Three tips to maximize profit when buying an existing solar plant

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on email
Acquiring plants can be important for new entrants to India who need installed capacity to participate in certain tenders. Credit: IBC Solar

This may come as a surprise, but during the due diligence of an operating PV plant it is the knowledge of what to look for in Operations & Maintenance (O&M) that can guarantee strong returns. This issue of acquisition and how O&M is a critical and (completely) overlooked dimension to add into that process is especially important at the stage India is in, with the new/international players needing installed capacity to qualify for certain tenders.

It is of course correct that technical service providers of due diligence services apply a comprehensive review process to the solar PV plant targeted by the investor. But services to ensure future energy generation must go beyond simply verifying documents and performing basic visual inspections. And must start bringing in key details that professional O&M service providers can identify in the plant’s construction and performance history.

Therefore, if investors want to be assured of future performance, they should contract a reputable solar O&M firm to provide a high-level and detailed assessment of the targeted PV plants. They must also adopt a strategy of allowing the future O&M provider to carry out the technical due diligence, in combination with a guarantee of performance after acquisition, to accrue substantial cost savings. For example, if due diligence is conducted by a third party, and an O&M service provider is appointed after acquisition, the latter provider will have to conduct another technical analysis in order to secure their risk. In other words, a technical due diligence will need to be done twice, therefore incurring double the cost.

So here’s the first tip – Define O&M-linked DD:

To save on spending twice, ensure that the solar O&M provider provides the following due diligence services:

  • Verify the status and functioning of all the equipment in place at the targeted plant. Conduct verification in the field
  • Identify the plant’s defects or performance weaknesses
  • Suggest cost-effective corrective or improvement actions
  • Highlight the relevant technical upsides/downsides of the plant to the investors, for a better negotiation with the seller
  • Properly serve the plant as an O&M service provider after the acquisition
  • Develop the relevant typical plant key performance indicator (KPI) guarantees during operation

The second tip – Outsource O&M with Guarantees:

The professional O&M service provider can be asked to agree to a completely different commitment on the basis of the assessment and the relevant findings of their in-depth analysis, since they can also be required to provide performance guarantees (typically performance ratio and availability) in the case where they are appointed as the O&M service provider after the acquisition.

And the third tip – Negotiate using O&M wisdom:

Knowledge of the weaknesses of the targeted plants before acquisition will allow the investor to save money on the acquisition itself. The value of this approach for an investor requires them to drive the O&M partner to act in a speedy, accurate and complete manner in their assessment of a solar PV plant in the field; add fundamental understanding related to the real value of the plant being evaluated for acquisition; and provide quick and comprehensive answers to questions which are normally out of their scope.

Read Next

May 26, 2022
Leading solar manufacturers have implored governments to implement tax credits and other financial incentives to stimulate domestic PV manufacturing.
PV Tech Premium
May 25, 2022
Solar EPC Sterling and Wilson believes an easing of PV module supply concerns, the rise of alternate supply chains and a gigawatt-scale green hydrogen market will drive both short- and medium-term growth for PV developers and EPCs.
May 25, 2022
Module price increases, higher raw material costs and logistical challenges will pull down the return on equity (ROE) for 25GW of India solar projects, with 5GW of those at high risk given when they submitted their bids.
May 24, 2022
Canadian Solar has unveiled a new PV manufacturing strategy, bringing more upstream capacity inhouse to reduce its exposure to pricing volatility.
May 24, 2022
South Korean conglomerate Hanwha Group has said it will invest US$3.3 billion in solar and wind technology and intends to create a solar R&D hub in Korea as part of a massive investment strategy focused on several industrial areas.
May 9, 2022
Indian independent power producer (IPP) Azure Power has appointed Harsh Shah as CEO, effective from 1 July, following the resignation of its previous CEO, Ranjit Gupta, last month.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
June 7, 2022
Leonardo Royal London City, London, UK
Solar Media Events
June 14, 2022
Napa, USA
Solar Media Events
June 22, 2022
Sheraton Austin Hotel at the Capitol, Austin, Texas