SolarQuarter Middle East magazine had an exclusive interview with Mr. Antoine Poussard – Managing Partner, Finergreen, and understood about the solar services the company provides. We learned about the key parameters for financing different types of solar projects on the basis of project scale and the challenges faced. He also gave us insights into the evaluation of consultants along with the company expansion plans.
Please tell the readers about the kind of services FINERGREEN provides in solar energy space for the Middle east region.
Finergreen is a global advisory boutique specializing in renewables and energy transition.
We assist our clients by providing three different types of services: Merger and Acquisition, Project Finance, and Strategic advisory.
Merger and acquisition: We structure and execute transactions that maximize value creation for our clients.
Project finance: We design and execute the most suitable financing strategies for the projects of our clients.
Strategic advisory: We are market makers providing insights to help our private and institutional clients taking the right decisions in terms of the energy transition.
Through 10 offices, we are able to support clients almost everywhere in the globe.
Currently, what is the situation of financing large-scale solar projects in the region?
We assume the questions are more about the debt market on a non-recourse basis. The pandemic slowed down many processes in the power sectors, projects that regional banks would have financed quite easily in normal circumstances. This results in a surplus of liquidity in many countries, leading to improvements in financing conditions, well perceived in a context where CAPEX is more on another trend.
Having said that, the region is very fragmented and encompasses sophisticated leading institutions, and less experienced ones keen to expand in renewables.
Their appetite is growing but the economic situation of the country will here be the driver determining the limits of maximum possible exposures per project.
What are the key parameters for financing different types of solar projects on the basis of project scale?
We should here make a difference between utility-scale (US) and distributed generation (DG) projects.
While the large utility-scale project will focus on the creditworthiness of the off-taker, bankability of the PPA, and situation of each contractor, DG projects have layers of complexity with respect to parameters for financing, among others:
- Size is definitely one of them mostly due to costs of due diligence which are not compressible. There is however a trend downward due to increased volumes of projects, increased experience of banks, replicated structure & mutualization of costs across many small similar projects.
- Currency risks: Small private off-takers do not easily see or accept currency risks which on the other hand may be a no-go for many institutions. Bankability of the contracts in a context where the creditworthiness of off-takers is sometimes difficult to assess regulation may not be as well structured and permitting as it can be for US projects. The trend is definitely toward a real maturation of the regulation, improving financing conditions but it takes time. Now that signs show that the pandemic is active but slowing down, governments are definitely on this.
What are the biggest challenges that your clients face when implementing projects in your region?
- Regulation is among the top ones if we focus on DG markets. Each country has its own specifies and requires good knowledge and power is another challenge. Pandemic leads to the maintenance of subsidized power to maintain an active economy, making PV not always the most competitive solution. If on top of that we consider the recent evolution of CAPEX, this is definitely a temporary limiting factor. We are however here positive for the upcoming as most renewable targets of each country have been revised up and projects will have to be delivered. COP26 starting now will also be a good opportunity to hopefully see other guidelines in that sense.
- Quality of developers: Fast-growing markets always see opportunistic players with different experiences. Working with reliable and experienced ones is essential to the success of the project.
What factors should a client consider when choosing a consultant for complex project financing?
Consultants are often evaluated on:
- Their experience and knowledge of the requirements of targeted markets or projects: This is a time-saving solution as well as an opportunity for a client to scale up on new opportunities.
- But the consultant can also make a difference by demonstrating how a project can bring value in terms of the development plan of the investor whether from tax, legal, value creation requirements. In a MENA market, in particular, clients may not immediately see the benefit of working on a specific project, or technology due to a lack of service offer or immaturity of the market. The ability to provide bespoke solutions tailored to a client for him to make the right decisions is therefore essential.
- Track record could also be a relevant parameter but in a context where a market is nascent and developers are learning from the first experience, this should be a less critical parameter.
- Last but not least, we should note evaluate consultant on the value he could potentially bring either on other projects in other countries or locally. Successful experience on complex projects makes clients captive and keen to keep longstanding relationships. At Finergreen, we definitely value this and are committed to providing top-notch services to make sure our clients are happy and keen to work with us on their global development programs.
What are your plans for expanding your services specifically in the Middle East region?
We recently established our activity and focused primarily on the most active countries like Tunisia, UAE, KSA, and Central Asia. We are now extremely knowledgeable in these countries and can provide relevant development strategies to any clients interested in these markets.
With the whole region reopening doors, we are bringing more resources to increase our product offer in the surrounding countries like Oman, Turkey, Morrocco in particular.
We are definitely leveraging on our global presence with our 10 offices to be able to assist our clients everywhere in the globe. Our objective is to be close to our local market to be able to propose a large variety of projects, support on tenders, market analysis, help in finding fundings or strategic partners,
We are also specialists in the Energy transition making us knowledgeable partners on many domains directly linked to renewables (mobility, sustainability, etc).