Overseas PV power plant investment "four big" risks

There are huge market demands for overseas PV power plants. Why are there a large number of them that cannot be sold? What are the potential risks of overseas power station investment?

The chairman of Super Solar, “Ni Kailu was suspected of going abroad to run the road” continued to ferment, causing great vibration in the photovoltaic industry. Despite repeated clarifications by the company, the risk of overseas PV power plant construction and sale is causing more and more attention.

Downstream investment, this slightly unfamiliar industry segmentation vocabulary has become hot with the subsidy price, and more and more component suppliers are the preferred way to digest excess capacity, optimize product form and asset allocation.

It is undeniable that under the current global rapid development background of new energy and the pressure of industrial environment, photovoltaic power station is not only the most stable and considerable fixed-asset investment in global yield, but also the core link of upstream manufacturing and terminal applications. The upgrading and application of the energy industry bears an irreplaceable key pivotal role. From the perspective of professional investment and construction companies, the smooth integration of photovoltaic power plants and normal power generation means the basic formation of asset value and IRR return models. However, from the perspective of PV component suppliers, it is necessary to extend the investment risk to a more back-end loan exit or overall sale. For component suppliers, the cash flow of power plant asset transactions is the key to the success of the entire investment.

Regarding the construction of downstream photovoltaic power plants, although there are many pioneers and advocates in the photovoltaic industry, in the face of the huge benefits that can be expected and the unpredictable risks, the industry is always full of a subtle entanglement. Then, after the PV power station is completed, can it be sold smoothly? What kind of power station will be recognized by the terminal holders represented by European banks and new energy funds? What technologies exist in those power stations that cannot be sold smoothly? Hidden danger?

Power plant investment steps

As a fixed investment, solar power station is not fundamentally different from traditional fixed investment assets. It is a downstream asset in the solar energy field. In this industrial chain, polysilicon, silicon wafers, battery chips and components are upstream products, components and inverters. After being installed and connected to the grid and other products, it becomes a fixed asset. His fixed income comes from the power generation revenue. The asset can generally last for 25 years. It is generally determined according to the illumination range, the electricity price per kWh, and the overall efficiency of the system. income.

In the whole power plant investment process, it is divided into the project development phase, the project construction phase and the project operation maintenance phase, which are called the ABC phase. In the A stage, the investment amount is small, the risk is large, and the process is large. Generally, it needs local people to complete. In the B stage, the capital demand is large, the investment risk is high, and the return is high. Generally, the stable investors will not participate, the C stage It has become a fixed asset with stable income, with low risk and large demand for capital. It is a long-term holding return. Generally, depending on the region and country, the 20-year yield is between 8-20%.

The European solar energy market was the earliest commercialization. As a fixed asset financing, power stations have become a very common behavior. Pension funds, social security funds, insurance, commercial banks and other industries have become one of the main players in pursuit of 6-8% annual return. Some listed companies will also choose to invest in solar power plants to improve their asset structure. Other private companies will invest in power plants to meet asset transfers or long-term stable returns.

Since there are a large number of European banks or funds with asset allocation needs that are willing to participate in PV power project loans, why are some power stations unable to sell? Why is the power station intention holders looking for high-quality power station assets, and another In fact, there are a large number of completed power stations that nobody cares about?

Power plant investment risk

The first is technical risk. In the mature solar market, investors will examine in detail the most important products such as components, inverters, brackets, transformers, cables, etc., whether it is Bankable. Under normal circumstances, the brand, quality, model and quality of the components are very important. After installation, a third-party evaluation agency is required to conduct random inspection of the components, which will comprehensively detect the attenuation, cracking, power and quality of the components. And complete a detailed written report.

The other biggest technical risk affecting the sale of power station assets is the EPC contractor's qualifications, engineering design, engineering quality, grid-connected technology, professionalism, well-known, whether it is Bankable, whether EPC provides professional and comprehensive construction reports, construction logs, technical specifications and other technologies. data.

In addition, you need to select a standardized and experienced law firm to draft all the text, and all contracts must be Bankable. For example, a project may have to sign contracts with dozens of institutions, various lease contracts, various construction process contracts, and various future operation and maintenance related contracts. These contracts are the basis for future bank financing, even if they are sold in the future. Will choose to partially finance from the bank and need a bankable contract.

Followed by potential operational risk. Mature solar market, after the power station is connected to the grid, will choose professional operation and maintenance company operation and maintenance, will purchase operational insurance, purchase quality assurance services, install security monitoring equipment. The operation and maintenance company can respond in time when the failure occurs. The insurance company recognizes the losses in different situations and compensates for the losses, ensuring that the operation and maintenance process will not cause additional losses. As long as the professional protection, the investors will eliminate doubts.

Again it is policy risk. In countries with stable policies, countries with high internationally recognized ratings, such as Germany, Japan, the United States, and the United Kingdom, have high credibility, economic strength, and supporting legal safeguards. Once the electricity price is determined before the construction, the future 20 to 25 years of power generation revenue will be executed at this price, so the risk of investment construction is small. On the contrary, in the Czech Republic, Greece, Bulgaria, Ukraine and other countries, after the completion of fixed assets investment, additional tax is retroactively added, resulting in unrealized investor income expectations and even large losses. The companies mentioned in the media have invested in a large number of power stations in Bulgaria and Greece. In fact, their assets cannot be realized as expected.

Finally, there is a risk of capital security. It mainly refers to the problem of capital security caused by investment mode, investment channel, investment mode, investment recovery period, exchange rate risk, etc. The excessive cost caused by unreasonable investment mode and unsafe fund payment, etc., excessive exchange rate fluctuations lead to serious investment Depreciation, so choose a reasonable investment model and tax structure, make payments through third-party accounts, and introduce third-party guarantees.

Since 2009, a large number of Chinese production companies have begun to choose to invest in solar power plants. They do not have an in-depth understanding of the potential risks of power station investment, slamming investment, using their own products, choosing the cheapest EPC contractors, and not having experienced lawyers. After the completion of the project, it does not purchase operational insurance, does not choose to operate the company with experience, in order to pursue high profits, choose to invest in countries with imperfect laws, etc., and plant the consequences for the future sale of assets. The solar power station is a huge amount of money. Projects that cannot be financed or sold in a timely manner will cause problems such as a broken capital chain.

For photovoltaic project developers, the formation of photovoltaic power plants and the circulation of assets must ensure that they do their homework in the following areas: the stability of new energy policies and the judgment of financial payment capacity, the full investigation and technology of the project itself. Design, pre-communication of international commercial banks' specifications for wind power plant project specifications, international financial institutions resource reserves and acquisition standards, as well as the selection of internationally experienced engineering contractors (EPC) with good banking certification background.

In fact, compared with other fixed asset investments, PV power plants have significant advantages in terms of assets, cash flow and circulation. They are also one of the industry sectors with the highest internal rate of return on fixed assets investment in the world. For international banks, funds and investors, there is a greater appeal. However, the realization of the above values ​​and objectives is based on the compliance with the rules, technical specifications, safety guarantees and resource support for PV power plants. Otherwise, it will only allow PV companies that originally hoped to build downstream products to drive upstream production. The look that looks beautiful is getting deeper and deeper.

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