15 Nov 2022
AFRY and Pexapark have entered a partnership to develop the market's first 'Daily Valuation Curve', providing renewables investors, developers and portfolio owners with a consistent valuation framework that covers the full lifetime of renewable energy projects – from short term market-observed prices to long-term price simulations.
The new offering, combining Pexapark's market-based pricing approach and AFRY's fundamental price curves is designed to give renewable energy investors and lenders a consistent valuation across all investment tenors.
Renewables investors, developers and portfolio owners rely on market-based forward price curves to value their assets, close Power Purchase Agreements (PPAs), understand and manage their risks, and make investment decisions.
However, different approaches are used for different time frames: In the first 5-10 years, 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. Currently there is no standardised procedure for combining these methodologies.
Investors therefore lack a single consistent approach for valuing energy positions and assessing price volatility throughout the lifetime of their projects. This poses significant risks and obstacles to confident pricing, valuation, investment and hedging decisions.
In response, the teams at AFRY and Pexapark have developed a methodology to create a single pricing curve for the entire lifetime of a renewable energy asset, combining both market data and fundamental data. This 'Daily Valuation Curve' seamlessly 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 | https://pexapark.com
AFRY Management Consulting | afry.com/management-consulting