Global Asset Management Company: Due diligence on acquisition of renewable asset portfolio

The challenge 

Our client, a global asset management company, sought to invest in a portfolio of Australian renewable energy assets spanning various stages of the development lifecycle. Rennie was engaged to conduct commercial due diligence (CDD) on the portfolio to validate the investment thesis and inform asset valuation. Our advice was provided on a reliance basis to support confident decision-making.

The approach

We took an issues based approach to provide comfort on the areas that could present the biggest risk to our client’s investment thesis.

We initiated the project with a scoping phase to identify and prioritise key risk and opportunity areas within the CDD workstream. Key issues explored included:

• The likelihood of projects under development achieving critical milestones and reaching their expected commercial operation dates, considering regulatory trends, connection approval timelines, contractor and supplier performance, land access, and personnel capability.
• Operational risks for assets already in service, with focus on contractor performance, asset reliability, and risks of curtailment.
• The commercial soundness and risk profile of Power Purchase Agreements (PPAs) underpinning asset revenues.

To enhance our analysis, we partnered with Aurora, who conducted detailed energy market modelling. This enabled our advice to incorporate future wholesale energy market pricing forecasts and their implications for project economics.

Our impact 

Our commercial due diligence delivered critical validation of our client’s investment thesis and informed accurate valuation and bidding strategies. Furthermore, we equipped our client with a clear, actionable view of post-acquisition risk mitigation measures, including operational improvements, contract renegotiation priorities, and market exposure management. This comprehensive diligence underpinned confident investment decisions and facilitated proactive portfolio management planning.

Key insights 

• Project delays are common and must be rigorously assessed, particularly around grid connection approvals and contractor performance.
• Thorough review of PPA arrangements is essential to identify revenue risks and potential opportunities for renegotiation.
• Incorporating energy market forecasts is crucial for a realistic assessment of future cashflows and valuation.
• Collaborative partnerships, like our engagement with Aurora for market modelling, strengthen due diligence outcomes and enhance strategic advice.