Manuscript - Financing Modeling of Renewable Energy Projects

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Valuation Terms in Renewable ProjectsDetailed Terms for Renewable Projects• P50, P90, P99 etc.• Measures the chances that the capacity factor of a project will be below or equalto the stated level. P99 will be a lower capacity factor than P50.• 10 Year P50 versus 10 Year P75• Feed-in Tariff• A fixed price offered by the government for specific types of renewable capacityover a given term. Can be related to market prices and/or have inflation.• Merchant Prices• LMRC or SRMC - Long/Short Run Marginal Cost• The amount by which renewable technologies should be less than in order to beeconomic. Could be long-term or short-term.• Grid Parity• LCOE – Levelized cost of electricity• Debt Capacity16
Financing Terms in Renewable Projects - 1Debt Service Coverage Ratio (DSCR) for Renewable Projects• Typically, a bank will base the financial model on the ‘exceedance cases’provided within the energy assessment for the project.• The mean estimated production of the project (P50) may be used to decideon the size of the loan, or in some cases a value lower than the mean (forexample P75 or P90).• This depends on the level of additional cash cushioning that is available tocover costs and production variation over and above the money that isneeded to make the debt payments.• The debt service cover ratio (DSCR) and is the ratio of cash available at thepayment date to the debt service costs at that date.• For example, if €1.4 million is available to make a debt payment (repaymentand interest) of €1 million, the DSCR is 1.4:1.Deb Sizing• Banks loan money depending on the difference between the cash flow andthe amount of the debt service – this is the debt service coverage ratio• The higher the risk the higher the debt service coverage ratio, becausebanks need a margin.• A project with a lot of risk may have a debt service coverage ratio of 1.8whilst a project with little risk may have a DSCR of 1.2. (Look at graphson the next chart)• Once you have the DSCR, you can find the level of gearing from theDSCR (using the goal seek).• The equity IRR which is the main thing that the sponsors are concernedabout depends on the debt terms• It is better to have longer tenor• It is better to have level debt service instead of declining debt service(annuity payments)• It is better to have lower DSCR17Statistical Analysis Used in Sizing Debt• Computation of deviation in wind from period to period• Distribution of wind• Difference between risks• New Technology and Consulting or Scientific Study• Statistical Properties of Prices• Mean Reversion of Weather• Standard terms of debt define value and cost of capital• Optimization of Capital Cost and Operating Cost• Tax Incentives
Page 1 and 2: MODELINGVALUATION &FINANCING INRENE
Page 3 and 4: IntroductionAlhamdulillah, finally
Page 5 and 6: Characteristic of Renewable Project
Page 7 and 8: Specific Characteristics - 1Solar
Page 9 and 10: Financing IssuesWind• Project Fin
Page 11 and 12: KPI of Renewable Projects - 11. Ele
Page 13 and 14: KPI of Renewable Projects - 34. Ope
Page 15: CHAPTER 03Valuation andFinancing te
Page 19 and 20: CHAPTER 04Valuation andFinancing Mo
Page 21 and 22: Modular Development“Thedevelopmen
Page 23 and 24: Steps to Build the ModelStarting wi
Page 25 and 26: 25I. Static Debt Size
Page 27 and 28: MODULE - INPUTFile: 1. Static Debt
Page 29 and 30: MODULE - OPSFile: 1. Static Debt st
Page 31 and 32: RevenueOPS-RevFile: 1. Static Debt
Page 33 and 34: Working CapitalOPS-WCFile: 1. Stati
Page 35 and 36: MODULE - C&FFile: 1. Static Debt st
Page 37 and 38: Financing costC&F-FincostFile: 1. S
Page 39 and 40: Timing ConversionFile: 1. Static De
Page 41 and 42: Project Risk in financiers’ point
Page 43 and 44: File Reference2. Static Debt end.xl
Page 45 and 46: Financial covenantsDebt ratioFile:
Page 47 and 48: DepreciationD&T- BookDepFile: 2. St
Page 49 and 50: Tax Expense vs PaidD&T-TaxExpFile:
Page 51 and 52: MODULE - EQUITYFile: 2. Static Debt
Page 53 and 54: Dividend paymentEquity-DivFile: 2.
Page 55 and 56: Financial StatementFS - IS/BS/CFFil
Page 57 and 58: 57II. Dynamic Debt Size
Page 59 and 60: Debt DynamicC&F-leverageFile: 3. Dy
Page 61 and 62: MODULE - MACROFile: 3. Dynamic Debt
Page 63 and 64: DSRADebt-DSRAFile: 4. Dynamic Debt+
Page 65 and 66: DSRA MacroMacro-DSRAFile: 4. Dynami
Page 67 and 68:
File Reference5. Dynamic Debt+DSRA+
Page 69 and 70:
Shareholder loanFile: 5. Dynamic De
Page 71 and 72:
File Reference6. Dynamic Debt end.x
Page 73 and 74:
IRRVAL-IRRFile: 6. Dynamic Debt end
Page 75 and 76:
MODULE - AFSContentFINANCIAL STATEM
Page 77 and 78:
MODULE - DASHBOARDContentDashboard
Page 79 and 80:
File Reference7. Deterministic mode
Page 81 and 82:
Monte Carlo Simulation (Probabilist
Page 83 and 84:
SIPmath InstallationInstruction1. D
Page 85 and 86:
Probabilistic ModelFile: 8. Probabi
Page 87 and 88:
Steps to build probabilistic Model
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Price Optimizationa. Deterministic
Page 97 and 98:
Price Optimizationb. Probabilistic
Page 99 and 100:
WRAP - UP1. Renewable Project Chara
Page 101:
Modeling valuation and financing in
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Manuscript - Financing Modeling of Renewable Energy Projects

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