Valuation of wind farm financial impacts to equity investor from construction problems

Background

• The client is an experienced wind farm & solar farm project development and management company
• Renewable energy projects are typically subject to high and all-rounded risks in development and construction phases. These projects will realize higher valuations at later phrases as they are de-risked
• The client sees an opportunity to co-own new projects by utilizing its unique expertise and well-established track records
• The client requires assistance on quantifying the potential value creation to the project from its expertise

Role and methodology

• Develop a financial model for a typical 50-MW with 20-year operation, 75% debt financing and with detail construction capex and potential delay and performance parameters
• Cash flow analysis and valuation of project and equity return of normal case vs potential construction problems
• Develop a memorandum of financial impacts from potential construction problems of a typical wind farm project

Project outcome

• Valuation of financial impacts (to project and equity owners) from potential construction problems in three categories:
  • Construction delay
  • Cost overrun
  • Impaired performance
• A memorandum which serves as a marketing material distributed to target renewable project owners

Keywords: Wind Farm, Valuation, Financial Model, Project Finance, EPC, Construction Management