Project Sapphire: Restructuring Plan for Distressed Renewable Energy Business

Client Overview

Project Sapphire was a business who operated a renewable energy business focussed on the installation of Solar PV and BESS solutions for residential and commercial applications. The business had annual revenue of c. $35-40m, was operating at a loss and approaching financial distress. The Board was seeking options to identify performance improvement areas, develop a comprehensive restructuring plan, and determine the timeframe and quantum of ongoing financial support required.

​Engagement Scope​

Engaged to conduct a full scale financial and operational business review to identify performance improvement options and turnaround recommendations in consultation with key stakeholders over a 6-week period.​

Our Approach

Following a high-level overview of the business, our focus was on the following key aspects:​

• Efficiency and effectiveness of sales team and drivers impacting lead conversion for residential opportunities ​
• Cashflow forecast assumptions, including:
  • Review of commercial opportunity pipeline and project mix to ascertain indicative timeframe and likelihood of commencement ​
  • Assumptions relating to residential opportunities ​
  • Working capital and liquidity requirements based on forecast commercial pipeline ​
• Divisional profitability, including:
  • Pricing and Procurement ​
  • Operating Costs review to identify potential cost efficiencies ​
  • Review of operating model, including offshoring arrangements and geographic coverage ​
  • Impact of operational execution and project risk
    
    In this context, developing a comprehensive restructuring plan was essential to guide the turnaround process effectively.

Key Findings and Outcomes​

A detailed report was prepared for the Board which addressed the following key aspects:​

Liquidity Management​

We conducted a detailed review of cashflow forecast assumptions which enabled sensitivity analysis to be completed. Our analysis indicated that a short term cashflow deficiency was imminent and we recommended additional funding be secured immediately to prevent solvency issues.

Impact of Commercial Projects Pipeline

Our analysis indicated the commercial pipeline was healthy, however it was highly volatile. The business incurred substantial delays in projects converting the contracts which is creating risk on the certainty of future cashflows and conversely operation execution may become problematic should multiple projects commence simultaneously.

Working Capital

We identified that that working capital was currently constrained with increases in trade finance required. Further, we identified that the current facility has limitations which are impacting cashflow which resulted in material decrease in cash reserves. We recommended that they explore facility options to increase flexibility and the funding limit, particularly to manage potential commercial project exposure. ​

Performance Improvement Initiatives​

Our analysis of the current performance of the business in collaboration with Management (in comparison to market benchmarks) indicated opportunities exist in:​​

• Improved profitability through direct costs reductions from vertical integration ​​
• Improved lead conversion from adjusting customer acquisition methodology ​​
• Reduction of execution risk, including revision of internal policies and procedures ​​
• Continuation of non-core operating costs reduction initiatives ​

Customised Restructuring Plans for Your Situation

Every distressed business requires a unique approach. Our restructuring plan and recovery experts can tailor a turnaround strategy specifically for your situation with a customised roadmap for recovery and growth. Reach out and speak to our specialists today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.