wind-and-solar-project-due-diligence_eqinternational_july-aug2012.pdf

Wind-and-solar-project-due-diligence_eqinternational_july-aug2012.pdf

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EQ INTERNATIONAL July/August 12 76 www.EQMagLive.com T he differentiation between a renewable energy project that gets built and a project that stalls is often a determination of whether or not the plant is believed financeable. While the ultimate determination of a project’s future lies in the details of balance sheets and cash flow models, the inputs needed for these projections are gathered by industry experts and third parties hired by the financial institutions. This investigation into the plant’s projected health is conducted on many levels – commercial, legal, financial and technical – and the findings of these efforts ultimately decide on how, or if, a project gets financed and built. One of the most critical investigations into the future well-being of a plant is the projection of its performance. In order to successfully gauge the technical viability and future energy production of a project, a due diligence effort is conducted by an independent engineer (IE) hired on behalf of either the lender or sponsor before the financial transaction occurs. What is due diligence? Due diligence is an investigation into the viability of a potential project which occurs in some form before every investment or major decision. While due diligence can cover a lot of aspects of a project, this discussion addresses only technical due diligence conducted by an experienced IE for renewable energy projects. Wind and Solar Project Due Diligence An In-Depth Look At Risks That Can Make Or Break A Project. Josh Kunkel AWS Truepower LLC. Sreeni Krishnamurthy AWS Truepower LLC. Marie Schnitzer AWS Truepower LLC. After the buyer and seller come together in principle on the terms of the arrangement, an IE is br ought in to assess the project. The results of the IE report is then used in the final negotiations to work out differences that might remain. IE reports are very thorough, which means the scope of work for the due diligence effort is extensive and can take weeks or months to complete. Every technical aspect is investigated and high risk items should be identified and communicated immediately. A critical starting point of the effort is a fatal flaw review to identify any red flags or high risk areas that may exists. This can be done in a matter of days through a high level review of the project’s data room. The data room should contain all critical information and key agreements pertinent to the future plant. Any missing documentation or contracts should be identified immediately and reported back to the appropriate parties to decide the best path forward.
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