Financial Strategy

BUILDING A COMPANY

At Schneider Power we are looking to build a North American renewable energy company with International ambitions. We measure our success not by market share or by our pipeline of development projects. We measure our success by building net asset value. We will never build a project unless it meets our minimum hurdle rates and we will never waiver on the quality of our assets. If it does not meet our guidelines, we will not build it.

Our approach to business is agressive entrepreneurship backed by knowledge and experience with a manageable project size and solid corporate finance. Green field development forms the pillar of our business, but we will furthermore accelerate the growth of our business through the acquisitions of quality assets at decent valuations.


PORTFOLIO EFFECT

Delays in this industry happen. Its a fact of life. That's why we take a portfolio management approach to project development. The old way of doing things says, build one 200 MW project and put all your eggs in one basket. Our approach says, build twenty 10 MW projects and you also get 200 MW, but now you have a diversified portfolio of projects that when delays happen you can redeploy your team and resources at another site, while you wait for the inevitable beaurocrat to finalize your permits. All the while you are still building net asset value.


NET ASSET VALUE

Our long-term economic goal (subject to some qualifications mentioned later) is to maximize Schneider Power's average annual rate of gain in net asset value on a per-share basis.

Net Asset Value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments in our industry. Net asset value can be defined simply: It is the discounted value of the cash that can be taken out of a project (a) at the beginning and (b) during its remaining life. The calculation of net asset value, though, is not so simple. As our definition suggests, net asset value is an estimate rather than a precise figure, in particular in the early stages of a projects life and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised.

PER SHARE BOOK VALUE

We regularly report our per-share book value, an easily calculable number, though one of limited use. The limitations do not arise from our holdings of marketable securities, which are carried on our books at their current prices. Rather the inadequacies of book value have to do with the companies we control, whose values as stated on our books may be far different from their net asset values.


RETURN ON INVESTMENT

In our industry there are two types of investors, ones that simply invest in the long-term returns of the project (eg. annuity) and ones that invest in the potential uplift in value of a greenfield project and related asset management revenues. Schneider Power is the latter. When you buy a share in Schneider Power you are investing in our ability to solve problems and take a project asset and turn it into a facility that has substantial net asset value. But you are also investing in a business with a diversified portfolio of multiple revenue streams that come from construction margins, asset management and development fees and long-term retained interests in the cash flow of the facility. Rather than one revenue stream, you are investing in the compounding effect of multiple revenue streams to generate substantially higher returns.