PPA valuation and advisory

KYOS offers support to value renewable Power Purchase Agreements (PPA). We accompany you through the entire PPA life cycle, with pricing, risk analytics and dispute resolution.

PPA valuation is not easy. There is a wide variety of risks in renewable power purchase agreements, such as volume risk, price risk, profile risk and imbalance risk. The KYOS PPA model considers all these factors to come up with a fair market value. It includes all price and volume risks for a one-off valuation or for continuously managing the contracts in your portfolio. We help you in getting the best deal for your PPA!

PPA Valuation

PPAs often include complex pricing mechanisms, typically with price floors, risk sharing elements and specific reconciliation mechanisms. KYOS has a lot of expertise to value PPAs.

Our PPA model includes a fundamental power market model to create long-term electricity price forward curves, important given the long duration of many PPAs. In addition, we have software modules to simulate price and volume risks. These are necessary if you wish to assess the future earnings and hedging strategies.

Capture rate is another important parameter for PPA valuations. Our system can therefore calculate this using historical data or using long-term fundamental price forward curves. Alternatively, the user can define its own capture rate.

Valuation support can be used for different cases. Some examples of the services we offer:

• Deal valuation: KYOS performs the main valuation of the PPA for either buyer or seller. KYOS can also provide advice in structuring the PPA. Shift the risks of the PPA in accordance with your company’s risk profile. This can be a one-off valuation request or under a framework agreement. In that case you can get access to KYOS PPA valuation expertise for multiple calculations.
• Second opinion: KYOS valuations are used to benchmark your own, internal, valuations.
• Dispute support: KYOS performs independent valuation of existing PPAs. Many PPAs have been concluded some years ago, and might include ambiguities which could lead to disputes between contract parties. We provide reliable support to settle such disputes in a fair way.

PPA Valuation: for whom?

KYOS provides PPA consulting for example to:

• Corporates: if you buy PPAs to reduce your carbon foot print
• Project developers and renewable power producers: if you sell production to the market and want to secure your investment
• Financial institutions: if you finance renewable projects
• Utilities and power traders: if you manage a portfolio of renewable power production and sales

Renewable production risk management

With a rising number of PPAs, the management of renewable power positions is of growing importance for many energy companies. Due to the often complex and non-standard nature of PPAs, it is typically difficult to capture the contracts in existing trade and risk management (ETRM) systems. Managing the PPAs in custom made, often spreadsheet based, solutions is therefore common. However, there are a lot of advantages to switch capture of PPAs in ETRM systems. For instance: auditability, consistency of pricing methods, less time spent on maintaining many different spreadsheets and better control on user access. And KYOS has the right answer for you.

KYOS offers a flexible web-based software package to effectively capture and risk manage PPAs. This package is part of the KYOS Analytical Platform, a user-friendly and intuitive system for energy market players.

KYOS is the # 1  Provider of analytical solutions for valuing renewable assets

The KYOS PPA software model has a market price and forward curve database and uses an advanced Monte Carlo simulation engine – perfect to value all PPA characteristics. Add various risk management tools, including earnings-at-risk.

Advantages KYOS PPA Risk Management

The PPA module lets the user create and capture any type of renewable PPA. KYOS puts a lot of effort to find the right balance between offering a robust deal capture system and a fully flexible spreadsheet solution. On one hand, we include standard PPA pricing mechanisms for certain countries and technologies. On the other hand, we offer the unique feature that users can add their own pricing structures to the system. For this purpose we offer an easy-to-use Python programming interface.

In short, the PPA risk management system provides a complete picture of the electricity portfolio with renewable energy PPAs and related hedges. Reporting includes volumetric position, mark-to-market value, value-at-risk and earnings-at-risk. Assess the effect of different dynamic hedging strategies, such as stack-and-roll and proxy hedging

Subjects

• Arbitration
• PPA valuation and advisory
• Flexibility advisory
• LNG valuation and advisory services

Publications

• Integrate your own code and models in the KYOS system with Python
• PPA Insights: Overview articles
• Webinar on Hedging price risks in renewable energy - Follow up
• PPA Insights: European solar and wind power prices
• Post event: solar finance and investment summit 2023