The client, a world-leading supplier of pulp and packaging materials, was considering a significant investment in an innovative biofuels production facility. In order for the project to make sense, they needed to arrange a long- term offtake agreement – without an already-established market for the product. The company needed a financial model to help them see the probable impact of the project on their balance sheet, cash flows and net present value. That would help them set a reference price and decide if the project would be a good fit for their business.
PwC performed an initial market analysis and modelling to map the key drivers of the business giving the company:
The model visualised the project’s profitability, relevant costs and cash flows associated to different funding/capital structures based on various price assumptions.
The output and the insight derived from the model supported management in their investment decision and funding strategy. It also provided a solid basis for contract negotiations with a possible purchaser through a long-term offtake agreement.
The client is a vertically integrated group, working in a number of areas from cell and module production to turnkey projects. The group wanted to double its turnover through expansion in the Italian and overseas markets.
We supported the group management through the drafting of a three-year business plan, which focused on refinancing opportunities from main debt holders. This included a market analysis of the Italian photovoltaics sector, a competitive and positioning analysis of the company in the Italian market and new markets as well as consideration of the impact on the top line and cost structure.
The client received a strong, rigorous and bankable business plan, which included a thorough analysis of the reference markets and market growth assumptions.
Avante Genera (part of Inveravante Corporation) wanted to consolidate its position within the Spanish renewable energy market by developing four solar thermal power plants (parabolic cylindrical technology). To complete the financial process for the new investments, the investor needed the services of external assessors to understand how the project finance could be structured.
Our corporate finance team carried out financial and economic planning which took into consideration the economic, technological and regulatory factors of each new development. The plan included the acquisition of four solar thermal power plants of a nominal 49,90 MW installed capacity.
Our work gave the client a deeper understanding of the financial feasibility of the project and enabled them to secure financing. Inveravante Corporation has now started the commissioning of the first of its four solar thermal power plants.
Stadtwerke München (SWM) is undergoing a transformation of its generation base and aims to supply all electricity sold to residential customers from renewable energy sources by 2015. As part of its renewables drive, SWM acquired a 30% stake in Gwynt y Môr, off the coast of Wales. It is one of Europe’s largest offshore windfarms with a capacity of up to 576 MW.
PwC supported SWM in developing a financial model that allowed the company to analyse the project economics in the transaction and post-transaction phases. The model reflects the structure of the greenfield project as proposed by the vendor, RWE Innogy, and allowed SWN to calculate the project’s return on investment and other financial indicators in order to structure the transaction and decide on a purchase price. The financial model was further used to optimise the complex tax structure of the project, taking into account the British background of the project and crossborder European tax implications.
By providing a comprehensive approach that brought together renewables and tax experts from Germany and the United Kingdom, PwC contributed to the successful acquisition of the Gwynt y Môr offshore windfarm by SWM.
A Taiwanese manufacturer of thin-film solar PV modules was looking to expand in India. The company needed to understand the market potential, find the right partners to help sell their products, and select a strategic partner to build a new turnkey manufacturing plant.
Our team took a comprehensive look across the entire solar supply chain in India. We started by assessing the potential market for solar PV modules in different segments and identifying potential partners like utilities, developers and integrators, manufacturers and distributors. Then we created a selection matrix to rank potential targets based on the company’s priorities. We also prepared a pitch document to showcase the value ofusing the solar PV modules offered by the client.
In addition to the sale of modules, the client wanted to support partners interested in thin-film manufacturing. We helped prepare a pitch document to showcase the value of manufacturing thin-film solar PV modules based on the equipment and process solution offered by the client.
Since the client wanted to build a manufacturing plant, we also helped evaluate Engineering, Procurement and Construction (EPC) contractors capable of delivering a turnkey facility.
Our analysis helped the company understand the Indian marketplace and develop a compelling case for their products. By identifying prospective targets, we helped raise interest in the company, creating a competitive bidding situation for a bilateral sales contract. And with potential strategic partners already identified, we gave the company comfort in their ability to hit the ground running in a growing new market for both supply and manufacturing.
