Build Internal Support for a Transaction

Closing virtual power purchase agreements ("PPAs") is a complex endeavor. The most complex part is likely to be the process of obtaining internal support and approval.

The benchmark for a virtual PPA in the U.S. signed by a corporate off-taker is six weeks for a team of two people, only one full-time that has done one deal already (the benchmark for a utility off-taker is four weeks). The six week period covered moving from "we want X MW in state Y" to a deal that was approved and signed. The same team took six months to close the first deal. In other words, the technical elements of executing PPAs are reasonably straightforward. The main complication is to educate and bring on-board not only the deal team but also all the colleagues that have authority or influence on the final decision.

This page describes:

• Why internal support is needed, and what building it will require

• Why you should find an executive-level deal champion

• How to map and engage your key internal stakeholders

Why internal support is needed, and what building it will require

These transactions are in the hundreds of millions of dollars of nominal value. They typically require CFO or CEO, if not board, approval. To get executive or board approval, you will need broad-based internal support.

These transactions will be unfamiliar to many internal stakeholders; in fact, most of these stakeholders do not spend much time thinking about energy at all. As a consequence, obtaining their support will require a lot of communication and many internal iterations for them to become comfortable with the topic and feel that their concerns have been heard and addressed. Among these internal stakeholders, the accounting / treasury department is of paramount importance. Depending on the company and deal structure, other executives such as business unit leaders, procurement managers, and operations leaders may also play an important role.

Find your deal champion

At this stage it is also important to identify and cultivate your “deal champion.” Depending on your company size and structure, this may be a team of people or an individual, but the champion will be responsible for getting ultimate approval by the CFO or other necessary person or group. For example, if you work for a large and structured firm, your deal champion may need to be a VP or president of the division that the sustainability or procurement team reports to. At a smaller company the project lead may have direct access to the CEO/CFO.

Establishing the strong support of a deal champion will make the rest of the process easier for you. Ideally, you will be able to leverage your deal champion’s influence when engaging with other stakeholders and when seeking approvals.

Map and engage internal stakeholders

The next step is to identify the key stakeholders within your company. While every company is different, the most common stakeholders to engage are:

• CSO / energy procurement

• Accounting / finance / treasury

• Legal

• Procurement

• Facilities / operations

• Public relations

• Senior line executives

• CFO

• CEO

When you have mapped out your key stakeholders, it is time to get everyone on board. As mentioned previously, your accounting, finance, and treasury teams are most important to engage early on in the process. The Internal Support Guide gives in-depth descriptions of the issues typically most important to these stakeholders, and how they apply to renewable energy transactions and PPAs.

It is also important to recognize your company’s corporate structure--some ultimate decision makers prefer to be brought into the process early on and may require you to get approval before even starting the procurement process.

Build your Team

Assembling an internal deal team and identifying necessary external support are important to ensure your combined team has the skills and capabilities to execute the deal and navigate internal processes. This page describes:

• Guidance for building an effective team; and

• Composing the team into three layers: the core, other internal staff, and external support.

Building an effective team: Required skills and capabilities

For your endeavor to succeed, it is critical to build a deal team that encompasses the skills and capabilities necessary to execute the transaction, including moving through your company’s internal approval process.

Consider the composition of your team in several ways. First, your team must have the subject-matter expertise necessary to analyze options, manage the process, and execute the deal. Second, your team should represent different company verticals so that you can effectively understand and address the perspectives and concerns of those groups. Third, your team should have ultimate access to the relevant decision makers.

The Deal Dream Team Guide provides more details about the skills and capabilities that you might consider ensuring are represented on your team.

Organizing the team into core, other internal, and external layers

Your deal team will likely consist of three layers:

• The core: consisting of a few individuals, including the deal champion.

• The internal support: consisting of technical experts who contribute to specific areas.

• The external support: consisting of additional experts contributing to specific areas.

The core

The deal champion is often the corporate sustainability officer ("CSO") or the head of energy procurement. However, if he or she is not a seasoned executive at the VP level or above, the deal champion should seek backing from an executive sponsor early on in the process.

Depending on the corporation, the core team may be a single person (i.e. the deal champion), or may consist of two individuals, the deal champion and a staff member with energy experience who leads the execution process.

The internal support

In addition to the core team, it is critical to have individuals from accounting, finance, and legal assist with the internal execution.

Depending on the organization and type of transaction, procurement may or may not be involved. In our experience, large-scale, off-site renewable energy deals tend to be significantly different from what procurement organizations typically do. So it is likely to be more effective to get an exemption from corporate procurement involvement and work closely with accounting, finance and legal to ensure that internal financial guidelines are adhered to.

The external support

The most common types of external support engaged by corporations are:

• Legal - most internal legal departments do not have the necessary experience with utility-scale PPAs to handle the legal issues completely in-house. Therefore, external legal support is highly recommended for all but the very most experienced internal legal departments.

• Economic - external support to assess the economic value of deals (e.g., access to market data, forward prices, price forecasts, modeling of power purchase agreements) is strongly recommended if these skills are not available internally.

• Procurement - external support to identify project developers and/or available projects is likely to be valuable, especially if the deal team is not comfortable running its own RFP process.

• Strategy and change management - external support from industry consultants may be helpful, but should be decided on a case by case basis (e.g., support on change management or support on defining the strategy).

• Accounting - you likely will want to ensure that your external auditors are comfortable with the accounting analysis you are conducting. The major accounting firms have experts with experience in PPAs; you may need to ensure that such experts are involved in the discussions.

More than half of corporate PPAs have been completed with the help of an external transactional consultant or broker. These firms may provide support in the three middle areas: economic, procurement, and strategy/change management. One major difference between a broker and a consultant is the compensation model: typically you as the buyer pay the consultant on an hourly or flat fee basis, whereas typically the broker is compensated by the project developer on a success fee basis. It is up to you to determine which of these compensation structures may be more or less effective for your company. If you have not already engaged with an external party to help organize your deal team and navigate the internal approvals process, you should evaluate if a third party is necessary to define your overall strategy and help with the procurement process.

The Deal Dream Team Guide includes more information on the “make or buy” decision.