Over $1 Billion to Spend on Alternative Energy Projects
When it comes to renewable energy projects in the United States and Canada, money does not seem to be the hardest part. Lack of viable projects is the most difficult. Greenavise has access to capital sources looking to deploy over $1 billion in the renewable energy arena. More and more financiers are emerging and many of them are competing for the same projects. Below is a review of what investors are looking for.
Investors want a Strong Experienced Development Team. Most of the capital sources we work with have established relationships with trusted contractors whose projects they are willing to finance. If you don't have a reasonable level of experience, investors are usually willing to pay a development fee and give some level of participation to the inexperienced party. They might insist that the developer use the investor's preferred contractors and give up control. It should be noted that even if you would be asked to give up control of a project you can certainly insist on a development fee and then you can use your involvement in this early project to build your brand or company resume.
Investors want Sizeable Projects. The bigger the better. Investors who have hundreds of millions of dollars to invest in renewable energy projects can't spend a lot of time on underwriting small deals. It just isn't worth the time when a small deal takes almost as much time to bring to fruition as a big one. This is what drives the average size of acceptable projects up. That said, most of the sources that we work with are willing to aggregate systems or will work with developers that can generate a pipeline of dealflow in order to create the scale that they are looking for in an investment.
Investors want "Shovel Ready" Projects. This is a term that is floated around a lot when discussing renewable energy projects. "Shovel Ready," in reference to solar and wind projects, often means:
- The project has an executed Power Purchase Agreement (PPA) with the price to be paid per kWh by the host/off taker specified in the PPA, along with a signed interconnect agreement when necessary.
- A capable Engineering, Procurement and Construction firm (EPC) has been secured or has bid on the project.
- The required building permits have been issued.
- If necessary, the land for the project has either been purchased (or an option has been secured) or a land lease has been signed (or an option has been secured).
- An investor package has been created that includes a pro forma for the project, a timeline of the use of funds and presents a viable financial picture that can be presented to sources of capital (equity or debt).
- The window of opportunity based on the tax structure, PPA, lease or purchase option, EPC contract, and other factors has been clearly identified and is outlined in an Executive Summary.
It is much easier to find financing for projects that have all of the above. It does create a chicken or the egg problem in that some capital must be expended to get to this point (professional fees, legal fees, time, travel, etc.). However, if the project is not even close to "shovel ready," it is difficult to get financiers interested in underwriting a deal which may never happen.