increase the ROI of a Wind Farm
from 7% to 15% (normal)
up to 20% to 50% (GPP MTN model)
or 200% to 1000% (BTUBANK model)
This white paper and class is part of a series of classes provided by Gold Pact Power and
partners, such as Eduhosting and KCK. KCK has written software
and online class for firms such as Wadsworth/Thomson Learning and the University
of Phoenix.Page available at www.goldpactpower.com/classmtn.html |
Typical wind farm ROI (return on investment) is between 7% and 15%, which is not attractive to most investors. As a result, nations pass laws to subsidize the industry, such as the U.S. Congress mandate of applying Production Tax Credits (PTCs), which allows firms that invest in wind farms to 'write off' gains made in other investments.
The GPP MTN method, developed by GPP with assistance from a Patent Attorney in Silicon Valley, eliminates the reliance on PTCs to make projects profitable. The ROI of a wind farm funded using the GPP MTN method is 20% to 50% and when combined using the BTUBANK model shown below, ROI can be 200% to 1000%
As a result, PTCs are not required to make a project attractive; capital can be highly leveraged. For international investors who seek a low profile, the GPP MTN method provides additional layers of protection from onerous regulations surrounding interest in the renewable energy and fuel sectors in the United State or any nation, by giving investors controlling interest in a local bank that funds a project, rather than interest in the project itself.
As a result of new U.S. Treasury regulations on the hedge funds, derivative markets and the OTC, its now even harder to fund the renewable energy infrastructure through traditional markets. As UCC compliance expands through the EU, Asia and Latin America, similar laws are being implemented in other nations, making it more difficult than ever to:
- Reduce airborne, ground-based and stream-based pollution.
- Reduce consumption of coal and conventional fuels for power.
- Reduce each nation's reliance on foreign oil.
- Increase exports. The GPP facility design produces zero emission fuel that can replace conventional fuels
in coal-fired, gas-fired and oil-fired generating stations.
- Help the U.S. recover from the worst economic disaster in history. As the
class below shows, the economies of China, Brazil and India are
taking off, while the U.S. and Eurozone are being left behind. You can change that
and profit from it along the way.
GPP MTN: Solution and Benefits:
GPP's MTN method doesn't rely on hedge funds or OTC derivatives (high-risk), rather the process is low-risk, highly transparent and allows investors to:
- Retain their capital in a bank account they control. Their
capital never goes to a third-party 'trading platform', 'hedge
fund' or 'derivative'.
- The capital is returned to the investor within one year. In
some cases, where a bank is acquired rather than chartered from
scratch, as early as 60 days.
- At all times, the investor's capital is insured against
loss in their bank account (vaulted account), through a
"Credit Guarantee" policy: insuring investors will not lose their
original capital during the bank formation process.
- Once the bank is formed and the loan is issued to the
project developers, the capital is backed with a 4 to 1 level of
fixed assets as collateral. These are typically wind turbines in
pristine condition on the factory floor.
- If the new banking entity markets an attractive CD rate, as shown
in the BTUBANK model, local depositors
make up the bulk of the capital reserves of each banking entity, reducing
the initial capital required by the investment group to 1% to 5% of
the project job cost.
The effect on ROI is to raise it to the 200% - 1000% level for the project debt service period.
Example: a $3 billion dollar (USD) project requires:
- $3B if funded directly.
- $300M if funded 100% by the investor's new banking entity and yields an ROI of 50%, or
- $30M if funded using the local BTUBANK "High CD yield" method
and yields an ROI of 500% for the banking entity, with an equal amount for investor equity, bringing the total
ROI to 1000% - see formulas at the bottom of this document.
- $3B if funded directly.
SUPPORTING WORKS: Credit for the Math
The GPP MTN method was developed after analyzing the strengths and weaknesses in the Gaussian Copula function, shown below, which as originally developed by David X. Li. Born in China as Xiang Lin Li, David is a Quantitative Analyst and Qualified Actuary who pioneered the function for pricing of collateralized debt obligations (CDOs) which was widely used by firms such as J.P. Morgan, UBS and other investment banks. In 2003 he was director and global head of derivatives research at Citigroup. In 2004 he moved to Barclays Capital and headed up the quantitative analytics team. In 2008 Li moved to Beijing where he works for China International Capital Corporation as head of the risk management department.
The GPP MTN method is based on the strength of the banking model, backed by the 'full faith and credit' of the United States and therefore, relies less on the weakness of traditional financing models for renewable energy projects, or reliance on government subsidies and programs, which can come and go with each new administration.
