By Solar Land Partners

04/04/2014
The completion of Solar Investment Due Diligence has matured and evolved since the 2008 period with the successful completion of GWs of Utility Scale Solar projects especially in California. We have been involved in providing this solar farm consulting service for solar investment acquisitions on well over 600MW since 2011 alone. This white paper will give our view of the steps needed for the due diligence process and the ability of the investors/owners to meet their required IRRs after acquisition.
Our approach is usually to perform a Phase 1 analysis/report; and then if warranted, a Phase 2 development and expense plan for the completion of any development activities, construction and start of operation. The later services are then part of our Solar Farm Development Consulting services program.
In Phase 1 we will review the project’s viability for development, and the current status of the Project. We use our permitting, interconnection, system design, financial modeling, and legal team experts to work on their specific areas, with specific emphasis on:

• • Development Budget Review and Financial Modeling
  • Interconnection Agreement and status review
  • PPA strategy and potential Off Takers
  • Project company organizational and other legal documents
  • Site control documents and title review
  • Output modeling and engineering review
  • Environmental and permitting review
  • Information review and Report writing

A Phase 1 report is then submitted that will provide a development stage opinion and viability recommendations with supporting analysis and caveats. If the Solar Farm Due Diligence customer authorizes further study, Solar Land Partners will provide a development plan and budget in a Phase 2 work product.

Initial Developer Deliverables
The more advanced developers will have most of this information in a “drop box” that is provided. We have found that our Solar Farm Due Diligence time to complete a Phase 1 report andthe ability to evaluate projects efficiently will largely be determined by the accuracy and completeness of the initial project documentation sets.

Interconnection Application, PPA and supporting documentation

Development Budget, Capital Budget, Financial summaries and spreadsheets

Engineering diagrams and output simulation files and projections

Preliminary Title Report, Site Control documentation (Option, Lease or Purchase agreements, etc.)

Filed Permit Applications and supporting Environmental documentation

EPC Quotes and Bid Packages

Portfolio Developer Company History and Key Personnel CVs

Any other documents the initial developer has which might assist the Solar Farm Development Consulting group’s evaluation process

Solar Investment Due Diligence Deliverables

The Phase I Solar Investment Due Diligence services will comprise of a report on these items:
1. Evaluation of the interconnection details, projected costs, and time lines for an agreement with the utility.
2. Review of financial modeling and legal structure such as a partnership flip.
3. Review of PPA, interconnection agreement and other legal documents as they exist for each project.
4. Review condition of title and site control documents.
5. Review the output modeling as well as engineering and design work for the solar farm project.
6. Review environmental and permitting work completed to date.
7. Deliver project evaluation report identifying all positive attributes and areas requiring additional review.
8. Any fatal flaws seen are specifically described in some detail

The Phase 2 services,if desired as a Solar Farm Development Consulting agreement, would thenprovide aPreliminary Development Plan and Budget to make the Project “shovel ready”.

Most Common Fatal Flaws in Solar Investment Due Diligence

In our recent experience the most common flaws by newer developers tend to be these items:
1. The project has not paid money or taken the time to simultaneously pursue, permitting, the interconnection agreement with the utility, and obtaining a PPA or other aspects of a SREC agreement. By having one of these three legs in a very immature state this can make the whole project not a viable IRR candidate for sophisticated investors/owners.
2. Of course unless these developers have been in the market transacting projects, there is usually adisconnect between what they have been told is an acceptable developer fee and the realities needed for a tolerable unlevered and then levered IRR by the final investment group.

As a final note it is almost always true that what is told to us by any “real estate” type broker for the developer never is quite true as found in the Solar Investment Due Diligence process. So it is best to hire best in class Solar Farm Professionals for this important investment work and large expenditure with high risk of failure.