Clean energy transactions must go digital. Here is why
November 23, 2020 | Felicity Jones
If I need to get from A to B, my Uber arrives in minutes.
If I want a book, I get it delivered the next day.
If I buy something in a shop, my contactless card works in under a second.
And in my working life there’s an app for most things: CRM, IT, document storage, project management, comms, video calling, more.
Now contrast the world of due diligence (DD) for clean energy. All too often investors and lenders find themselves wading through unwieldy advisor reports, provided late in the process. They worry about not knowing how the review is shaping up; and they’re frustrated to uncover risks that could have been sorted if their lawyers and engineers had talked to each other.
Meanwhile, those advisors are bogged down by energy-sapping admin tasks: keeping on top of Q&A and client comments across multiple tools and emails, compiling reviews from multiple authors – not to mention fixing last-minute report formatting nightmares.
Surely us energy professionals deserve better?! How come we haven’t nailed this yet?
This is what I’m struggling to understand. It’s certainly not due to the people: the lawyers, financial advisors and engineers I meet and work with rarely fail to impress.
Yet somehow the process feels suboptimal; surprising given the highly competitive state of clean energy financing landscape right now. In this environment, it’s more important than ever for investors and lenders to get immediate and clear updates on risks as they emerge – to enable better decisions, faster. Meanwhile, advisors deserve to be freed from admin tasks to focus on doing what they do best. It’s the same whether we're pursuing an offshore wind farm, a solar+storage project, or a domestic flex portfolio.
The good news is that change is happening: digitalization is starting to hit asset-based transactions. And I’m not just talking about Teams and Zoom.
Take the housing market: online conveyancing is accelerating and simplifying the DD process for buyers – enabling them to track progress and interact. Check out eway or simplyconveyancing as examples. One of my colleagues recently used an online conveyancer and loved it: the clarity it offered on the transaction process helped alleviate his anxiety when the stakes were so high.
Similarly in DD for clean energy, the digitalisation trend is starting to take hold. The legal world is rolling out online automated contract generation and review, deal management, dataroom+ solutions, eSigning and Conditions Precedent (CP) checklists. Likewise for provision of DD, digital is gaining momentum. We’ve seen a number of Technical Advisers adopt LiveDiligence: an online platform that gives Transaction Managers live access to their DD review, so that they can track issues as they develop.
Upping ambition, putting investors and lenders first
But look at what Uber, Amazon and online banking have achieved: I just feel that as an energy industry, we’ve got further to go.
We’re never going to deliver DD in a day: asset-based transactions are more complex than that. But we could for sure be making our lives less stressful and our appraisals clearer – and likely quicker too. Clean energy investors are supersmart people who deserve a crisp, coordinated articulation of a project’s risk profile: we should be leveraging tech so they can focus on making winning commercial decisions. For instance:
- What if investors and lenders had live and prioritized access to ALL issues as they develop – and early sight of review structure too?
- What if there was a central digital DD hub, with legal, technical, financial and insurance advisors all working alongside each other?
- What if deal transaction managers could build up a repository of their own DD data, to help benchmark and accelerate future deals?
- What if sponsors could pre-populate elements of the review to simplify and accelerate the DD process for all?
This is so much more important than another next-day delivery on Amazon Prime. We’re talking about the energy infrastructure investments that we need to deliver net zero.
Time to up our game.
Photo by Anders J