1. Lack of stability in regulatory environment
and more broadly in governmental energy policies, induce uncertainty in future cash flows predictability. Investors seek both steady returns on capitals and value preservation. A stable regulatory framework is at the core of the investment decision
2. Badly structured documentation pack
including project description, NDA/LOI, project Teaser, unstable PPA, undefined or unrealistic business/financial models, inadequacy or instability of the data rooms, too generic SPAs, poorly defined commissioning and testing process of power plants
3. Mismatch between demand and offer
This is mainly due to extreme distances on prices, lack of access to industry benchmarks, several communication issues, culture and knowledge levels gaps among transacting Partners, lack of education in handling complex transaction frameworks
4. Inhomogeneities in project/asset portfolio classes
Quite often inappropriately mixing asset typologies, authorization processes, selected technologies and asset sources, EPC and O&M contractors not sufficiently robust or skilled to cover all asset typologies
5. Lack of critical mass of the asset portfolio
On transaction driving unbalanced due diligence costs and unacceptable banking fees on investor side
6. Unclear funding structure
Including payment installments conditions not adequately detailed to cover all transaction steps. This include construction funding or bridge financing, bank lease teaser, warranties, test and commissioning, asset take over procedure, performance bonds, etc.
7. Weak commitment
Indecision and vacillation are harmful to the deal as much as a failure to agree on prices. Changes in mood or decrease of focus during deal evaluation steps inevitably lead to delays by reducing the chances of closing. A successful transaction is made of committed Partners bound from a common goal, closing the deal.
To prevent endlessly delaying renewable energy transaction deals and to ultimately improve deal closing ratios, transacting Partners should take very serious all these points. This to inject continuous confidence on both seller and buyers’ side.
Giuseppe Stinca – Partner
At-Venture Business Strategies LLC