DEL will own 50% of the SPV's for VIC1 and SA1. The ownership may change going forward for a whole raft of reasons (i.e. a refinance event, a sell down event or other) - but let's assume its 50/50 on a HTM (Hold to Maturity) basis for 25 years. I would assume under the shareholders agreement that both parties have some kind of a first right over the other's interest in a sell down scenario.
Refer Page 1, dot 6 of the announcement:
Palisade will also receive equal ordinary equity interest in the Immediate Projects together
with Delorean in excess of the preferred return.
So, IN ADDITION to Palisades 12% capitalised interest (converting into DEL shares) they are also going to get 50% of the ordinary equity in the SPVs. There is a small question mark on the ownership of VIC 1 because the landholder had 10% free carry. So does the landholder still have 10% or are DEL and Palisade splitting the residual ownership of the residual ordinary equity 45%/45%? Not sure, relatively immaterial point in any event. It is fairly typical to see 'drag' rights in these shareholder structures whereby the landholder is forced to sell it's minority holding - so it may well be 50/50. Both 45/45 and 50/50 would satisfy the 'equal ordinary equity interest point''.
Just because Palisade are ''funding'' 100% of the capital cost (and Devex cost) does not mean they have a right to own 100% of the equity. This is just a disproportionate capital funding arrangement, and quite common. As said earlier, what have DEL given up? - they have given up 50% of their SPV ownership, as well as some dilution to make this deal work - in exchange for Palisade funding 100% of the construction cost.
VIC1 and SA1 put together - I think its about $43m+ (somewhere hear).
So DEL will own 50% of the projects at least VIC1 and SA1 and in addition to this they will extract value from the other contracts - i.e. construction (EPC Margin) and O&M. It would appear they have agreed a 25 year O&M Agreement (this agreement will have a margin in it). So that is good from a DEL perspective. DEL calls this a ''commercial margin''.
Where does 12% come from? Palisade's view of the risk in the short term. In the end this has to be an arms-length interest rate (commercial as you suggest).
I hope this clears up your understanding.
