April 2017

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It is a hard task to compress in a blog post the reasons behind the technical due diligence of a wind farm and the several points that must be evaluated.
In a nutshell, in the clear majority of the wind farms developments are built using borrowed money.
The equity (cash at risk) is put by the developer, while the debt (money given against some form of security) is provided by a financial institution, or more commonly by a pool of institutions.
There are obviously exceptions to this rule, that is wind farms developed only with cash coming from the books of the company investing in the project. Nevertheless, these are exception and what is common is to have most the budget (up to 70%) provided by a financial institution such as a bank.
The lenders will be obviously interested in being sure that the financial model behind the project is solid.
Therefore, they will ask for a due diligence to identify, quantify and (if possible) mitigate technical risks.
In general, the lender will check what he considers appropriate.
Normally 3 macro categories are checked:

Financial due diligence, including for instance

  • Hypothesis
  • Budgets
  • Financial models

Legal due diligence, including items such as

  • Land lease
  • PPA
  • Contracts (e.g. TSA) & subcontracts

Technical due diligence

There is obviously an overlap between the various categories – for instance, some items are not purely “technical” or “legal”.
The technical due diligence should investigate in detail several key points.
A short, non-exhaustive list would include at least the following items:

  • Site suitability (wind resources, turbulence, data solidity)
  • Choice of WTG model (track record and match with the wind resource, power curve, certification, etc.)
  • Archeological y environmental constrains (impact on flora and fauna, such as birds and bats)
  • Access to the area (road survey and works outside the wind farm)
  • Geotechnical survey (ground risk)
  • Noise study (a big problem in inhabited areas)
  • Shadow flickering & visual impact
  • Grid connection
  • Electrical losses (are they calculated correctly?)
  • Projects for the BoP (foundations, MV, substation, etc.)
  • Congruence of the time schedule of the project
  • Interface between subcontractors
  • Allocation of risk