Projects for the construction or purchase of renewable energy plants are the focus of xFigureFinance’s activities as the factors that make sense and validate the investment decision for PV plants are very complex. In the last few years, the renewable energy sector has been gaining interest in Bulgaria due to a number of factors, including: the stabilizing regulatory and political situation, the pan-European green deal, the growth in electricity market prices and the country’s natural resources. The renewable electricity generation sector is the closest approximation to a passive income source, with a high degree of predictability on key assumptions such as sunshine, performance, level of operating costs and therefore revenue, profit and returns. This type of project is very close to a passive income prospect, with less than 10% operating costs after initial construction and effectively more than 90% of the income remaining to pay off the financing or directly to the investor.

See more here:

Success in structuring an investment in a solar power plant (SPP) is directly proportional to the risks that accompany the entire process.

Firstly we would point to the construction of the project and the assumption of the construction risk, which is often shared between the parties, so we recommend choosing an adequate EPC contractor. The second pillar, which is key to the project’s return and the meaningfulness of the investment, is related to revenue. The strong volatility in electricity exchange prices indicates that in the next 5 years (and for the period thereafter) the price of electricity will be difficult to predict. For this reason, we should build a strategy to sell the electricity on the open market, with a fixed price power purchase agreement or a contract for differences. In addition to the revenue from the sale of electricity, we need to consider other opportunities for profitability from a PV plant.

Last but not least is the risk associated with adequate debt structuring. Good debt raising preparation necessarily includes a set of tools (such as a flexible financial model) to predict the project’s profitability in detail.

Experience shows that the risks at each stage of the PV plant investment are minimised by careful selection of good partners. Following the natural course of investment, we would point to construction companies (EPC and O&M contractors) as the most important unit in the construction and subsequent maintenance of the power plant. The role of the EPC also relates to the documentation of the Project through to construction. In parallel with the construction and according to the specifics of the project (production capacity and investment objective – construction or purchase of a ready-made project), legal consultants, law firms, panel manufacturers and inverters are involved in the process, electricity traders or corporations, banks (investment funds, leasing companies).

At xFigureFinance, we know the specifics of the process and have partnered with the leads at every stage of the Project. Remaining an independent consultant, we stand by the client from idea to success, providing choices and making informed decisions.

The entire process takes between 4 and 18 months and is highly dependent on the timing of the review and approval of the documentation by the EDC/ЕTC (electricity distribution company/electricity transmission company) and the municipality where the site is located.

The process through which the investment in the Solar power plant passes can be conditionally divided into two stages – before and after the construction of the power plant.

In case the investor already owns the property, the steps in the process at the beginning are related to obtaining an opinion from the EPC/EDC, preparing a detailed design and a building permit. Until the building permit is obtained, we strongly recommend that two more parallel lines of investment be started – negotiation of the PPA and of financing. An application and contract for grid connection follow.

The second stage includes acceptance of the completed site, 72-hour testing, energization and signing of a power purchase agreement.

The electricity trader is the party that purchases the quantities produced by the solar plant. It could be a retailer, an institution using electricity for personal use (e.g. a school, hospital, government, etc.) or a large corporation aiming to reduce its carbon footprint at the most affordable cost. The duration of the agreement is usually 2 years on average, but can go up to 20 years, providing secure revenue for the generator and a promised amount of electricity to the buyer. On the other hand, РРА agreements are a prerequisite for attracting project financing during project construction.

The type of PPA agreement is determined by the electricity buyer and can be:

– Commercial PPA – the buyer is a type of institution (school, hospital, government, etc.) aiming to use the electricity for its own needs, purchasing it directly from the producer.

– Merchant PPA – the buyer is a merchant seeking to resell the purchased electricity. The only condition in a commercial PPA is that the producer and the end-user are market participants.

– Corporate PPA – one of the most common types of PPA. The buyer is a large corporate player aiming to achieve its green energy goals. More and more large companies are entering into PPAs to reduce their carbon footprint, such as Google, Apple, Amazon, etc.

Corporate power purchase agreements of electricity produced from renewable energy sources are not yet widely used in Bulgaria, as most of the producers are also consumers of their own capacities. Typically, these agreements are concluded for large renewable energy projects on the basis of project financing, providing the necessary electricity for large (usually international) companies that necessarily supply themselves with green electricity“.

The core expertise of the xFigureFinance team is to raise capital through a wide palette of financing instruments for renewable energy projects. We are an independent financial advisor, we know the financing options and terms well and can provide options for informed decisions at every stage of the investment. The advantages of xFigureFinance’s work are precisely our expertise, experience, and partnerships with the different types of participants in the process – EPC and O&M contractors, law firms, ESCO companies, panel and inverter manufacturers, investors, and others.