Mercuria CSR Report 2020 - Flipbook - Page 38
| THE SOLUTION:
| CONCLUSION:
Mercuria and Broad Reach decided to use a portfolio lien
This industry-leading transaction is an example of the
structure that (1) allows operating projects in the portfolio
ways in which Mercuria is working with its investment
to support projects that are still in construction and (2)
teams to solve the challenges posted by an industry
optimizes flexibility by allowing Broad Reach to substitute
in transition. The structure itself was an organic
qualifying projects into and out of the portfolio as they
creation, and thus required input and participation
progress (or are sometimes stalled) in their development
from a number of different areas. From bottoms-up
cycle. By taking this approach, Broad Reach and Mercuria
analysis of the fundamental trends of the Texas power
solved both barriers that are inherent to the risk trade.
market, to engineering evaluations on the feasibility and
Mercuria, through its ownership of a diversified portfolio of
construction timeline of yet-to-be-built projects, a wide
operating and pre-operating projects, was given reasonable
range of stakeholders were consulted to provide the
assurance of collateral coverage, while Broad Reach was
framework necessary to support this transaction.
able to bridge its early-stage liquidity limitations to de-risk
its development portfolio.
All in, this structure has paved the way for future
developments in the space, by establishing an efficient
This
38
transaction
combined
contracting
structures
and functional framework which can be used by
used in other areas of the energy market—lien-based
development companies to de-risk their projects. Others
structures and portfolio coverage—to create something
in the space (both credit providers and developers)
truly innovative in the battery energy storage space.
By
have seen the way in which these groundbreaking
doing so, it frees batteries from the requirement to have
developments have been hedged, and are seeking to
long-term bilateral purchase agreements and instead
follow suit. In solving one of the key issues faced by IPP
enables batteries to access the much more liquid and
developers, this structure has contributed greatly to the
transparent energy trading market. Given its ability to
advancement of entire industry.
reduce transacting costs and its scalability, the structure
is an easily adoptable model for other battery IPPs.
