EnergyNewswatch

PPA Valuation and Pricing Best Practices

January 23-24, 2024 | Live Streaming Online

Click Here to register $1195

If you are unable to attend at the scheduled date and time, we make recordings available to all registrants for three business days after the event

This course provides a methodical review of financial and risk elements that influence the value of renewable energy power purchase agreements (PPAs).  It will explore the many layers of financial considerations that confer value in these PPA contracts for power.  It will look at the dependent relationships that often make the difference between a PPA that accomplishes its objectives over an extended period versus one that can disappoint almost immediately.  

Our expert instructors will review and demonstrate multiple analyses and methodologies that provide important financial and risk guidance in the structuring of PPAs for project developers, off-takers, investors, lenders and other transaction parties.  

Learning Outcomes   

• Review the fundamental financial components of PPA
• Examine the underlying risk factors that impact the value of a PPA
• Evaluate fleshed-out PPA terms
• Assess the relationship between PPA price and value
• Discuss project production-related guarantees
• Identify the differences between the standard contractual parameters used for wind and solar contracts
• Evaluate risk distinctions that especially apply to virtual/financial PPAs

Agenda

TUESDAY, JANUARY 23, 2024

9:00 a.m. – 4:45 p.m. Central Time

9:00 – 9:15 a.m. :: Overview and Introductions

9:15 – 10:30 a.m. :: A Survey of the PPA Landscape

• Corporate renewable energy transactions
• Types of off-takers
• Physical vs. Virtual PPAs (VPPAs)
• Market trends
• Variables that impact the markets of increasing renewables
• ERCOT deeper dive
• Impact to how PPAs are viewed
• Standard PPA settlement example
• Upside-share PPA
• Upside-share PPA with storage

Annie McClelland, Director – Origination & Regulatory Affairs, Renewable Energy Systems (RES), Americas

Nicolas Muszynski, Vice President – Energy Storage, Renewable Energy Systems (RES) Americas

10:30 – 10:45 a.m. :: Morning Break

10:45 a.m. – 12:30 p.m. :: PPA Pricing Trends and Their Cost Determinants

• Levelized Cost of Energy (LCOE)
• Historical wholesale market value by region
• Incentives
• Specific components
  • Energy value and capacity value
  • Value factor or capture ratio
  • Negative prices and basis risk
  • Impacts of curtailment
  • Market value
• Looking ahead
  • Influence of Inflation Reduction Act (IRA)
  • Exploring the impact of CapEx and interest rate increases
  • “Headroom” comparison to gas-fired generation

Mark Bolinger, Research Scientist – Electricity Markets & Policy Dept, Lawrence Berkeley National Laboratory (LBNL)

12:30 – 1:15 p.m. :: Lunch Break

1:15 – 2:30 p.m. :: Finance & Valuation Fundamentals of PPAs – A Developer’s Perspective

• What drives a PPA?
• What are typical returns?
• What is in a pro-forma?
• What drives returns? What are levers?
• Example
• What are investor concerns?
• Concept of risk and return
• Translating PPA legal terms into financial terms
• Role of consultant(s)

Steve Birndorf, Director – Renewable Energy Consulting, Usource (a NextEra Energy company)

2:30 – 2:45 p.m. :: Afternoon Break

2:45 – 4:30 p.m. :: Examining the Underlying Risk Factors that Impact  PPA Valuation

• Curves
  • How market projections impact contract economics
  • Traded curves (forwards) vs. consultant curves (forecasts)
  • Components of curve generation
• Shapes
  • Timing of generation and delivery
• Hub
  • Types of contracts available
  • What happens when the same project offers to settle at a different hub?
• Penetration
  • Relationship of value to installed generation base
• Timing
  • Online date and tenor
  • Generation and delivery schedule
  • Relationship to all power generation in service pricing area
• Negative covariance
  • How does historical back-cast impact contract value?

Brock Mosovsky, Vice President – Analytics, cquant.io

4:30 p.m. :: Course Adjourns for Day

WEDNESDAY, JANUARY 24, 2024

9:00 a.m. – 12:30 p.m. Central Time

9:00 – 11:00 a.m. :: PPA Term Sheet Review – Key Commercial Terms

• Examples
• Business acquisition perspective
• Off-taker perspective

Examining the Relationship Between PPA Price and Value

• Price of the carbon benefit
• Net settlement
• Single project vs. portfolio contract position(s)
• Mark-to-market (MtM) value of PPA over time as market conditions evolve

Impact on PPA Risk and Price of Project Production-Related Guarantees

• Availability
• Output and performance
• Forced curtailment

Impact on PPA Risk and Price of Standard Contractual Parameters and Terms

• Liquidated damages and termination rights
• Force Majeure
• Differences between wind and solar contracts

Supria Ranade, Head – Power Markets, SoftBank Energy

11:00 – 11:15 a.m. :: Morning Break

11:15 a.m. – 12:30 p.m. :: Panel Discussion: Impact of Externalities on the PPA Landscape & Implications for Negotiations

• Supply Chain
• Tariffs
• Customs impositions
• Inflation Reduction Act
• CHIPS Act
• Interest rates
• EPC and SME advisor staffing
• Contracting
• Impact on project developers of utilities to commission, develop and own renewable energy assets
• Schedule and cost risk
• Liquidated damages
• Target COD and curative periods
• Geographic and/or locational complications
• Consolidation in project development
• Pricing trajectories
• Forward price curves

12:30 p.m. :: Program Adjournment