Our view on solar asset management and value creation
During the recently presented “Asset Management Best Practices Guidelines” promoted by Solar Power Europe, we emphasized the importance of value-added services across the lifecycle of PV assets.
The term “value add” is associated with any intervention resulting in enhanced risk-adjusted returns.
Such interventions that were a “nice to have” in an incentive-driven market, now, with the tighter EBITDA of the market parity context, become crucial to make solar investments viable in the long term.
In order for an asset manager to be able to crystallise the value of PV assets, three conditions need to apply:
- A partnership-type approach with investors: an asset manager, now more than ever, is a strategic partner and this should be reflected in two main contractual terms:
- Long-term agreements: deal origination is just the first step and value add is the son of time. Long term agreements are necessary to bring continuity, allow a sufficient time of observation and capture market evolutions. Apart from the low hanging fruits, the value creation is a "continuous learning" process
- Fee structure: the asset management fees need to reflect a “win-win” situation and should be based on upside sharing to create full alignment of interests
- An appropriate organization structure: value-add is the result of a multi-disciplinary team effort and cannot be captured without a holistic approach. In order to create synergies among the various departments, the asset manager should have an organization that facilitate internal communication. In addition, it is crucial to have a figure, e.g. a “portfolio manager”, that benefits from a 360-degree view on each asset and is able to coordinate and supervise the various professionals involved
- An early involvement: it is common to think about the asset manager as someone that should be involved when a plant is already in operation. We have learnt from the past that actually an asset manager can bring its valuable view also during the development and construction phase, by providing suggestions on the plant layout, choice of components, warranty management and opex optimisation.
Never validate a business plan without asking the asset manager first!