Owning VS Selling: How Small-Scale Solar Developers & EPCs Could Raise Capital, Build A Platform & Create Substantial Equity Value
In our previous article, we discussed why Developers & EPCs should strive to own assets rather than selling for a development fee. In this article, we will discuss how they can successfully raise capital to build a platform and own assets.
1- Building A Project Pipeline:
The projects pipeline is 1st step and the cornerstone of the IPP/platform’s capital raise.
Most investors would like to see an investment ticket of $30-$50 million within a 12-18 months investment period.
If the pipeline did not reach $30-$50 million, the developer should use eDGe Renewable Partner’s aggregation solutions to combine their projects with our other developers’ projects, reach the $30-$50M investment ticket threshold & get access to institutional level capital.
The projects should be organized in a report showing high level information such as size, capex/pricing, development status, PPA info, type of off taker, expected returns, etc..
Please see pipeline template attached that could be downloaded here
The pipeline should include projects that are in an advanced development stage or ready to invest within 3-6 months, as well as projects in early/mid development stages that would be ready for an investment within the next 12-18 months.
As a minimum, for C&I projects, include those projects that have a PPA MOU/LOI signed with the offtaker. For Utility scale projects, include projects where site control and interconnection studies have started.
2- Maintaining A Well Organized Data Room:
Once the investors see the pipeline and show initial interest, the next steps would be to dig deeper into the project’s information and details.
The data room should include clearly labeled folders including the relevant information about each project as well as a separate folder for the corporate information.
For each project, include a separate folder with the relevant documentation on the permitting, site, interconnection, financials, PPA, other legal documents, third party reports, engineering (design, O&M and EPC).
For the corporate folder, include separate folder for the team bios & org chart, legal documents & financials.
3- Building A Clear Financial Models:
Even at early development stages, financial models are extremely important to show the developer’s understanding of the range of possible returns, the project risks, and the different variables/inputs of the project at the different stages of development.
Additionally, the models are needed to understand and set the expectations for the range of valuations the developers could ask the investors and is an essential tool for negotiations.
The financial model’s inputs should be clear & referenced to a strong source (report, third party, quotations, etc.) especially for the core model difference makers (PPA, EPC, Interconnection, etc.).
4- Creating Concise Marketing Materials:
Presenting the investment opportunity in the form of a teaser and Confidential Information Memorandum (CIM) is also essential to the capital raising process, however, a simple presentation should suffice if it includes the core information about the company and the projects.
The team skills should be introduced & presented clearly as this would be a major differentiator for the developer. Any third party/consultants that are not full-time employees of the company should be highlighted as such.
The information in the presentations should exactly match the information in the pipeline report and data-room.
At eDGe Renewable Partners, we help finance developers & EPCs to build renewable energy platforms & create long term equity value. Please feel free to contact us if you have any questions or would like to learn more about our financial solutions for small scale developers. Email: samy@edgerp.ca
