Manuscript - Financing Modeling of Renewable Energy Projects

Financing Terms for Renewable Projects - 2
Use of Probability Estimates in Debt Sizing and DSCR
• Financier’s models often size debt on the P90 10-year energy case, even if the main
‘base case’ uses the P50 over the long term.
• So, the lower the P90 relative to the P50, the lower the size of the loan
• The selection of either the P50 or P90 may not be critical, as the Debt Service
Coverage Ratio changes with each energy case.
• Europe
• Loan based on P50 with 1.4 DSCR vs Loan based on P90 (10 year) with 1.2 DSCR
• North America
• Loan based on P99 (1 Year) with 1.0 DSCR
DSCR criteria
1. On-Shore Wind
• DSCR 1.40 for P50 10 year (base case)
• DSCR 1.25 for P75 10 year (low case)
2. Off-Shore Wind
• DSCR 1.5 for P50
• DSCR 1.3 for P90 10 years
• Use of cash sweep facilities for
cost over-runs
• Debt tenor 12-14 years
• Sweep for Availability, Wake
Effect of other Farms
• Credit Spread 2.75% increasing
• Cost of Project 3,500 GBP per kW
• Merchant Price Risk with Band
3. Solar
• 1.20 DSCR
• Sculpted
• 1-2 year tail
4. Hydro
• DSCR Target: 1.8 or more
• Credit Spread: 2%
• Tenor: 10 Years
• Cash Sweep
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