The EU’s new entrants reserve (NER) 300 programme aims to provide financial support for eight carbon capture and storage (CCS) and 34 innovative renewable technologies to drive low carbon economic development across EU member states. The NER300 competition will co-fund projects with revenues from the sale of 300 million EU carbon allowances from the NER. At a carbon price of EUR 8 under the EU ETS the funding programme is worth around EUR 2.5 billion.
The selection of CCS and renewables projects for NER300 funding will take place through two rounds of Calls for Proposals. Interim results of the first call for proposals were published in July 2012. Under the terms of the programme, the European Commission will fund up to 50% of the relevant costs related to the construction and operation of the projects, with member states and potential private sponsors providing remaining funding.
PwC led the multidisciplinary consortium which supported the EC in the programme’s early design and development and subsequent roll-out. The consortium brought together commercial, legal and technical specialists in the international renewable and low-carbon industries. Together we worked with the EU Directorate General, Climate Change to create detailed criteria, a practical process of application and supporting information and template documentation for use by competition entrants. And we worked with the EC to design a detailed adjudication process for the competition.
We also undertook financial due diligence on some of the CCS projects submitted in the first call for proposals. This due diligence role drew on PwC’s extensive experience in financial and commercial analysis and our deep sector knowledge and expertise. Work was carried out against demanding deadlines in order to comply with the EC’s timetable for the NER300 programme.
The construction and development of offshore windpower carries significant risk and the potential for unforeseen setbacks. PwC was contacted by a leading engineering and technology company who had been confronted with massive loss notifications on some of its offshore power transmission projects. These were of sufficient magnitude to threaten the profitability of its entire worldwide energy transmission project portfolio.
“PwC immediately set about validating and verifying the risks, both on the projects directly affected and on the wider worldwide portfolio. In the space of two weeks, 30 international PwC professionals were deployed in seven different countries across three different continents. The project demonstrated our ability to quickly assemble and mobilise an expert team. Our focus was to eliminate uncertainties within running projects, which threatened the EBIT and the cash flow of a successful business. We were able to give the company transparency, validation and verification of the risks. The result was a sound platform to prepare corrective actions and begin to get the projects back on track.”
A large municipal electric utility wanted to upgrade its customer information system (CIS) from its current legacy system to mitigate billing risks and meet specific operational goals.
We helped the utility to implement a new system which allowed them to improve customer service through process redesign and implementation of new CIS functionality (e.g. complaint handling, payment prioritisation, loans, controls, etc).
The project came in on time and was under budget by 22.6%. In addition, as a result of using computer training modules, the utility realised ongoing savings approaching US$1m.
Reyjkavik Energy (RE) is the biggest geothermal energy company in Iceland. It provides electricity, geothermal water for heating, and used water for consumption. RE has experience from operating geothermal district heating utilities since the 1940’s.
RE was considering expanding operations across borders, but needed to improve public accountability for the company’s public ownership. The company also needed to make sure it was independent and that the plans made sense with its long term strategy.
An infrastructure fund was looking to invest in US renewable generation facilities. The target had 900 total MW operating capacity and 1,500 MW under construction/in development. The investment profile included the formation of a joint venture, contribution of existing project pipeline, operations and management function, and the infrastructure fund’s capital investment to grow the investment portfolio.
Our client was new to the industry and was able to get up-to-speed quickly. We provided them with end to end services around their planned transactions, from financial due diligence, accounting advisory, M&A tax, structuring (including in-bound structure development) to valuation for partnership tax allocation purposes.
Pacific Hydro is a leading renewable energy company, producing clean power from natural resources. The Australian company has over 850 MW of operating hydro and wind assets and a further 2,000+ MW in project development pipeline.
We conducted independent valuations of Pacific Hydro’s assets and development projects across Australia, Brazil, Chile, Philippines and Fiji, which was comprised of a complex portfolio of renewable energy assets in operation, construction and project development stages. In conjunction with Pacific Hydro, PwC developed a robust valuation methodology to assess the value of individual assets and development projects. This included assessment of the appropriate cost of capital for the assets across the different geographies taking into account specific development risks of individual projects.
PwC’s knowledge of the renewable energy sector and an infrastructure valuation capability provided the assurance needed for Pacific Hydro and its key stakeholders.
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