SolRiver’s Diligence Process

Our Approach

SolRiver Capital strives to make the diligence process as transparent as possible. Below is a list of what is needed for each phase of the process.

 

The table lists the documents we typically review during each phase. It also explains what our team is looking for within those documents.

Initial Review

A preliminary look at your project to see if it meets our basic investment criteria. Occurs before signing a Term Sheet.

Full Due Diligence

A deep dive into your project to get our full legal/financing approval. Occurs after signing a Term Sheet.

COD Conditions

A check to make sure you’ve met a handful of closing requirements. Occurs before final payment. 

Initial Review:

We conduct the Project Review prior to signing a Term Sheet. It’s a preliminary look at your project to see if it can meet our investment criteria. In this phase, we request a short list of documents, as seen below.

 

DOCUMENT

WHAT WE LOOK FOR

SYSTEM SPECS

Preliminary Site Plan
The preliminary site plan should show the array’s layout on the site, including the proposed string configuration, inverter placement, and tie in points. It should further specify the azimuth and install type.
We use the preliminary site plan to confirm that the proposed system design matches the size, equipment specs, anticipated production level, and location information that we have been provided previously.  Once we have confirmed this information, we run our financial model and create a term sheet for the transaction. 
Production Estimate
An energy yield assessment predicting the amount of energy a project will produce.
We examine the report to confirm that production matches the production assumptions in our model.  If the production estimate does not match our assumptions, we adjust the purchase price to reflect the discrepancy.

INTERCONNECTION (IN FRONT OF THE METER)

Form Interconnection Agreement 
Copy of the utility’s standard interconnection agreement.
We review the interconnection agreement to see what technical requirements, operating parameters, and additional costs need to be included in our model.

We also look at the agreement to see when deposits or other payments are due and to ensure that the project is up to date on payments.  We additionally note any restrictions on assignment, as well as any drop-dead dates and curtailment provisions.

PROJECT ECONOMICS

PPA (Proposed or Executed)
An agreement providing for the sale of power from the project LLC to an offtaker.
We thoroughly review PPAs to assess a project’s economics and financing viability.  We look to confirm that the PPA supports every relevant assumption made in our model, and that all supporting documents called for in the PPA are accounted for.

SITE CONTROL

Site Lease
The lease for the system to use the site and for us to access the land.
We look at all the terms of the site lease and confirm it covers the property identified as the site location.  We also check that it was executed by the proper title holders.

Note that the length of the lease must meet or exceed the length of the PPA. Ideally, we’ll have the option to terminate the site lease if the PPA is terminated.

ADDITIONAL INFORMATION

Project Questionnaire
SolRiver provides a questionnaire to developers regarding applicable regulations for the project.
We look to the questionnaire to better understand the specifics of the project.  In particular, we want to see what local requirements might apply to your project.  In the questionnaire, we ask developers to briefly list all required permits for the project.
Offtaker Credit Information
A rating issued by a credit agency or historical financial statements.
SolRiver checks the offtaker’s credit rating or financial statements to determine whether the entity is investment grade credit quality. If so, we can underwrite the deal.

Full Due Diligence

We conduct Full Due Diligence upon completion of the Project Review and signing a Term Sheet. This phase is a deep dive into your project in order for us to give you our legal/financing approval. Full Due Diligence includes each document requested during the Project Review and each document listed in the table below.

 

DOCUMENT

WHAT WE LOOK FOR

SYSTEM SPECS

Geotech Report (for ground mount arrays)
A geotechnical engineer produces a report following a site visit and soil sample analysis.
We ask for a geotech report to determine whether there is any danger of cost overruns after we issue a Notice to Proceed for the project. For example, if there is a large granite slab under the site, the racking costs for the system will be higher than initially estimated.

The report must contain a “reliance” clause stating that certain parties can legally rely on the analysis.

Preliminary Site Plan
The preliminary site plan should show the array’s layout on the site, including the proposed string configuration, inverter placement, and tie in points. It should further specify the azimuth and install type.
We use the preliminary site plan to confirm that the proposed system design matches the size, equipment specs, anticipated production level, and location information that we have been provided previously.  Once we have confirmed this information, we can run our model and create a term sheet for the transaction.
Single Line Report/Electrical Engineering Plans
A single line diagram and other plans for permit applications.
We use this report to confirm that the plans match the assumptions used in determining the production estimate.
Production Estimate
An energy yield assessment predicting the amount of energy a project will produce.
We examine the report to confirm that production will match the production assumptions in the model.  If the production estimate does not match our assumptions, we adjust the purchase price to reflect the discrepancy.

