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Case Studies

Commercial Risk Review: Pexapark analyses AIP acquisition in the US

2 min read

The Client

AIP is a direct infrastructure investment platform for institutional investors

Originally established as PKA AIP in 2012, AIP has grown into an independent investment manager dedicated to advising institutional investors on direct investments into energy and infrastructure assets in Europe and the US.

To date, AIP has invested more than EUR 4 billion and the target for the coming years is to invest approximately EUR 800-900 million per year into private equity infrastructure, with a focus on alternative energy assets.

The Challenge

AIP has accumulated considerable experience in Europe’s renewable energy markets and is exploring opportunities in the US in light of a growing volume of M&A transactions in the region. The majority of renewable energy projects in the US require a power purchase agreement (PPA) in order to secure financing.

In 2019, AIP considered the acquisition of a US wind farm. Prior to the due diligence process, AIP needed to confirm that the existing PPAs were structured effectively to manage long-term financial risk.

Commercial Risk Review

Pexapark conducted a full Commercial Risk Review ahead of AIP’s acquisition, to determine whether the current PPA for the project optimally managed and allocated financial risk.

In this analysis, Pexapark:

  • Illustrated how the PPA distributed key energy risks between the Wind Farm and the PPA including price, profile, volume and locational basis risk.
  • Analysed and highlighted how the PPA interacted with the route to market structure.
  • Reviewed key commercial terms to highlight any areas of particular relevance or any potential mismatches with AIP’s risk appetite.
  • Provided an overview of the relevant power market design and showed how the PPA and route to market agreements would operate within this context
  • Provided AIP with the third-party perspective necessary to validate their more conservative energy trading strategy for the project.

Kristian Schmidt Clausen, Investment Manager, AIP:

“Pexapark’s thorough examination and valuation of commercial risk helped us build the foundation for negotiating the final capital structure of the project. The report was a clear, thorough piece of work that we can rapidly pull relevant information from when revisiting the investment, and that keeps us confident in managing risk for the long term.”

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