For Professional Investors Only

Renewing renewables – Bringing new life to underperforming and aging assets

3 min read time

The average well-maintained solar asset should have a productive lifespan of around 40 years.

However, assets that are not well serviced and managed can see a significant decline in productivity. Underperforming assets are often found in countries where there have previously been strong incentives in place for individuals to develop small-scale solar plants. In these circumstances, many inexperienced and opportunistic players entered the market despite lacking the necessary professional and financial expertise to run power plants effectively.

Italy is a prime example of where such a situation has unfolded. Generous incentive schemes between 2008 and 2013 encouraged huge growth in the space; local banks financed assets with high leverage levels of around 80% or higher to lure several small investors and entrepreneurs to the market. Furthermore, the solar equipment used in the plants is often no longer state-of-the-art, or may be manufactured by suppliers that no longer exist.

In general, assets can underperform for several reasons:

  • Technical & operational underperformance: Due to poor design, thefts, insolvent manufacturers, defective components, poor maintenance, and technical/commercial asset management that triggered significant underperformance.
  • Financial issues: Special Purpose Vehicles (SPVs) that are not able to service their debt due to a combination of high leverage, expensive interest rate derivatives, poor performance, technical issues, and tariff re-modulation.
  • Administrative/ planning & tariff roadblocks: Certain assets have been built by applying the wrong authorisation process and this has resulted in revocation and/or reduction of the tariff by the GSE (the Government body in charge of paying the tariffs).
  • Subscale assets: Certain markets are fragmented with several subscale assets that do not have the productive capacity to secure professional management and economies of scale.
  • Distressed sellers / orphaned assets: When the SPV is solvent, the controlling asset owner (i.e., the HoldCo) have entered liquidation. Thus, the assets are captured as part of the liquidation perimeter and are sold through tribunal auctions.

However, all is not lost for these assets. A well-resourced and specialist owner/manager can do a lot to revitalise underperforming assets and return them to their productive potential. This process of renewal could include:

  • Commercial: Renegotiation of all the contracts in place for each asset with the goal of reducing the costs and reaching better terms.
  • Technical: Expert evaluation of the asset in question to identify a capex plan and optimisation strategy to revamp the performance of the asset in question.
  • Asset management: More efficient and expert asset management going forward is essential to capitalise on the technical and commercial solutions implemented. Specialist owners/managers have the ability to internalise the management of a number of smaller assets into one single company in order to enjoy economies of scale on the management side of running a solar plant.

There are not many investors in the market who are in the position to take on such assets – large long-term investors have mandates to invest in large clean assets and often don’t have the expertise or dedicated team to manage complex or challenging assets.

The Bluefield platform has specialist investment, technical and engineering expertise to identify, purchase and boost underperforming assets to assemble, optimise, create value and sell a portfolio with a premium on the acquisition price.

Bluefield’s recent value-add ‘Revive’ strategy took exactly this approach to the Italian solar market and demonstrates the potential value to be unlocked in assets that might otherwise be passed over. The strategy, which closed oversubscribed in August 2023, seeks to acquire several small assets, optimise them and offer them to the market as a single, sizeable, clean portfolio that could potentially sell at a premium as large players bid against each other to acquire the latest portfolio available in the market.

The pilot of the strategy was launched in 2019. This project, called ‘Sole’, involved the revitalisation of ten solar photovoltaic (PV) entities in Puglia and ultimately yielded high double-digit returns and a high cash multiple, concluding with a sale in October 2023.

The portfolio’s success was due to several activities since acquisition to optimise the technical and operational performance.

  • Between 2020 and 2022, a technical revamping and capex plan was devised and implemented. This involved installing new cooling systems, rectification of strings underperformance and revamping of inverters.
  • Between 2021 and 2023, Bluefield replaced the existing O&M contractor and appointed a new one at better terms.
  • We also introduced the 231 Compliance Model into the structure and introduced some tax optimisations. All of which generated cost savings.
  • We also started negotiating the extension of the surface rights agreements with the landowners alongside requesting additional capacity to the DNO allowing for the revamping and repowering of the assets.
  • In 2022 the portfolio was refinanced with a leading Italian bank with a Green Loan at better terms than its previous financing, and with some equity released at closing. The refinancing was the first step towards the portfolio’s sale in October 2023.

All these activities helped add value and deliver returns for investors, alongside helping increase Italy’s solar capacity without the construction of brand new infrastructure.  


This article has been prepared and is being issued by Bluefield Partners LLP (Bluefield Partners), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (the FCA), with firm reference number 507508. 

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