EPC

EPC Bid
A bid from an EPC contractor will provide an initial scope of work and itemized terms and conditions for the project. It is a starting point for an EPC contract, which may not yet be in place when we begin our review of the project.
Developers do not need an EPC in place at the beginning of our process. However, when the EPC process begins, we look at the bid for the scope of work, standard terms and conditions, a proposed completion date, liquidated damages clauses, change-order/fixed-price terms, and whether a performance bond will be issued.

We review these items to:
(1) confirm our assumptions in the model match the stated EPC price and equipment specifications and
(2) see what exclusions and warranties are contained in the EPC bid.

EPC Agreement
The EPC Agreement is a binding contract to build the system.
We look at the EPC Agreement for many of the same things as the EPC bid, including:
(1) that the agreement does not exceed our previous cost estimates and
(2) there is a guaranteed completion date with a liquidated damages clause.

Fixed-price terms/change-orders also remain near the top of our list, as we want the PPA to address any change order terms we find in the EPC agreement as well.

The EPC agreement should comprehensively address the site build, including system monitoring, security (fencing and any other systems in use), access roads, and weed abatement. All build costs should be captured in this document for our model.  We will also review warranty terms and the construction schedule to make sure both are consistent with our expectations.

Note that both the EPC bid and EPC Agreement may be unnecessary at the beginning of diligence if the Developer and EPC are the same entity.

EPC Diligence Package
These are some additional areas we examine in the EPC agreement.
(1) an EPC bid outlining warranties, commissioning acceptance tests, and performance guarantees;

(2) list of subcontractors;

(3) performance bond availability and costs;

(4) Statement of Qualifications, listing relevant project experience;

(5) summary information about financial health.

 

Construction Schedule
A schedule detailing the construction timeline.
The construction schedule allows us to estimate a completion date and adjust our expectations for the timing of all project phases.  We look to it to determine whether our target COD is achievable based on the schedule, and to whether any lease factor changes or liquidated damages might apply as a result.
Equipment Spec Sheets and Warranty Information
A manufacturer’s standard specification sheet and warranty for each major piece of equipment once designated.
We confirm that the manufacturer’s stated specs are consistent with our production estimates and that the manufacturer’s warranties match our assumptions.

INTERCONNECTION (IN FRONT OF THE METER)

Form Interconnection Agreement
Copy of the standard agreement with the utility to interconnect the system.
We review the interconnection agreement to see what technical requirements, operating parameters, and additional costs need to be included in our model.  We also look at the agreement to see when deposits or other payments are due, and ensure that the project is up to date on payments.  We additionally note any restrictions on assignment, as well as any drop-dead dates and curtailment provisions.
Proof of Interconnection Payment
A document (such as a photo of a wire transfer) that verifies interconnection payments were made and on time.
We review this document to ensure that interconnection payments that are due have been paid.
Interconnection Request
Application made by the project LLC to the utility including an outline of the proposed system design.
The utility company studies the interconnection request and issues an Impact Study Report based on their analysis.  We look to the interconnection request for confirmation that the technical specs provided to the utility are the same as the specs for the site plan underlying our model.
Impact Study Report
A report conducted by the utility that reviews the proposed solar system and its impact on the grid.
We look for confirmation that the proposed system has permission to interconnect. The report also often includes a cost estimate that we compare to our model.

PERMITTING

Permit Memo
A 1-page bulleted summary of the necessary permits required for the project.  This is included as part of our questionnaire.
We look at the Permit Memo to get a sense of all the permits required to complete the project.
Minutes from Project Meeting with Commissioners (if available)
Certain jurisdictions provide for initial meetings with authorities to determine if a project can continue forward.
We review meeting minutes in order to determine general sentiment towards the project and what permits and challenges may be ahead for the project to earn a Conditional Use Permit.
Conditional Use Application (if applicable)
An application for the Conditional Use Permit.
We look to see if this application has been made, and how far along the project is in this process.
Conditional Use Permit (CUP) (if applicable)
Captures all requirements and conditions for project permits.
We look to confirm that the project has secured all of the necessary permits, and compare the CUP against our other documents and maps to ensure that we have included all CUP requirements in those. In addition to the CUP, we look for:

(1) building permits;
(2) electrical permits;
(3) storm water permits;
(4) storm water pollution prevention plan;
(5) wildlife permit;
(6) decommissioning plan;
(7) FERC 556 Self-Certification.

