Valuation of PPAs

Valuation of PPAs

Financial and Risk Dimensions that Confer Value to PPAs

April 14-15, 2021 | Online :: Central Time

“EUCI is interested not just in teaching industry topics, but also encouraging education for both sellers and buyers through facilitated discussion, allowing attendees to share experiences and learn from each other’s perspectives.” Director – Asset Management, Invenergy

This course provides a methodical review of financial and risk elements that influence the value of renewable energy power purchase agreements (PPAs).  It is a companion to the Renewable Energy Power Purchase Agreements seminar, which instead focuses on key provisions and central legal concerns associated with PPAs. 

The course will explore the many layers of financial considerations that confer value in these contracts for power.  It will devote a granular look at the dependent relationships that often make the difference between a PPA that accomplishes its objectives over an extended period versus one that can disappoint almost immediately.

The instructors will review and demonstrate multiple analyses and methodologies that provide important financial and risk guidance in the structuring of PPAs for project developers, off-takers, investors, lenders and other transaction parties.  

Learning Outcomes   

  • Review the fundamental financial components of PPA
  • Examine the underlying risk factors that impact the value of a PPA
  • Evaluate fleshed-out PPA terms
  • Assess the relationship between PPA price and value
  • Discuss project production-related guarantees
  • Identify the differences between the standard contractual parameters used for wind and solar contracts
  • Evaluate risk distinctions that especially apply to virtual/financial PPAs

Agenda

Wednesday, April 14, 2021 Central Time

12:30 – 1:00 p.m.
Log In and Welcome

1:00 – 9115 p.m.
Overview and Introductions

1:00 – 5:00 p.m.
Course Timing

1:15 – 3:00 pm. :: Finance & Risk Fundamentals of PPAs

  • What is a PPA?
    • Capital stack
    • Riskless structure
  • Why do they exist?
    • Cash vs PPA, show investor return
    • Tax
  • What drives a PPA?
    • Economic value to investor, financial returns
    • Pro-forma
  • What are typical returns?
    • Unlevered IRR
    • ITC
    • Depreciation
  • What is in a pro-forma?
    • Revenue
      • PPA
      • SREC
      • Incentive
    • Expense
      • O&M
      • Insurance
      • Legal
      • Accounting
  • What drives returns? What are levers?
    • EPC
    • Production/Yield
    • PPA rate
    • Escalation
    • Term
    • Discount cash flows (time value of money)
  • Example
    • NJ TREC deal
    • CA, no incentive
  • What are investor concerns?
    • System size
    • Credit
    • Geographic location
    • Construction risk
    • Operational risk
    • Tax risk
    • Regulatory risk
  • Concept of risk and return
    • Interconnection
    • incentives
    • Construction timelines
    • Tax equity
    • ITC stepdown
  • Translating PPA legal terms into financial terms
    • Try to shift risk
    • Finance likes “belt & suspenders”
    • Indemnification
    • Production guarantees
    • Force majeur
  • Role of consultant(s)
    • Stuck between finance, legal, and YOU

3:00 – 3:15 p.m. :: Afternoon Break

3:15 – 5:00 pm :: Market Trends and Externalities Influencing the Trajectory of PPA Prices and Practices

  • Aggregate
    • Corporate green energy transactions
    • Merchant/marlet PPA transactions
    • Utility-scale PPA transactions
  • PPA vs Virtual PPAs
    • Similarities
    • Differences

Changing Market Fundamentals and Effects on the Valuation of Renewable and Storage PPAs

  • How renewable generation affects electricity markets
  • Understanding basis risk under mass renewable deployment
  • Buyer motivations for renewable procurement
    • Annual RECs versus 24-7 clean energy
  • Reliability and economic implications of storage paired with renewables

5:00 p.m. :: Program Adjourns for Day

Thursday, April 15, 2021 Central Time

8:45 – 9:00 a.m.
Log In

12:30 – 1:15 p.m.
Lunch Break

9:00 a.m. – 5:00 p.m.
Course Timing

9:00 – 10:30 a.m. :: Economic Valuation of the PPA

  • The process
  • Engaging bidders and providing good information to get good bids
  • Qualitative scoring
  • Assessing developer/project delivery risk
  • Quantitative valuation analysis
  • Case studies
  • Modeling example

10:30 – 10:45 a.m. :: Morning Break

10:45 a.m. – 12:30 p.m. :: Examining the Underlying Risk Factors that Impact the Value of a PPA

  • Curves
    • How market projections impact contract economics
    • Traded curves (forwards) vs consultant curves (forecasts)
    • Components of curve generation
  • Shapes
    • Timing of generation and delivery
  • Hub
    • Types of contracts available
    • What happens when the same project offers to settle at a different hub?
  • Penetration
    • Relationship of value to installed renewable generation base
  • Timing
    • On-line date and tenor
    • Generation and delivery schedule
    • Relationship to other power generation in service pricing area
  • Negative co-variance
    • How does historical back-cast impact contract value?

