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Corporate PPA support services for renewable energy developers
Benefits and challenges of effective corporate PPA business models under Japan’s new FIP scheme
With the introduction of Japan’s Feed-in Premium (FIP) scheme in April 2022, new renewable power plants, with some exceptions, are no longer subject to the Feed-in Tariff (FIT) scheme. Under the FIP scheme, renewable energy developers bear risks that did not apply under the FIT scheme, such as income fluctuation risks (e.g. risks associated with their generation profiles and fluctuations in monthly income), imbalance risks and non-fossil certificate sales risks. In order to develop new renewable power plants and continue to engage in the power generation business, it is essential for companies to manage these risks.
A corporate power purchase agreement (PPA) is one effective way to accomplish this. A corporate PPA is a long-term agreement under which renewable energy developers sell electricity at fixed prices directly to off-takers such as electricity users, electric power retailers or aggregators. Utilising this method enables renewable energy developers to avoid or transfer the abovementioned risks. Another benefit of a corporate PPA is the potential to sell electricity at higher prices than under the FIP or FIT schemes due to the recent rise in demand for renewable energy.
Alongside these benefits, however, corporate PPA presents the following challenges including the need to:
- search for off-takers with favourable conditions;
- select feasible electricity sales schemes based on various conditions;
- scrutinise the terms and conditions of the PPA; and
- secure project finance, which could be more difficult than securing project finance under the FIT scheme.
Our services
We can support you in your efforts to solve these challenges and successfully execute corporate PPAs by leveraging the following resources:
- an extensive network of potential off-takers across various industries and regions;
- in-depth knowledge of the renewable energy business and project finance; and
- strong information and data gathering capabilities underpinned by our client network and abundant industry knowledge.
Our detailed corporate PPA support services
(1) Support to help you better understand the Japanese power market
As a first step for companies seeking to enter the renewable energy business in Japan, we help you gain a solid overall understanding of the Japanese power market, including but not limited to the regulatory framework, trends in supply and demand and key issues likely to impact the power market in the future. We also analyse future power market prices and non-fossil certificate prices to help you better understand the renewable energy business in Japan.
(2) Introduction of potential off-takers
By leveraging our client network of hundreds of companies*, we introduce you to potential off-takers with favourable conditions and high credit ratings, including electricity users, renewable energy aggregators, electric power retailers and others.
*Our client network built through M&A support, project finance support, accounting audits, tax and legal support, etc.
(3) Advice on the PPA scheme
We propose a feasible PPA scheme based on the latest information* on legal and regulatory frameworks and market player trends.
*Including information on the FIP scheme, non-fossil certificate trades, necessity of acquiring a license under the commodity derivatives transaction act, applicability of hedge accounting, selection criteria for subcontractors including those providing balancing operations, electricity users’ circumstances such as demand profiles and conditions of current agreements with retailers, availability of backup electricity suppliers, lender risk tolerance and more.
(4) Advice on negotiating the terms and conditions of the PPA
We provide support for negotiating the key terms* of a PPA. Based on ongoing and previous case studies, we provide advice to help you achieve PPA terms that are fair and bankable.
*Key terms include contract capacity, price per kilowatt hour (kWh), contract period, supply and off-taking obligation, response in the events of curtailment or force majeure, representations and warranties, termination, penalties, pledges, compensation for damages, etc.
(5) Analysis of project investment returns and loan repayment capabilities
We develop a variable cash flow model to analyse project investment returns and loan repayment capabilities. We can also provide support in conducting a sensitivity analysis of cash flow when utilising the Japan Electric Power Exchange (JEPX) market for power sales under the FIP scheme (e.g. long-term JEPX price forecast, JEPX price spike analysis, non-fossil certificate supply and demand analysis, imbalance price analysis).
(6) Support for securing project financing
We provide the following services by leveraging the knowledge accumulated through our broad financing support experience:
- Project risk analysis and consideration of countermeasures
- Advice on financing schemes
- Introduction of potential lenders
- Lender bidding
- Advice on loan-related contract negotiations
(7) Support for project equity financing and exit
We provide the following services by leveraging the knowledge accumulated through our broad equity financing support experience:
- Introduction of potential equity investors
- Fund establishment and fund raising support
- Investor bidding
- Advice on investment-related contract negotiations
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Our Team
Partner, PwC Advisory LLC
Director, PwC Advisory LLC
Hiroaki Ishii
Senior Manager, PwC Advisory LLC
Daisuke Kimura
Senior Manager, PwC Advisory LLC
Karin Baba
Senior Manager, PwC Advisory LLC