PROJECT ECONOMICS

Executed PPA 

A signed agreement providing for the sale of power from the project LLC to an offtaker.

We thoroughly review PPAs to assess a project’s economics and financing viability.  We look to confirm that the PPA supports every relevant assumption made in the model, and that all supporting documents called for in the PPA are accounted for.

The PPA must be executed and ratified (if applicable) in order for SolRiver to issue a Notice to Proceed.

PPA Customer Approval
The PPA may contain a clause granting the energy customer authority to accept or reject the proposed system design.
We may need to inform the offtaker of the system plans prior to construction. This may not occur before closing, but must be done prior to issuing NTP. The customer approval may be in the form of a letter, an email, or any other method specified by the PPA.
Offtaker Insurance
Proof of insurance by the offtaker.
We look at the offtaker’s insurance policy to ensure that it satisfies the scope and amount requirements in the PPA.
SREC Purchase Agreement (if applicable)
An agreement with a third party to sell a project’s SRECs to them.
We look for pricing and quantity terms, as well as any terms and conditions that may prevent the company from selling all of the SRECs.
PILOT Agreement (if applicable)
An agreement with a local authority waiving property taxes with respect to the solar power system.
We look for whether an agreement is in place, what the terms and duration are, and whether there are any changes we should make to the model to reflect the agreement.
Incentive Qualifications
Documents demonstrating that the project is qualified to receive all incentives included in the model.
These documents show us that the project is eligible for incentives or rebates and is in compliance with the relevant programs.  We look at any deadlines associated with the incentives to confirm that the project is still eligible based on the project schedule.

SITE CONTROL

ALTA Survey
The ALTA survey is an official survey of the site of the project. (Ground mount)
The ALTA Survey provides us with an overhead view and legal description of the project site, and shows any easements on the property.  We use the ALTA Survey to determine whether any easements are locus to the array, and the title insurance company will use this information in creating its list of exceptions to the policy.
Easements (if applicable)
A list of any easements that the property is subject to.
We review easements to confirm that they do not present a risk to the project.  
Executed Site Lease
The signed lease for the system to use the site and for us to access the land.
We look at all the terms of the site lease and confirm it covers the property identified as the site location.  We also check that it was executed by the proper title holders. 

Note that the length of the lease must meet or exceed the length of the PPA. Ideally, we’ll have the option to terminate the site lease if the PPA is terminated.

Amendments to Site Lease
Changes to the site lease.
We review any lease amendments to confirm that the lease as annotated is consistent with our model.
Site Lease Option Agreement (if applicable)
Option to execute a site lease.
We look for the terms of the full site lease attached, the duration of the option, and confirm that the option covers the property identified as the site location and has been executed by proper title holders. 

We determine whether the agreement is consistent with the lease, and note the duration of the option and the payment required so that we can adjust for any financial impact associated with it in our model. 

Phase I ESA with Reliance
This is a superficial review of the site that identifies:
(1) any existing environmental hazards on the site (typically man-made) or
(2) any protected natural habits on the site that can’t be developed.
We review the Phase I report to identify any potential red flags that could come up in securing the CUP. If there are red flags that are owner-contributed, then the steps and costs of remediation need to be discussed with the land-owner.

As with the Geotech report, reliance is a requirement for a Phase I.

Lease Estoppels
The land owner provides a lease estoppel to vouch that the lease is valid.
We look to the estoppel to confirm that there will not be a challenge to the validity of the lease.
Zoning Letters
A Zoning Verification Letter states whether a site is appropriately zoned.
We review the letter to ensure that the project meets zoning requirements.
Subordination, Nondisturbance, and Attornment Agreement (SNDA)
This is a document signed off by the mortgage-holder on the property. In it, they agree to not foreclose on the solar system in the event they foreclose on the property.
An SNDA is critical for us to ensure that we will retain ownership and control of the project in the event that the mortgagor of the property forecloses on the landlord.

Noe that this is only necessary if there is a mortgage on the property. 

Title Commitment
The title insurance company issues a commitment to provide insurance for the project subject to any exclusions based on the ALTA Survey. (groundmount with third party)
We review the title commitment to confirm that any exclusions to the insurance policy for the array will not pose a threat to the project or its long-term viability.  An acceptable title commitment is required prior to SolRiver issuing Notice to Proceed.

