Sierra Nevada Corporation

Independent Financial Analysis

Determining the financial value of a solar project can be tricky. Performing a detailed and accurate analysis requires many variables be taken into account. It begins with a well formulated and realistic expectation of system performance based on an accurate assessment of the solar resource available in a given location and system design and specifications. It also involves the use of reliable data on historical energy consumption along with projected future loads to predict overall demand, and incorporates complex utility rate schedules, rebates and incentives. Finally, financing methods and terms must be considered.

In addition to the complex set of variables mentioned above, solar energy has many subtle nuances and counterintuitive characteristics that make it difficult to perform a truly accurate and reliable financial analysis. When it comes to optimum system size, for example, bigger is not always better in terms of return on investment. Additionally, seemingly insignificant differences in design can have a major impact on performance, and therefore projected revenues.  Also, financing the majority of the initial funding for a project may in some cases be preferable to a large up-front cash investment.

The importance of accurate valuation of solar projects cannot be understated. This is particularly true when it is a large-scale project that is being proposed and the financial stakes are high. Therefore, an independent financial analysis performed by a third party who has a thorough understanding of the unique complexities of solar financial modeling is highly recommended.  Even in cases where the contractor may be more than capable of performing the work, and provided estimates of their own in the course of bidding on the project, they make lack the deeper proficiency in the area of financial modeling necessary to accurately value the finished product.

VeriSol is intimately familiar with the complexities of solar project valuation and will apply this expertise when performing an independent financial analysis on your behalf.  Additionally, we will use sophisticated proprietary financial modeling tools to more precisely measure the performance of your project. Our goal is to provide you with the confidence you need to make an informed decision which will enable you to realize a sound return on your investment, while avoiding potential losses.

The State of Nevada Considers Solar

When one thinks of the State of Nevada, wide open desert landscapes baking in the sun usually come to mind. A perfect place for solar? It all depends on the details.

In 2010 the Nevada State Energy Office submitted a request for proposals for installing solar systems on 54 state owned buildings near the cities of Reno, Sparks and Las Vegas. The RFP caught the attention of Sierra Nevada Corporation, which was looking to further expand its renewable energy technology capabilities.

With its headquarters located in Sparks, Sierra Nevada was a local company with a tradition of high-technology electronics, engineering, and manufacturing dating back to 1963. Recognizing the growth potential of renewable energy, it was determined to add renewable technology capabilities, including solar, to its diverse resume. The solar RFP from the Nevada State Energy Office was a great opportunity to do so. However, despite its impressive engineering credentials, Sierra Nevada felt it needed a partner to bolster its solar knowledge and expertise to improve its chances of winning the bid. Enter Gestamp Solar, an experienced developer and operator of utility-scale photovoltaic plants, who participated in the development of over 400 MW photovoltaic solar facilities in 2011. Thus a joint venture was born.

In early 2011, the partnership paid off, and Sierra Nevada/Gestamp was awarded the project. There was just one last hurdle. The terms of the contract stated that an independent financial analysis was required before final approval could be given. Since the contract was initially awarded based in large part on the favorable financial report given by the joint venture, it was critically important that these numbers be reliable. The state needed assurance that it would be entering into a contract that would indeed save it money over time.

Sierra Nevada/Gestamp were confident in their ability to perform the work specified in the RFP. But as they began reviewing their proposal in preparation for independent review, doubts began to arise as to the financial picture they had painted. At the suggestion of their EPC partner, solar program manager Sherri McDonald contacted VeriSol to perform the independent financial analysis required by the state.

“I had the pleasure of working with John from VeriSol on a large project for the State of Nevada. They made a great impression with their initial presentation on their abilities and they did an excellent job of following through as advertised. They performed complex rate tariff analyses for multiple project sites to evaluate and verify the economic viability of our proposed project. Their deep knowledge of all the issues and factors involved in this project from finance to technology to rate tariff analysis was a great benefit to us. I highly recommend them for any consulting activity in the solar energy field.”

Sherry McDonald, Solar Program Manager, Sierra Nevada Corporation

Supplied with information from the joint venture’s original proposal that included detailed system design specifications and performance estimates, VeriSol began the process of painstakingly and precisely reviewing the systems being proposed for each of the 54 sites.  After analyzing only 40 sites using extremely accurate custom built solar financial modeling tools which incorporated both the system design data and complex rate structure data from 3 separate utilities, a different financial picture began to emerge. It became clear that without major changes in the state’s rebate program or lower future equipment prices, the project would not be financially feasible.

In the end, the state decided that the project should not go forward based on VeriSol’s financial analysis. Although the cancellation was a disappointment to the Sierra/Nevada joint venture, they were relieved that they had avoided entering into agreement in which they could not deliver was originally suggested. Likewise, the utility rate payers of the State of Nevada saved millions of dollars in unnecessary energy costs.