Although risk is an unavoidable part of enterprise, responsible companies avoid unnecessary ones by making themselves aware of any issues before starting a new project. This is why Technical Due Diligence (TDD) is so important, being a full audit of a project’s potential legal and technical risks. A core function of the Quintas Advisory team is to carry out this audit for clients before any investors’ agreement is signed.
TDD: What is it and what does it include?
Any renewables project worth its salt requires a TDD study, which examines and evaluates a purchase object in the run-up to acquisition. It provides investors and buyers with peace of mind, assuring them that there are no looming problems with the infrastructure itself, or the legal and regulatory framework around it. Any issues that TDD identifies can be assessed and mitigated before they become too costly.
Any TDD study includes three fundamental elements:
- Feasibility: The team examines the project’s overall aims and objectives and reports on the likelihood that they can be achieved.
- Contractual reviews: Specialists identify and analyse the key provisions of all contracts and agreements, highlighting any possible risks or other relevant information.
- Infrastructure: This encompasses all the physical aspects of a project, such as local geography, environmental factors, the quality of any construction work and the state of any already existing plant.
When it comes to the renewables sector, TDD should also assess the projected energy output of an asset and the ease with which this energy can be fed into the national power grid.
How can TDD open up new markets and bring confidence to renewable energy projects?
For a company looking to invest in a new country, TDD is indispensable. While its own legal and technical teams may be experts on their core markets, they will be unfamiliar with those of the target nation.
Quintas Advisory recently pulled out all the stops to prevent potential pitfalls for investors on the road to their latest solar project. In this case, an international client and leader in the IPP market engaged Quintas Advisory to undertake TDD relating to the acquisition of a 100MW solar pipeline in central Italy. This involved 10 different sites, each represented by a different SPV company.
Italy is currently a very attractive option for solar investors. In 2022, renewable energy sources accounted for 58GW of total capacity and represented nearly 20% of total energy consumption and 36% of power generation. Going forward, the Italian government plans to push ahead with the penetration of renewable energy sources – and photovoltaic technology in particular. Its final aim is to bring renewables’ share of total electricity production to 72% by 2030, and to 95%–100% by 2050.
However, due to Italy's regional diversity and complex tax system, navigating its planning and application processes can be challenging. Another test for the first-time investor in Italian solar plants is developing an understanding of the country’s construction and engineering sectors. Such knowledge is very important when it comes to assessing the progress and quality of work undertaken when building and maintaining solar PV plants.
100MW Italian portfolio Business Case: overcoming challenges to succeed
Running a Technical Due Diligence process of a 100MW Italian portfolio, Quintas Advisory looked at a wide range of factors including, but not limited to:
- The local geography of the sites.
- The plant layouts.
- The environmental impact of the plants.
- Connectivity to the local and national power grid.
- The likely energy generated by the projects.
- The cost and schedule of the various projects.
The Quintas Advisory engineering team ensured that the plant locations were in suitable terrain for construction and there were no issues with areas of special natural or historical interest, while its legal experts checked the procedures for obtaining all the necessary permits, licenses and other paperwork for surveying, development, and construction work on the sites.
One of the challenges the team had to face was a tripartite language barrier, with staff communicating both internally and externally in Italian and Spanish. This applied most of all to the research Quintas Advisory was undertaking, with 6,000 documents in both languages needing to be read, understood, and analysed. What’s more, final reports needed to be written in English, adding another layer of complication.
As if all this wasn’t enough of a task, the Quintas Advisory team frequently found themselves working to tight deadlines regarding planning applications, construction milestones, and financing. “With so much going on, clear and quick communication was vital,” said Senior Project Manager Andrea Toscani. “Overall, this was one of our most challenging projects, and I am very impressed with how the entire team rose to the occasion.”
Technical Due Diligence expertise for Italian renewable market investors
After completing the Italian TDD task, the Quintas Advisory team felt it had achieved a more profound understanding of Italy’s renewables sector and how to navigate it.
Given the Italian government’s big push for solar, and Quintas’ active and ongoing support for origination and co-development projects in that country, it is safe to say the team’s enhanced expertise is going to prove invaluable going forward, with many more TDD assignments lying ahead. Quintas currently manages over 500MW of solar production for 200 sites across Italy. It is exceptionally well placed to support and advise anyone interested in being part of the future of the Italian energy sector.
The team’s experience is also part of a larger picture. Quintas values expertise gained through practice as part of its long-term outlook and is constantly expanding its knowledge of regions and their potential for renewable investment.
Is your company thinking about investing in Europe’s second solar boom? Visit our website to learn how Quintas Advisory’s consultancy work can help you.