Getting the best financial return from a Renewable Energy business
As the world’s appetite for energy continues onwards and upwards, climate change concerns are driving markets rapidly toward decarbonised and lower emission technologies. The indicators all favour investment in Renewable Energy opportunities with the promise of excellent yields. Meanwhile the risks of doing business in SA continue to grow exponentially.How can investors, energy producers and supply chain businesses optimise returns while mitigating the minefield of risk?
“Outsourcing is the answer,” says Antonie van der Hoek, partner, and head of Renewable Energy at Business Services Outsourcing (a division of BDO South Africa).
“Because, apart from the cost-benefits we deliver via our core transaction and services offering, we also bring years of accumulated renewable energy market experience. We know where and how to use specialist knowledge to support our clients and give real value for their money. It’s often in places where they least expect. Somewhere along the line from setup and establishment of funding, during operations or at exit or re-funding, we will find better ways to optimise financial performance. And never underestimate the risk of dealing with SA’s notoriously fickle energy stakeholders.”
The market has changed substantially since the early days of renewable energy. The benefits of improved technology and delivery of engineering solutions can be quantified as they help improve efficiency and reduce the cost of delivery. But there will always be unforeseen challenges and the need for updated financial strategy as regulatory and economic changes come into play.
“There are so many permutations and potentially critical considerations to monitor” says Antonie. “We never really know what type or level of expertise we will be called on to apply – but we do know that for every client it will be different according to their technology or the type of investment.”
The market is dynamic. Incumbents or new entrants to the SA energy scene should take note!
“Generally speaking, we can split our value proposition into two main areas. We will get into more detail as we continue this series:”
Investors in Renewables come to SA attracted by past rates of returns (ROR) of 16-20%. So yes, while rounds 1 and 2 of DoE’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) were delivering those (and sometimes higher) yields, today it’s more like 12% (for a properly managed portfolio).
So while there’s still good returns on offer for funds and large scale investors, our market is complex, regulated and demands an intricate understanding to manage risk and optimise returns. Our financial specialists know how to spot a good opportunity and how to leverage it through the various phases of the investment to maximise ROI.
2. Project performance
Solar? Wind? Whatever your technology you will find that it’s better to work with specialists and teams of people who understand the language and business of renewables. While cost control is critical and common to every project, there are nuances, unique to technology and the business model for each client. We have seen and learned how to make money in Renewable in SA, and we use this knowledge to help producers and suppliers to maximise nett profitability.
BSO is a one stop for renewable energy business and financial advice!
“During the financial lifecycle of entry/exit to a renewable energy investment or project we provide routine and specialist services on daily routine, adhoc or hybrid business models. Our services line-up is extensive and completely integrated. Some of the most common business areas we advise on include corporate and governance, compliance and market risk and mitigation, tax affairs, legal business affairs, HR and financial management.”
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