Biodiversity & Renewable energy Valuations

Biodiversity & Renewable Energy Valuations

Renewable energy valuations

Valuation issues in relation to renewable energy related businesses include:

• The expected supply, demand and price per MWh
• Recognition and pricing of large-scale generation certificates (LRETs) and small-scale technology certificates (STCs)
• Purchase power agreements (PPAs)
• Changes in legislation including the Renewable Energy Target
• Changes in technology
• Treatment of grants and R&D tax credits.

Given the growth and uncertainty in the renewable energy sector, Lotus Amity typically takes a detailed and granular discounted cash flow approach to valuation.

Biodiversity valuations

The Biodiversity Offsets Scheme provides a mechanism to value biodiversity and to offset the impact of developments. There are two types of biodiversity credits: ecosystem credits and species credits. These credits are publicly traded and the transactions, included number and price, are recorded in the Environment Departments public register. The Biodiversity Credits Market Sales Dashboard provided the transaction sales data and also current supply and demand for credits.

Key inputs in valuing biodiversity include assessing the number of ecosystem credits and species credits, pricing those credits and determining the Total Fund Deposit. The Total Fund Deposit is the amount set out to cover the costs of future land management, as per the Biodiversity Stewardship Agreement. A portion of the revenue from the sale of credits goes towards the Total Fund Deposit.

A issue in valuing biodiversity is that many ecosystem and species credits are thinly traded, with low and infrequent volumes. Consequently, caution is required to the extent that observed prices can be relied on to reflect market value. Consideration also needs to be given to the current demand and supply for specific ecosystem and species credits.

Experience

Lotus Amity provides business and company valuations for entities engaged in the biodiversity and renewable sector. Previous valuations include:

• Valuation of a tech-based infrastructure business in the biogas and renewable electricity market. Valuation prepared to assist in capital raising with incoming investors. Discounted cash flow valuation models were prepared for different projects to assist in capital raising with incoming investors. Valuation issues included impact of R&D credits, working capital requirements and equipment finance.
• Critique of two valuer reports in relation to a transaction dispute with a distribution business in the renewables energy sector. Report prepared as an Expert Witness report for mediation. Key issues included the basis of value, assets being valued, valuation approach and application of approach, and key man risk. The report dealt with rolling revenue trend, one-off revenues, inventory levels and inventory purchases, commissions for owner, working capital requirements and profit share analysis.
• Valuation of the loan notes held in a large renewable electricity supplier. Report prepared for financial reporting purposes. Key issues included the loan note terms, guarantors, debt service and repayment risk, security, subscription and pricing, and financial covenants. Other information analysed included quarterly performance, budgets and forecast, cash and assets values, risk-free rates and market yield spreads

Why choose Lotus Amity for biodiversity and renewable valuations?