Traditionally, investors preferred to see a deal after it had reached certain milestones, such as executed site control and/or an electricity offtake agreement. Now, however, financiers such as Sol Systems are more interested in seeing a deal earlier on in the development process, even after some of the initial host discussions.
Why the change? We have found that getting the investor involved earlier drives efficiency and standardization, allowing both the developer and investor to get deals done faster so we can pivot to the next opportunity, reduce transaction costs, and scale through repeat transactions.
Incorporating investor requirements into host conversations is key to avoiding fatal flaws early. The financier may also be able to provide other value early on, such as conducting an upfront credit analysis (often a commercial-scale deal killer), confirming the adequacy of technical specifications, pricing out the PPA, and even helping sell the host on a PPA-financed commercial solar array.
Another primary benefit is the early introduction of legal documents that are acceptable to the funding source. Involving an investor earlier on in the development process is also central to the quest toward standardization of legal documents and subsequent cost savings. For example, if the investor provides a developer with a form PPA as the base for host negotiations, less time will be spent on costly legal negotiations by the time the PPA reaches the investor’s desk.
Bottom line: if you have a deal with a valuable site and offtake, it is not too early to share the project details with your investor. In fact, you’re just in time.
This is an excerpt from our Solar Project Finance Journal, a monthly electronic newsletter analyzing the solar industry’s latest trends based on our unique position in the solar financing space. To view the full Journal or subscribe, please e-mail firstname.lastname@example.org.
About Sol Systems
Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 180MW solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. Inc. Magazine named Sol Systems on its annual Inc. 500 list of the nation’s fastest-growing private companies for a second consecutive year, ranking it No. 6 in the nation’s top solar companies in 2014. For more information, please visit www.solsystemscompany.com.