Unreliable energy estimates have resulted in industry-wide systematic underproduction far more frequently than was realized.
Equity investors’ returns are extremely exposed to this risk considering their position in the capital structure. A Green Energy Revenue Guarantee (“G.E.R.G.”) can transfer future, uncertain PPA settlements from the energy buyer to coverage provider for a fixed agreed upon premium.
The purpose of the G.E.R.G is to reduce production risk thereby allowing sponsors to better optimize the capital stock of their assets. This in turn, can improve asset values, and allow the owner to make sharper, more competitive offers for PPA’s in the market.
The G.E.R.G guarantees up to 95% of P50 energy generation including, irradiance deficiency, lack of wind, excess snow, degradation, tracker issues, and installation problems.
The G.E.R.G places an investment grade “floor” on 95% of the remaining sources of uncertainty, stabilizing cashflow. This enables lenders to size debt based on the insured floor instead of a volatile projection. If the project is successful you have a profitable investment. If not, you have a guarantee of the revenue. For corporate buyers who do not want to hold this speculative exposure, this guarantee agreement enables them to exchange the uncertainty of future PPA settlement gains and losses for a single, fixed annual payment.