for proposals focused exclusively on the continent, particularly Sub-Saharan Africa. Given the number of previous calls focused on Africa and its existing fund portfolio, OPIC decided to emphasize other regions of the world based on its assessment of the renewable energy sector in those regions.
Question:
The applicants are required to submit a large number of hard copies of the application. The questionnaire guiding the filling in of applications requires submission of copies of various documents (financial statements, contracts, memoranda, due diligence reports, partnership agreements, etc). Such documents contain an extensive number of pages.
Should these copies be submitted in the same number of copies as the application? Should all hard copies of the application contain copies of all additional documents requested, or is it allowed to submit a lower number of attachments of this type in order to save paper?
Answer:
For a proposal to be deemed complete, fifteen copies of the application must be sent to OPIC and three copies to Dalberg Global Development Advisors. With respect to the additional documents mentioned above, three copies of each document submitted to OPIC and one copy to Dalberg Global Development Advisors is acceptable.
Question:
Could you please elaborate on what is meant by "the team's relationships with key renewable energy stakeholders in OPIC-eligible countries" from Section D.1.e?
Answer:
As a part of the proposal submission material, OPIC has requested fund managers to identify working relationship experience with (or knowledge of) investors, financial institutions, regulatory entities, and government initiatives relevant to the country and/or sector of interest in the context of the renewable energy industry and the requirements of OPIC's Call for Proposals.
Question:
Does OPIC consider investments in thermal power projects where we can improve efficiency and reduce emissions via carbon sequestration or other techniques a "renewable energy" investment?
Answer:
While OPIC does not consider carbon sequestration a "renewable energy" technology for the purposes of the Renewable Energy Call, OPIC will consider funds' proposals that have some investments in commercially viable geological sequestration projects. For example, OPIC could consider support for a thermal power plant to the extent it is bundled with verifiable and certifiable geological sequestration processes that offset the emissions. However, the generation of carbon credits should not be the primary investment strategy of the proposed fund.
Question:
If the track record information requested in Section E of the questionnaire includes portfolio information that is considered non-public (e.g., corporate venture funds), how will this information be evaluated/protected by OPIC?
Answer:
OPIC maintains strict confidentiality with respect to all business confidential information. OPIC will not, however, treat as confidential or proprietary general ideas and concepts contained within any proposal. For the benefit of the Call finalists and the process, OPIC may choose to share their proposals with other potential interested investors, but will ask for written permission from the Call finalists before doing so. In addition, OPIC may consult with pertinent offices within the Department of Energy or other US Government agencies regarding submitted proposals as part of the selection process.
Question:
With regard to question B.1.d, how much detail is appropriate for a fund that is global/multi-country vs. a single-country fund?
Answer:
The more detail, the better for our evaluation purposes. However, there is no difference in the amount of detail OPIC would like to see for a global/multi-country vs. a single-country fund. For both types, OPIC would like to see examples of current or potential deal flow, with as much detail as can be provided.
Question:
Is a single-country or regional fund a preference for OPIC? If several countries or regions are targeted, is it permitted by OPIC to undertake transactions in other OPIC countries that are not yet contemplated by the proposal?
Answer:
OPIC is not partial to single-country vs. regional vs. multi-region funds, so long as their mandate falls within OPIC eligible countries. OPIC is keen on understanding the strategic rationale and investment focus of a fund. Absent other information, a single-country fund may appear less diversified (e.g. country risk cannot be diversified), but with a strong cohesive overall fund strategy, single country funds are not at a disadvantage. Finally, yes, OPIC permits funds to undertake transactions in other OPIC countries that are not contemplated in a fund manager's original proposal.
Question:
The Call states that funds should plan to invest approximately half of their capital in the renewable energy sector. Are there any sector or other restrictions that might apply to the fund for non-renewable energy deals? Also, will the OPIC financing apply to all fund deals or only those in the renewable energy sector?
Answer:
There are some restrictions on renewable energy that have been posted on the website, such as those pertaining to carbon sequestration. OPIC financing applies to all fund deals, not just renewables; however, OPIC would like to see a solid investment strategy in any of the renewable sectors.
Question:
Are Biofuel production projects in Brazil ineligible under OPIC's criteria or are projects in Brazil that produce for domestic consumption eligible?
Answer:
As a U.S. Government agency, OPIC must ensure that its activities do not have adverse effects on the U.S. economy or on American companies. OPIC has undertaken a thorough review of the industry and has determined that at this time it is not possible to support certain biofuels projects. Specifically, OPIC cannot support foreign biofuels producers that export to the U.S., or projects in countries that are export markets for American companies. However, OPIC may consider biofuels or biodiesel projects that produce for domestic consumption in emerging economies and that do not export to the United States.
Brazil is currently a country for whom the US is an export market. While OPIC cannot provide capital to companies or projects that support Brazilian biofuel exporters (or biofuel projects whose outputs are for export markets), it may consider companies or projects that invest in Brazilian biofuel producers if the full amount of that production is for direct use within Brazil.