Renewable Energy Deals: Typical process & timeline (Sell-side Advisor’s perspective)

Most renewable energy professionals know that transactions in this industry are often large and very complex. Whether it is an asset sale, a project finance deal, a company investment, refinancing or any other transaction, these deals take time to prepare, market, negotiate and close.  

However, very few people get to see what one of these processes looks like, what the key steps are, and, often more importantly - how much time to allow for the process from start to finish. This is crucial information for developers, who are balancing resource allocation trade-offs against strict timeframes. 

We surveyed the most active sell-side advisors from our network and concluded that most simple mid-market transactions take around 6 months (26 weeks), with more complex and larger deals taking longer and vice versa. Using these insights, we formulated this guide to give clean energy developers and sell-side advisors an insight into the deal process. 

The guide will delve into the process steps and timeline over this 26 week period, as told from the perspective of a sell-side advisor.

Below, we use the term ‘asset’, however, a similar framework would likely also apply to SPV, company, portfolio or TopCo transactions, including sales, financings and investment partnerships. 

Also, the ‘seller’ is both a singular and collective term used to define any combination of the developer and the mandated sell-side advisor. The renewable market is dynamic, so this guide should be used only as a rough basis to understand expectations between buyers and sellers. It is not a rigid framework, and cannot guarantee success.   

Asset sales processes really start around 6 months at the shorter end, but can take considerably longer, especially for complex deals or when extensive due diligence is needed. 

Fortunately, the process can broadly be split into 10 steps, below. 

As the process progresses through each of these, the seller and investor relationship grows closer, trust is established and more information is shared between the parties.

Step 1. (Typically 2-6 weeks before starting outreach) Mandate and pre-marketing preparation

Step 2. (Week 1-3 of outreach) Introductory call between the seller and all potential buyers

Step 3. (Week 3-4) NDAs signed, teasers shared and buyer(s) access data room 

Step 4. (Week 5-6) Buyer(s) review basic initial data room and submit non-binding offers (NBOs)

Step 5. (Week 6) Seller shortlists NBOs while confirming buyer’s proof-of-funds

Step 6. (Week 7-8) Buyer(s) ask additional questions, and update NBOs to give their best final NBO

Step 7. (Week 9-10) Seller selects best NBO and grants exclusivity 

Step 8. (Week 11) Site visit 

Step 9. (Week 12-19) Full due diligence with the final binding offer and Head of Terms (HoT) are agreed

Step 10. (Week 20-26) Sign full binding contracts 

To engage with investors or potential acquirers efficiently, mastering both preparation and process is key. Many developers decide to engage an advisor to structure the deal, produce the materials, source and engage with potential transaction partners and run their process. 

The process begins with an introduction where the developer and advisor initiate dialogue. This meeting sets the stage for collaboration, and an NDA is typically signed to allow both sides to share commercially sensitive information more freely, in order to gain clarity on the current situation.

The advisor conducts a brief evaluation of the developer, alongside their financial goals and priorities for which they may need support. As a part of this process, they may request access to any pre-existing data room materials in place from the developer. However, more generally the advisor needs to understand the objective, e.g. is it only one project/SPV or a pipeline, does the developer want equity, debt or a complete 100% sale? Do they insist on staying as a shareholder? 

If they believe they can successfully aid the developer to achieve it’s goals, this is the point at which they will propose an advisory mandate and negotiate with the developer through to it being signed.

If the existing data room, content and/or structure, is not up to the standard of a potential buyer, then the first order of business is therefore often to help gather the missing information, produce the core documents and restructure the data room. 

Interestingly, advisors often find that developers believe all pre-existing documents are completed and there is nothing left to do on this side, nothing left to clarify, and nothing to add to their data room. Advisors anecdotally indicate that this is generally not the case.

The objective is to ensure the data room is digestible, and that the key information is shared but no more than is needed. This will eliminate unnecessary friction for future buyers as any review will take less time and generate fewer questions. A slick-run process also signals professionalism to any potential buyers / investors, which isn’t a bad thing. 

For greenfield and pre-RTB deals, there are 3 main types of key folders within the data room, which may vary in depth depending on how much the project has progressed so far: 

• Land documents
• Grid documents
• Offtake documents

For an RTB project, they will likely include more folders and more materials, with generally deeper insights, such as:

• Feasibility report findings
• Financial model
• Signed PPA 

For an operational model, they will also include at the very least: 

• Historical performance data

For any process, the seller or advisor would typically be expected to also have one more key document: the teaser. The name, teaser, comes from the fact that this document gives enough information to interest a relevant party, without giving everything away. Typically it is 1-10 pages or slides, but remember - short and succinct is the name of the game here. No need for life stories. 

Now that the advisor is mandated and the data room is in order, the asset marketing and sales process can begin!

Advisors begin the marketing process by reaching out to potential buyers. They may do this by referring to what is known colloquially as their ‘little black book’ of pre-existing connections and relationships, however this is of course limited. 

Increasingly, sellers are instead using technology and availability of data to reach a much wider audience. PF Nexus can help here - with (a) data ecosystem of 3,000 companies (for those who want to research and manually connect), or (b) asset marketplace (for a slicker, more efficient outreach).

