About ArcStar Energy
The purpose of our company is to develop or acquire high value solar energy investments. Our veteran management team has many years of experience in financing, building and operating distributed energy assets in deregulating domestic and international markets. ArcStar has established a pipeline of superior commercial solar investments in Ontario, Canada, the most secure and lucrative solar market in North America. The company is seeking investors interested in funding an ongoing series of profitable energy investments which produce long term predictable cash flows backed by superior credit.
ArcStar Financing Proposal for Ontario Ground Projects
1. ArcStar has secured an initial high-value 10MW ground project site under the Ontario Feed in Tariff, the largest allowed under the program. The 20 year Power Purchase Agreement is guaranteed at $0.443 per kWh. The off-taker is AA rated Ontario Power Authority.
2. The company has developed a strategy and methodologies to secure a minimum of 10 such sites prior to the expected rate adjustment in October, 2011.
3. The strategy requires $250,000 in direct expense and $500,000 of refundable deposits in the form cash or bank LOCs per site.
4. Once fully secured, each site may be:
a. Sold to other project developers for $3-5 Million each.
b. Developed, each of which requires approximately $44 M in financing, generates over $3M in closing fees and distributes over $36M in net pre-tax distributions over the 20 year contract.
5. The company is seeking $2.5 M in equity and $5M in refundable cash or bank LOCs to execute its acquisition strategy, followed by up to $450M in structured financing to build 100MW of these projects.
Background
Under the Ontario Feed in Tariff program rules, all projects with FIT applications submitted that meet requirements prior to October 1, 2011 will be locked in at the current 20 year FIT rate of $0.443/kWh for ground mounted solar projects.
ArcStar Energy has launched a targeted market strategy to quickly secure site control of a number of properties qualifying for ground mount solar projects of up to 10 MW each. This initiative leverages modest amounts of cash to secure each of these valuable investment opportunities.
ArcStar Energy has engaged the services of seasoned real estate professionals who know the specific markets we have targeted and have prepared these agents to identify sites meeting our stringent criteria. The company has data and processes which enables our site procurement efforts to be targeted in the geographical areas with the most capacity available, thereby reducing the likelihood of facing grid capacity issues in the FIT approval process.
Once identified and qualified by the realtor and then surveyed by our own team, ArcStar will make an offer to acquire the site under purchase option or 20 year lease option. The offer will include a $10,000 down payment that will be paid within 90 days of the execution of the Option Agreement. No other monies will be due and payable to the landlord until a sale or lease is executed contingent on defined approvals being secured under the FIT program. ArcStar has dedicated a team to secure up to ten properties prior to September 30, 2011. Once the Option agreements are executed ArcStar will initiate the FIT application and approval process for each property.
The characteristics of the ideally suited land are as follows
Land uses:
§ Agricultural lands, Class 3 Available Lands (as designated on the FIT Program website) and Non- prime Agricultural Lands (Class 4, 5, 6 & 7) or Unclassified Lands.
§ Aggregate Pits – inactive, no future use expected. Active pits with inactive sectors are acceptable.
§ Landfills – closed & capped.
Land Characteristics:
§ 100 Acres or less (minimum 50 acres). The optimum size solar farm is 10 MW under the FIT program. ArcStar will consider sites capable of supporting solar projects that exceed 5 MW.
§ Close/direct access to a 3 Phase grid connection is required.
§ Clear, flat lands with an unobstructed southern exposure. Farm
§ Site preparation costs are minimal – clearing, grading, perimeter security & grid connection costs are significant to overall cost of development.
Ownership:
§ Privately owned lands are preferred as the sale/lease decision process is simplified.
Offer to Land Owners:
§ Purchase lands. Sale price range: $200,000 to $500,000 for 100 acre property. ArcStar will enter into an Option to Purchase Agreement and pay the landowner a non-refundable down payment, with the transaction closing on receipt of a Notice to Proceed (NTP) issued by the Ontario Power Authority.
§ Lease Lands. Lease rate range: $35,000 to $45,000 per year for the 20 year term of a FIT Contract.
Site Acquisition Fees
The table below lists the commissions ArcStar agrees to pay to any real estate broker or agent who is able to secure suitable and qualified properties that result in a FIT contract and are consistent with this initiative.
Real Estate Broker Fees for Land Acquisition | ||||
NPV of lease or Purchase Price | | Commission | Paid at Option Execution | Paid at Financial Closing |
| | | ||
Less than $300,000 | | $30,000 | 50% | 50% |
Greater than $300,000 but less than $400,000 | | $25,000 | 50% | 50% |
Greater than $400,000 but less than $500,000 | | $20,000 | 50% | 50% |
Sources of Funds per Site
The process to secure each site, the FIT tariff rate and reach the confirmed capacity and cost of grid interconnection will cost a total of $250,000 and will require refundable Letters of Credit in the amount of $500,000.
Uses of Funds per Site
Letter of Credit
$500,000 Refundable Letter of Credit (released by OPA if application approval fails or project is withdrawn)
Cash
$5,000 FIT Application Fee
$17,000 Capacity Impact Assessment (CIA) and Class A Connection Agreement (CCA) Fees
$10,000 Lease/Purchase option fee to Landlord
$25,000 Real Estate Commission (part on option, part on sale/lease)
$20,000 Design Engineering for FIT capacity and interconnect applications
$50,000 Renewable Environmental Assessment Study
$123,000 Site acquisition fees and expenses
$250,000
Summary Investment
10 MW Project: Revenue, Operating Income and Debt service
10 MW Project: Debt Service Coverage
10 MW Project: Asset Value to Outstanding Debt
Monty Bannerman
ArcStar Energy
646.402.5076
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