Transaction Advisory Agreement

by on Oct.12, 2021, under Uncategorized

In the case of a VPPA, the advisor assists the client free of charge for the duration of the order, and then receives payment from the project promoter in case of signing the contract (or other important steps). This royalty may take the form of a payment based on project size (dollar per MW), a current licence fee (percentage of long-term project revenues), or a combination of both. In this scenario, a customer avoids paying an advisory fee in favor of current payments levied in addition to the VPPA price paid during the term of the purchase agreement. Your company has taken the courage to set targets for renewable energy and carbon emissions. They did the work to encourage key stakeholders to consider a Virtual Electricity Capture Contract (VPPA). Now, ask yourself if you need an advisor to help you navigate through the buying process. Experienced consultants can help you avoid many of the pitfalls of participating in the wholesale energy market. But how much do they calculate – and should – for the value they offer their customers? A trustworthy consultant can bring considerable added value and contribute to everything from supporting stakeholders to navigating derivative accounting issues, conducting financial analysis and conducting contract negotiations. The market for consultants who offer their services has grown with the appetite of business buyers for VPPAs. However, clients` understanding of the cost of advisory services under the widely accepted success fee model remains unclear.

Removing the layers of this business model can bring more clarity and transparency to the market. Unfortunately, this model can also lead to a mis-orientation of incentives. The advisor is paid more for a longer-term, larger or more expensive activity. Even if the necessary advisory services (such as stakeholder engagement, creditworthiness, and contract analysis and negotiation) are the same, whether the VPPA is 10 MW or 200 MW, the consultant`s fees can increase significantly for the latter. Since the consultant is only paid when a contract is executed, this model can lead the advisor to focus more on signing a contract than on the nuances of the client`s best interests. This is a natural human reaction to incitement. Whether these potential conflicts are perceived or real does not diminish their impact on the client and highlights the importance of trust and transparency in this relationship. It is important to evaluate these cost and risk fees for the advisor.

Typical VPPA consulting services for time and material, which include stakeholder engagement, invitation, analysis, negotiation, approval, and execution of a VPPA, can cost a buyer around $250,000 to $400,000…

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