New business moves are being triggered by changes in the RES market, with lower revenue pushing investors to selling instead of enduring the increased risks, according to market executives who spoke with “N.”
The same executives explained the framework of purchases and sales of operating photovoltaic parks with a capacity of 500kW to 1 MW throughout this period, amid estimates that the relevant investment interest will remain in the coming months.
Why they are selling
The “sale” as reported by the same sources mainly concerns small parks of 500kW with 1 MW in a “feed in premium” regime and which have 20-year contracts with the Administrator of Renewable Energy Sources and Guarantees of Origin.
According to what the contract provides, these parks are not paid for the curtailed energy or at least are not paid for the amount they have lost so far since there is still no compensation mechanism while they are burdened with the consequences of zero and negative prices in the energy market.
The above entails significant losses of income forcing investors to change their business plans.
Given that the risk is expected to worsen for at least another year until the first batteries in the system are put into operation, which will limit the need for cuts, a number of investors evaluate the sale of the park as the best possible solution to hedge the risk, thus avoiding remaining in a long-term state of uncertainty.
Why they are buying
These are photovoltaic parks in operation with an active contract, which means that they have “locked in” a fixed compensation price (Feed in Premium) for the energy produced, subject of course to the parameters (negative, zero prices and cuts) that was mentioned above.
The difference between the individual producer and a company with a more comprehensive portfolio lies in the fact that in the second case, risk management becomes easier and therefore more possibilities arise for the investment to maintain a positive sign.
This condition applies to the entire management of the park, which has now ceased to be an easy task with the producer being called upon to measure multiple parameters in order to maintain a consistently profitable investment. This concerns everything from the daily operation of the park to the provision for the insurance of the park and its maintenance, with the main “headache” being the bank and the requirements for fulfilling the loan, especially at a time when the income from the sale of the electricity produced has lost its previous “certainty”.
According to market sources, these investments are accompanied by an internal rate of return of 7%-10% at best, a scale that is considered satisfactory, with a recovery horizon of the investment over a decade.
In this light, as they explained to “N”, these are not terribly profitable investments, but they are profitable.
