Another Short-Term Agreement for Part of a Project’s Capacity — Creating More Lessor Revenue Stream Uncertainty

Apex has announced a 12-year deal with a corporate offtaker (Steelcase) for 25 MW of a 150 MW project’s capacity.

Like with the recent EDF and Salesforce deal noted in a prior blog post, this arrangement creates an additional level of uncertainty regarding long-term project revenues. And this uncertainty trickles down to the lessor’s revenue stream.

These two announcements (Salesforce and Steelcase) probably cannot be deemed a “trend,” but they nevertheless force consideration of bifurcated PPAs when analyzing not just the then-current revenue stream to the landowner from that particular project, but also prospective future revenue streams (i.e. the value of a not-contracted revenue stream) for any project in a liquid market.

It will be especially interesting to track these trends as projects age. The fact of “12” years for both the Salesforce and Steelcase deals presumably has some connection to project financing. When financing is a smaller driver, will the terms of these deals become even shorter? Or will we see a trend toward merchant operation of part (or maybe even all) of a project’s capacity?

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