Project Specifics

BRAVO Strategies II LLC (BRAVO), an investment vehicle managed by PIMCO, engaged Geosyntec to evaluate an investment proposition consisting of two adjacent photovoltaic (PV) electricity generating plants comprising 289 and 532 hectares. The project is located in the southern part of the Atacama Desert, near Antofagasta, Chile, which is some of the world’s prime solar real estate. The potential $315 million venture would involve a construction of a 146 MWp solar power plant for interconnection to the national electrical grid via the Grand North Interconnected System (SING), which accounts for roughly one quarter of the total Chilean power capacity.

Geosyntec Scope of Services

Geosyntec conducted a technical and commercial due diligence of the proposed project for BRAVO. The scope of services included an evaluation of commercial risks (e.g., energy pricing forecasts), technical risks (e.g., structural designs, equipment, radiation levels, earthquake), and certain legal risks (e.g., existing contractual commitments and obligations) that could impair the ability of the investment to deliver on expected returns. Because the project was located in a region of high seismic activity, Geosyntec applied our expertise in risk-based decision analysis and geotechnical engineering to evaluate the risk of temporary and permanent disruption to power generation associated with a seismic event. Geosyntec also evaluated the risk of investment underperformance due to obtaining lower energy output than expected due to variability in solar radiation levels or sub-optimal panel performance due to manufacturing or installation defects. Geosyntec also gathered market intelligence and compared technical information and expected performance data supplied by the project developer with that used in similar projects in Chile and elsewhere. By identifying how value was intended to be distributed, we listed key revenue risks, missing elements from the data room, and errors and uncertain assumptions (e.g., capacity payments, penalty payments). To quantify the effects of identified risks on future revenue streams, the analysis also included application of Geosyntec’s novel decoupled net present value (DNPV) technique to evaluate the investment opportunity. The DNPV method allows direct integration of technical due diligence into a project valuation.

Notable Accomplishments

Within a compressed four week period, Geosyntec combined our engineering prowess with a deep understanding of financial risk valuation and probability modeling methods to develop a technically and financially defensible cash flow model for the proposed investment. A novel concept underpinning the DNPV methodology—cost of risk—was employed to facilitate the comparison of the different identified risks. The main risks identified were the energy cost, capacity payments, and the non-conventional renewable energy penalties. Risk management tools were recommended to mitigate these risks. Geosyntec provided results to BRAVO executives in a concise and straightforward reporting format.

What is a Quick Qual?