12:30 – 1:15 p.m. :: Lunch Break

1:15 – 3:00 p.m. :: Term Sheet Review: Key Commercial Terms

  • Examples
  • Business acquisition perspective
  • Off-taker perspective

Examining the Relationship Between Price and Value

  • Price of the carbon benefit
  • Net settlement
  • Single project vs portfolio contract position(s)
  • Mark-to-market (MtM) value of PPA over time as market conditions evolve

3:00 – 3:15 p.m. :: Afternoon Break

3:15 – 4:45 pm. :: Impact on PPA Risk and Price of Project Production-Related Guarantees

  • Availability
  • Output and performance
  • Forced curtailment

Impact on PPA Risk and Price of Standard Contractual Parameters and Terms

  • Liquidated damages and termination rights
  • Force Majeure
  • Differences between wind and solar contracts

4:30 p.m. :: Program Adjournment

Instructors

Steve Birndorf, Director – Renewable Energy Consulting, NextEra Energy. 

Steve Birndorf is Director – Renewable Energy Consulting at NextEra Energy. He is a seasoned solar and renewable energy executive with more than 20 years of professional experience. With a foundation in consulting, finance, and business development, he has developed projects, led teams and built organizations. Steve has developed, financed and advised on more than $500M of utility scale and C&I solar projects, largely to private industry, municipalities, school districts and water agencies. Before joining the company in 2020, Mr. Birndorf’s industry career has included stints at Edison Energy, Valor Analytics, Sungevity Solar, Borrego Solar and AMSOLAR. He graduated magna cum laude from the University of Pennsylvania and earned his MS and MBA from the University of California at Berkeley. 

Supria Ranade, Senior Director of Power Marketing and Wholesale Operations, Lightsource BP

Supria Ranade is Senior Director of Power Marketing and Wholesale Operations at Lightsource BP. She has more than 12 years of experience in the North American power, gas, and environmental markets. Prior to joining Lightsource BP, she worked on structured transactions at Direct Energy, BGC Partners, and Evolution Markets. Ms. Ranade received her Bachelor of Science in Environmental Science, from Johns Hopkins University, a Master of Science at Columbia University. She currently serves on the Board of the Midwest Renewable Energy Tracking System (M-RETS).

Online Delivery

We will be using Microsoft Teams to facilitate your participation in the upcoming event. You do not need to have an existing Teams account in order to participate in the broadcast – the course will play in your browser and you will have the option of using a microphone to speak with the room and ask questions, or type any questions in via the chat window and our on-site representative will relay your question to the instructor.

  • IMPORTANT NOTE: After November 30 you will not be able to join a Teams meeting using Internet Explorer 11. Microsoft recommends downloading and installing the Teams app if possible. You may also use the Edge browser or Chrome.
  • You will receive a meeting invitation will include a link to join the meeting.
  • Separate meeting invitations will be sent for the morning and afternoon sessions of the course.
    • You will need to join the appropriate meeting at the appropriate time.
  • If you are using a microphone, please ensure that it is muted until such time as you need to ask a question.
  • The remote meeting connection will be open approximately 30 minutes before the start of the course. We encourage you to connect as early as possible in case you experience any unforeseen problems.

Register

Please Note: This event is being conducted entirely online. All attendees will connect and attend from their computer, one connection per purchase. For details please see our FAQ

If you are unable to attend at the scheduled date and time, we make recordings available to all registrants for three business days after the event

Event Standard RateAttendees

CEUs

Credits

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EUCI has been accredited as an Authorized Provider by the International Association for Continuing Education and Training (IACET).  In obtaining this accreditation, EUCI has demonstrated that it  complies with the ANSI/IACET Standard which is recognized internationally as a standard of good practice. As a result of their Authorized Provider status, EUCI is authorized to offer IACET CEUs for its programs that qualify under the ANSI/IACET Standard.

EUCI is authorized by IACET to offer 1.0 CEUs for this event.

Instructional Methods

PowerPoint presentations and classroom discussion will be used in this course for each learning outcome. 

Requirements for Successful Completion of Program 

Participants must log in each day and be in attendance for the entirety of the course to be eligible for continuing education credit.