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DUE DILIGENCE


• Financial and tax due diligence – a review of the historical (if applicable) and forecast financial performance of the windfarm, including an in-depth review of the accounts and the valuation model


• Commercial/regulatory due diligence – considering the key commercial assumptions that underpin forecast revenue, including forming a view on likely future power price trends the current and future subsidy regime and other market aspects


KNOWLEDGE AND EXPERIENCE The nature of the wind industry is such that using a diligence provider with extensive sector experience is desirable. For example, technical advisers will often have knowledge of specific turbine models and the associated performance track record and the larger law and accountancy firms for example, have dedicated teams focused on renewables.


WHY COMMISSION DUE DILIGENCE? This will depend on the scale of investment – a small and relatively simple asset may present a lower risk profile than a large, complex windfarm or portfolio of assets. A larger investment is also more likely to justify the level of fees incurred in conducting comprehensive due diligence.


INVESTMENT FUNDING Another factor is the source of funds behind the investment. Banks and other debt providers will typically require a higher level of comfort over the future cash flows of the asset than small scale equity investors.


The requirements of debt funding often mean that the future cash flows will need to be assessed to a high level of detail and sensitivities applied to understand the risk of future performance falling short of expectations (with the possible consequence of inability to service debt interest and principal repayments).


Any investment made on behalf of others (for example, investing on behalf of a fund, or as a trustee) will require the decision maker to be seen to have taken all the necessary steps to make an informed and responsible decision – in other words, to have done their due diligence.


The nature and extent of any due diligence needs consideration at an early stage of the investment process to allow sufficient time and scope to carry out the analysis to the desired degree.


ABOUT THE AUTHOR Gian Paolo is a senior member of PwC’s dedicated renewables Transaction Services team. Based in Edinburgh he carries out financial due diligence across the renewables sector for a variety of clients including major utilities, private equity houses, Government bodies and corporates.


He has worked on onshore and offshore wind, solar and marine energy projects in addition to work in the wider power & utilities industry.


Gian-Paolo Gliori PwC


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