Banking entities have generally enjoyed long-term support from governments: witness the global bailout frenzy, especially in the U.S. Banks are also well-supported by Federally mandated insurance (i.e. the FDIC in the U.S.), giving depositors an additional safety net. The result in the GPP MTN method, when combined with the BTUBANK model; depositors form the majority of the capital base for the project funding and the investors who form a BTUBANK entity earn the lion's share of the profits with a minimal investment and minimal risk.
LEGAL ANALYSIS: Private and Federal support for the model
- A Patent Attorney with a background in Securities called the GPP MTN method
'Brilliant' citing it as the safest method he had
seen for investing in renewable energy infrastructure.
- The current U.S. administration has provided additional
support through:
- Modification of the tax credit subsidies to accelerate
the tax credits through up front payments.
- Liquidity in capital markets.
- Pressure on coal-fired generating stations through increased
fines, which has led to a significant increase in scheduled closure
of these generating stations, adding more pressure to develop
alternative energy driven generating stations.
- Development of the "Cap-and-Trade" programs and other programs
that address the emerging carbon markets: currently at six billion
dollars per year and expected to reach one trillion dollars per year
in the near future.
- Modification of the tax credit subsidies to accelerate
the tax credits through up front payments.
- Additionally, since the banking entity insulates the investor
from direct ownership in the facility, yet provides a large share
of the profits through leveraged investments, there is a reduced
chance of sanctions related to 'foreign interests' owning 'energy
related' facilities.
- New regulations from
the U.S. Treasury support the GPP MTN method by encouraging cross-state
lending which makes it easier to own a banking entity in
a different state than a GPP project. This makes it easier for
a group of investors to enjoy returns from a project while
basing their banking entity in a state that has no formal
agreement with the IRS or Federal Government to share corporate
Director information.
- The GPP MTN method can also fund a project on
the U.S. mainland through a banking entity based in an offshore
nation, so that income taxes due by the banking entity
are reduced to 15% of the amount due if the banking entity
was in the same state as the project. This method is legal
under current IRS statutes and does not involve "hidden,
numbered accounts."
)
RISK ANALYSIS: Eliminating speculative investment methods
The GPP MTN method has absolutely nothing to do with hedge funds, trading platforms, offshore banking or any speculative derivative instruments like corporate bonds, insurance bonds, credit default swaps or the 'toxic assets' that brought down Wall Street and the global financial markets.
The GPP MTN method was a result of consultation with:
- Gold Pact Power generating station auditors, system
designers and operators.
- Retired legal staff who specialized in risk management:
many of our advisors are seasoned veterans of the legal,
financial and utility industry.
- Bank and Credit Union Charter professionals.
- Hedge fund, OTC, derivatives and trading platform
brokers who were laid-off during the current economic
downturn and who revealed the inherent risks of Private Placement Trading
Platforms commonly used by J.P. Morgan and Goldman Sachs.
- Compliance officers who had worked with firms such as J.P.
Morgan and Prudential Securities.
- Former Bank Presidents and Operations Managers.
- Banking professionals with experience working with the
World Bank, the IMF and Bank of England.
- The Head of State of a Foreign Nation who brought to light
their nation's unique status with the IRS.
- The 'Credit Guarantee' bond.
- The Construction Performance Completion bond.
- The Project Wrap (liability and damage to turbines).
- The FDIC insurance covering depositors, and
- The low investor requirement: as little as 1% of project job cost.
- The elimination of the majority of U.S. income tax liability.
- An experienced team made of GPP's Board of Directors, and
- GPP's Vice Presidents
and Advisors.
EXAMPLES OF APPLICATION OF THE GPP MTN MODEL: Actual GPP Projects
Each of the projects below have an associated Job Cost, Project Plan, Pro Forma Financials and Executive Summary. In each case, the investment can be reduced by 99% to approximately 1% to 10% of the project job cost shown in the reports.
(Project Plan of small $60M project
that can be funded for as little as $1M)
)
(Executive Summary of small $60M project
that can be funded for as little as $1M)
(Project Plan of medium $400M project
that can be funded for as little as $4M)
)
(Executive Summary of medium $400 project
that can be funded for as little as $4M)
(Project Plan of large $3B project
that can be funded for as little as $30M)
)
(Executive Summary of large $3B project
that can be funded for as little as $30M)
)
(BTUBANK example of a 1000% ROI using the GPP MTN method)
(CLASS on "The widening global GAP as China, Brazil and India leave the U.S. behind)
(PDF version of this class)