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Case Studies, Revenue Management, Risk Management

Ardian infrastructure upgrades post-subsidy operating system with Pexapark

3 min read

Ardian is an independent private equity investment company, headquartered in France. Ardian manages over $100bn of assets across the globe, including infrastructure such as renewables.

  • Since 2007, Ardian’s renewable energy portfolio includes:
  • $17bn infrastructure assets under management
  • 10+ renewable energy companies
  • 3.5GW of renewable energy managed

The Challenge

At present, Ardian’s renewables portfolio – like most – consists mainly of subsidised assets. However, the sector is rapidly becoming more ‘merchant’. In the ‘new world’ of renewables development and operation, assets are being developed without subsidies because the cost of technology has become low – either they operate on a fully merchant basis or part of the production is covered by a Power Purchase Agreement (PPA) or other hedging mechanisms.

Faced with this increasing merchant exposure, funds like Ardian must prove to investors that they have the right infrastructure, skills, and capabilities to manage, control, and monitor energy market risks as renewables transition out of subsidies.

For large utilities, managing energy risk is a matter of increasing scale and diversification in order to balance out exposure. Infrastructure funds cannot fully replicate such strategy due to investment and divestment pace as well as lower diversification (less thermal investments, no exposure to retail). For Ardian, however – a fund with a small team managing multiple global investments – it is important to stay nimble and adapt differently.

Ardian is therefore taking pioneering steps to adapt its internal and portfolio-wide risk management capabilities. It is investing heavily in digital tools to provide the analytics and intelligence needed to optimise and diversify portfolios to better manage merchant risk.

Marion Calcine, Chief Investment Officer – Infrastructure, Ardian: “We are investing in risk management. As a fund, we do not internalise energy management and trading risk, and as such, we want to make sure that proper risk management is being done in a number of ways.

At asset level, we want our management teams to have the most adaptive tools to arbitrate between keeping merchant exposure or taking PPA. At Ardian level, we also want to have a view on our merchant exposure overall, which helps us with portfolio construction.”

Pexapark and OPTA

To accelerate Ardian’s success in post subsidy markets, it has embarked on a company-wide initiative to develop an internal digital asset management system, OPTA. OPTA incorporates best-in-class software to monitor and manage operational efficiency and market risk across Ardian’s portfolio companies.

As part of this forward-looking approach, Ardian uses Pexapark’s ‘operating system’ to gain PPA pricing intelligence to quantify and manage price risk and secure cash flow across its renewables portfolio. One functional aspect that is extremely important to Ardian is additionality – having the capability to assess the impact that bringing new assets online has on value and risk across the entire portfolio. This will help Ardian build its portfolio in a way that balances exposure to different market risks.

Furthermore, by integrating its production, revenue, and energy risk data across OPTA, Ardian is able to undertake important portfolio-wide analysis, including ‘revenue-based availability’ calculations that will be used to optimise and schedule maintenance programmes for periods of low production and low prices.

Marion Calcine: “If you can predict when prices are going to be low over a certain period of time, you can choose the best time to schedule maintenance work, or later down the line, decide whether to store energy or feed it into the grid.”

By providing Ardian’s team with quantitative and statistical tools to manage energy risks across its asset base, Pexapark is helping them to construct an optimised renewable energy portfolio that delivers for its investors in an increasingly volatile market.

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