Opportunity mapping and transaction support for renewables developer

The opportunity

Portico’s Managing Partner was engaged by a client group of private infrastructure investors and development finance institutions to provide: (1) due diligence and structuring advice on investments in Independent Power Projects (IPPs) in a country emerging as a continental leader in E-Mobility and industrial electrification; and (2) a scenarios-based multiyear forecast of grid supply and demand dynamics as new sources of generation and consumption come on-stream.

Regulations allowing private investment in IPPs had only recently been enacted. The investors therefore required an independent, evidence-based assessment of industry trends and risk issues at both project- and network-level.

The solution

Through Key Informant Interviews with utility staff, C&I customers, local governments, site-level community leaders and project land owners, a ‘hidden’ dependency surfaced.  Portico’s Managing Partner identified that T-line and sub-station construction—a government responsibility—could be delayed since wayleaves had not been acquired. In turn, this would prevent the country’s largest wind farm under development from evacuating power on schedule.

At the regulatory level, pressure was building to push back commissioning dates and renegotiate the price per kilowatt hour agreed in early Power Purchase Agreements. This was due to concerns over a looming electricity supply overhang; payment defaults in a market where IPPs were not backed by sovereign guarantees; and a potential shift from a “take-or-pay” to a “take-and-pay” model, which would see IPPs paid only for power used on the grid.

These insights informed recommendations for structuring and insuring the investments to limit the risk of financial loss should specific risks materialize. The client proceeded with investments into the largest projects (200MW+ onshore wind), while divesting from some smaller (50-100MW) solar projects which held lower strategic value and faced higher risk of renegotiation or de-prioritization. 

In practice, as electricity demand rebounded strongly following COVID lockdowns, the oversupply issue arose. Greater investment in T&D infrastructure into rural areas unlocked further demand, as did cross-border power exports. The client’s projects have become a recognized success story, although the future for renewables in the region is now pivoting to geothermal as the need for baseload power to solve intermittency challenges takes center stage.