Financial Model for Energy Asset Tokenization | Energy Tokens Power Point Presentation

April 30th 2021

Advances in Enterprise Blockchain and Security Tokenization

Financial structures of energy projects haven't changed for 100 years -

Traditional Structure of an oil project in the United States -

Problems with energy producing assets -

Tokenization of Energy Assets on the Blockchain -

Financial model to tokenize energy assets -

Tokenization of Renewable Energy Projects -

Company Overview of Ziyen Energy -

More Information on Enterprise Blockchain. Tracing its technological origin to Bitcoin cryptocurrency, enterprise blockchains have been designed to enable businesses to receive and store data chronologically and immutably, often without the involvement of any central authority. Unlike widely owned permission-less cryptocurrencies such as Bitcoin or Ethereum, enterprise blockchain solutions frequently operate in a fully permissioned and regulated setting to enable the real-time sharing, updating and validation of information by responsible market participants. Blockchain as a technology is still developing and is finding uses in various industries including finance, healthcare, industrial supply chain and energy, with practically all companies in the Fortune 100 as well as many large financial institutions and governments exploring secure blockchain solutions for their most important data and transactional matters.

Tokenization. Tokenization, though in its infancy, is one of the most promising applications of blockchain technology. Tokenization creates a digital representation of an actual asset such as a currency, commodity, equity or other financial instrument, where each blockchain token represents a fractional ownership interest in that asset. The tokens may be transferred on a blockchain shifting ownership of the underlying asset as the token moves from one person to the next – much like a dollar bill exchanging hands. Unlike cryptocurrencies, many tokens are not subject to risk of theft or loss via hacking or loss of encryption key because transfers are recorded by a registered transfer agent responsible for maintenance of the token ownership ledger.

Enhanced Transparency. Blockchain tokens are governed by smart contracts, which are self-executing and self-enforcing contracts with terms programmed in code. Transactions executed by smart contracts are recorded on the blockchain and become traceable and permanent without the involvement of third parties or centralized authorities. As a result, all contractual terms and conditions of smart contracts are accessible and visible, helping to bring transparency, accuracy, and trust to all parties involved. The Energy Tokens platform utilizes smart contract technology in two important ways: (i) to record data related to its energy infrastructure projects and (ii) to record the transfer and ownership of security tokens representing ownership interests in those assets.

The Energy Tokens platform's approach to tokenizing interests in energy producing assets takes financial assets which by themselves are generally exempt from classification as "securities" and transforms them into equity interests which are "securities" subject to regulation under US securities laws. Working interests and royalty interests in oil and gas wells are not "securities" under federal law. However, contributing working interests or royalty interests to a newly formed entity (an SPV) and issuing equity of that SPV in token form results in the creation of a security token which has the same financial attributes as a direct ownership of a working interest or royalty interest in an oil or gas well. The advantage of converting working interests and royalty interests into securities via tokenization is that the legal framework for the primary issuance and secondary sale of those interests is well understood and permissible as the issuance and sale of securities without the need for complex private negotiations and customized documentation, thereby enhancing the liquidity and access to investors for investments in energy producing assets.