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Wrestling risk in green projects: take time to think before acting

The increasing attention given to large-scale renewable energy projects over the last five years, has been driven primarily by larger companies. This has included specialist renewable energy organisations, such as Vestas or Orsted, alongside traditional oil and gas companies who are increasing their focus on renewable investment and generation.

Some smaller organisations, both upstream energy producers and members of the supply chain, are also getting involved for both corporate sustainability and commercial reasons. Many will be new to the field and will have limited internal resources to devote to opportunity evaluation.

Any energy-related project comes with its fair share of risk. The generally high potential margins in conventional energy projects are the reward for the inevitable failures or cost over-runs that are the nature of such a complex business.

The renewable energy sector is still in its infancy and many of its subsectors have yet to demonstrate long-term investor returns, especially outside the confines of government revenue support. The best projects will probably succeed, but the euphoria of green development must be balanced by the need to make sound strategic and financial decisions regarding project investment, based upon thorough and timely due diligence (DD).

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