Buyer(s) and the seller introduce themselves and schedule an initial call. The time taken to schedule this call is highly dependent on the number of parties in the process, and the number of respective stakeholders. A small asset with only one member from each party will be easy to schedule a meeting, and vice versa. 

Generally, calls can take longer when a buyer requests or is requested to be included in calls, since there is a higher number of stakeholders, hence it is difficult to find a time that works for all. 

A project teaser (1-10 pages/slides) is typically requested by the buyer before this call. Note an advisor is likely to want an NDA in place first, in order to protect themselves from the risk of circumvention. 

A successful call will confirm the interest between the buyer and the seller/asset. If many parties are being spoken to concurrently, it may take 3 or even 4 weeks to speak to all parties being involved in a process.

There is significant fluidity between the previous milestone and this one. Assuming the NDA was not necessary for the introductory call, an NDA is now signed and the seller gives the potential buyer(s) access to the full Information Memorandum (IM) before granting access to their data room

Potential buyers review the data room and undertake an initial round of due diligence. Using any previous experience, market trends and current assets under management, the buyer submits a non-binding offer (NBO) for the asset.

The seller reviews NBOs and makes a shortlist with a small number of buyers. Typically, this is 1-3 buyers with a single preferred option and two backups. This shortlist is taken on to the next step.

During this review process, the seller will ask to see accompanying documentation of the buyer’s financial position and background. This enables the seller to assess proof that they have the capacity and credibility to buy. Consequently, buyers without financial credibility can be removed from the process. 

Shortlisted buyers are invited to access a data room with more information. Additional documents undergo due diligence and can lead to further questions. Buyers may adjust NBOs according to the information and sellers receive final NBOs from all parties. 

Data rooms add additional data only when needed/requested. Each may have a different data room, but broadly this is a second tier of data insight since trust is building.

The seller reviews the NBOs again and selects the best NBO from the shortlist. Exclusivity is normally agreed with the most attractive offer. If there is no competitiveness in the situation (e.g. the buyer knows there will be no other rival swooping in and rapidly buying), exclusivity may not even be requested. 

Exclusivity shifts the balance of power to the buyer, stopping the seller from being able to sell to anyone else. Thus, it is not desirable for the seller and is not given away easily or for free.

A standard protection for the seller is to issue a non-refundable escrow deposit of US$10-50k (or equivalent currency) to the buyer in exchange for around 1-3 month exclusivity. Any money put down at all significantly increases the seriousness of NBOs placed. Whilst it reduces the number of buyers, it importantly increases commitment by the selected buyer.

An alternative structure to the deposit is a break fee at the back end if the buyer doesn’t close the deal. This method is significantly riskier and rarely used. The deposit/fee seems to be independent of the ticket size.

From the buyer’s side, it is attractive since it locks in the opportunity while they can check finer details. It gives them sufficient protection to enable investing time and resources in the deal, so it can be executed.

Exclusivity should be long enough for the buyer to reasonably come to a conclusion on the asset and incentivise efficient decision-making, but not too long as to significantly tie up the seller when they could be exploring other options. 

At some point during the process, the buy-side will likely organise for a site visit to take place. 

This can happen earlier or later in the process, but by visiting the site, the relationship and trust continues to build between parties. The buy-side can take note of any additional issues which may be visible when on the site grounds. 

Extensive due diligence is undertaken over the full data room and between the buyer and seller. Additional documents include all remaining agreements about the asset and shareholder information. Again the timing for this milestone can vary widely depending on the nature of the asset. 

Legal DD should take about 6-8 weeks depending on the complexity around SPV, and is a key component of the time frame here.

Due diligence is typically significantly longer at this point if the asset is at the company level, since more factors need assessing compared with the SPV. This includes but is not limited to experience, track record, other raises etc.

The non-binding offer is adjusted if needed and becomes binding. This is one part of the final memorandum of understanding (MoU)/head of terms (HoT) that are agreed upon. 

To conclude the asset sale, the full legally binding contracts are signed. 

The likely structure is dependent on the financial goal, the stage of the project’s maturity and the risk appetites of both buyer and seller. 

However, examples include a ‘Share Purchase Agreement’ (SPA), a ‘Development Service Agreement’ (DSA) or subscription documents for the issuance of new shares.

Sales processes are challenging but PF Nexus is on hand to help in the renewable space. We have an asset marketplace to help buy-side and sell-side to find and connect with one another, and an introductions section to help both sides keep track of the investors and developers they have connected with.

After sellers upload their asset sale details to PF Nexus, potential buyers within the network receive an email alert. From this, they can understand the high-level information online, via what we call a micro-teaser. This purely covers the most basic information shared by the project owner or seller. 

The 3 main sections of the micro-teaser are the summary information (e.g., country, energy type, build -stage etc.), capital information (type of capital, ticket size etc.) and asset revenue (typically PPA). 

If a buy-side is interested they can click the button to receive an introduction to the sell-side in their email account, and can take the discussion from there - it’s that simple!