Switzerland’s Pexapark, Sweden’s AFRY Develop Valuation Framework for RE Investments

 AFRY- a Swedish-Finnish supplier of engineering, design, and advisory services that helps accelerate the transition towards a sustainable society- and Pexapark, a firm which facilitates PPAs, have entered into a partnership to develop the market’s first ‘Daily Valuation Curve’.

The Daily Valuation Curve looks at providing renewables to investors, developers and portfolio owners with a consistent valuation framework which covers the complete lifespan of renewable energy projects ranging from short term market-observed prices to long-term price simulations.

The innovation will bring together Pexapark’s market-based pricing approach and AFRY’s fundamental price curves. The product will thus enable renewable energy investors and lenders a consistent valuation across all investment tenors.

Renewables investors, developers and portfolio owners depend on market-based forward price curves to value their assets, conclude Power Purchase Agreements (PPAs), understand and manage their risks. They also rely on them for investment decisions. However, different approaches are employed for different timeframes. In the first 5-10 years, for instance, market-based approaches, established by Pexapark, are most effective, but renewable asset lifecycles can be up to 40 years and require fundamental curves to understand long-term investment risk. But because a standardised procedure for combining these methodologies is absent, investors are left wanting for a single consistent approach for valuing energy positions and assessing price volatility throughout the lifetime of their projects. This, in turn, challenges confident pricing, valuation, investment and hedging decisions.

In order to address this lacunae, AFRY and Pexapark have together developed a methodology to create a single pricing curve for the entire lifetime of a renewable energy asset, bringing together both market data and fundamental data. This ‘Daily Valuation Curve’ combines Pexapark’s trusted market-based pricing approach and AFRY’s industry standard up-to-40-year fundamental price curves.

Overseen by an expert committee of the two companies, this standardised ‘blended’ product will capitalise on the strengths of both trusted, alternative methodologies. It will create a much-needed, consistent valuation framework, providing greater certainty to renewable energy investors navigating market volatility and driving forward the energy transition.

Luca Pedretti, COO & Co-Founder, Pexapark, said, “To effectively value their renewable energy assets and manage risks in this new volatile world of energy trading, investors need to look both within the 10-year time horizon and beyond. Market-based and fundamental pricing methodologies are not at odds with each other, but to date the industry has simply lacked a clear framework for ‘joining the dots’.”

Dr. Jan Wierzba, Senior Principal, AFRY Management Consulting, added, “We are excited to pool our strengths, capabilities and passion to address this challenge for AFRY and Pexapark customers, and provide a trusted, versatile and convenient solution that helps investors, banks and lenders focus on their core business of financing, developing and operating renewable energy projects.”

The ‘Daily Valuation Curve’ offering will first be made available to selected AFRY and Pexapark clients, before it is rolled out more widely to users of AFRY’s Independent Market Reports and the PexaQuote platform in Q1 2023.

Pexapark, an award-winning enterprise software and advisory company that specialises in renewable energy, boasts of supprting 21,000 MW of renewable PPA transactions , and says it is the reference for buying, selling and managing renewable energy. Further, it maintains that its PPA reference prices increase transparency across 19 markets and 34 price zones.

AFRY Management Consulting, which works globally to address challenges and opportunities in the energy, bioindustry, infrastructure, industrial and future mobility sectors, has in its profile more than 500 consultants across over 20 offices on 4 continents. It is supported by 17,000 experts at in areas of engineering, design and digitalisation.