ADDITIONAL INFORMATION

Project Questionnaire
SolRiver provides a questionnaire to developers regarding applicable regulations for the project.
We look to the questionnaire to better understand the specifics of the project. In particular, we want to see what local requirements might apply to your project.  In the questionnaire, we ask developers to briefly list all required permits for the project.
Offtaker Credit Information
A rating issued by a credit agency or historical financial statements.
SolRiver checks the offtaker’s credit rating or financial statements to determine whether the entity is investment grade quality.  If so, we can underwrite the deal.

ORGANIZATIONAL DOCUMENTS

Articles of Organization
A document that officially creates the project company and sets certain rules for corporate governance. It is typically filed with the Secretary of State in your jurisdiction of incorporation.
We look to the articles of organization for proof that the project company has been created, and that it is owned by you.  We also confirm that the name of the project LLC matches the name on the PPA and Site Lease (and any other relevant documents).
Amendments to Articles of Organization (if applicable)
An updated filing reflecting any changes that have been made to the initially filed articles of organization.
If there are any amendments to the Articles of Organization, we examine them to see what has been altered and how it might affect your ability to sell the project or our ability to buy the project.
Operating Agreement (if applicable)
An internal agreement that details the company’s corporate governance and lists the owners (members).
Operating agreements are typically only relevant if there are multiple members in the project LLC. When this is the case, we look to the operating agreement to see who owns the project and which parties have the authority to sell the project. Our goal is to make sure that we know exactly whose approval is required for us to legally complete the transaction. 

Our partners who own 100% of the project often do not have operating agreements because there are no other parties involved in the company’s governance.

Certificate of Good Standing
An official certificate from the secretary of state that confirms the company is in good standing.
We simply look to see if you can provide a certificate of good standing. If one cannot be obtained, it means there is an issue that must be addressed.
EIN
An EIN is the project LLC’s tax identification number issued by the government.
We use the EIN to conduct a lien search on the project company.
Transfer of Membership Interests (if applicable)
An official agreement transferring ownership of the project company from a prior owner to you.
This is only relevant if you purchased membership interests in your company from another owner. If so, it allows us to confirm that the transfer was made legally and that you are now the official owner of the company.
Membership Interest Certificate
A certificate evidencing a member’s ownership of interests in the company.
Most LLCs do not issue certificates for ownership interests. In the event you have issued certificates, we look to see that all units are present and accounted for and that the certificates match the ownership table in the company’s ledger. We will cancel these certificates upon closing the transaction.
Current Annual Report (if applicable)
Certain states require LLCs to file annual reports to remain in good standing.
We review the annual report to confirm the company is in compliance with state laws.
Certificate of Authorization (if applicable)
A legal contract confirming that our partner is authorized to enter an agreement to sell the project LLC.
This is only relevant if we have not seen any other evidence of your ability to sell the company via other requested documents like the Operating Agreement.
Foreign Entity Qualification (if applicable)
A certificate authorizing the company to conduct business in a state other than its home state.
This is only required if the project is operating in a state other than the state it’s registered to do business in. We review foreign qualifications to make sure the company has the authority to operate in the state where the project is located.

 

COD Conditions:

We conduct our COD Conditions review after signing a Purchase & Sale Agreement but before issuing any final remaining payments to you. Before that,  the project needs to officially reach COD. As part of that, we request the short list of documents below.

DOCUMENT

WHAT WE LOOK FOR

SYSTEM SPECS

Full As-Built Plan Set
A complete set of plans for the project that is required for final inspection.
We provide this plan set to the independent engineer so that he can confirm that the system as built is consistent with the plans we were provided prior to issuing a Notice to Proceed.  The engineer then runs an updated energy production analysis based on the plan set.
Independent Engineer Reports with Reliance
A report from an independent engineer evaluating the As-Built design and generating an updated production estimate. The report should include a clause stating that certain parties can legally rely on the engineer’s analysis.
We use this report to confirm that the system meets the EPC agreement and PPA requirements. We also check to see that it meets the terms of our acquisition agreement and that the production estimate matches the assumptions in our model. If there is a discrepancy, we discuss options with the developer.

INTERCONNECTION (IN FRONT OF THE METER)

Final Interconnection Agreement
An executed interconnection agreement between the project company and the utility.
We review the final agreement to make sure it is executed and enforceable.
Permission to Operate
A letter from the utility that gives permission to the project LLC to connect the grid
We check and make sure the letter is received.