Hi Everyone,
I would please need some help. I would like to know if some of you have experience in renewables (especially wind) projects/assets valuation using DCF approach.
Can any one provide me with some general guidance? or a wind valuation model example that could give me the chance to get more familiar with that type of valuation?
Thanks very much,
Y.
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Hard to say, very general question. Is this project levered or unlevered? Is there tax equity on the project? Either of which would make it very complicated.
General guidance on a wind operating model (unlevered, no TE)
Select typical Capex Assumptions: - Turbines - BOP - Land lease - Development fee - Financing Fees
Select typical OpEx Assumptions: - O&M - Contingency - Site taxes - Scheduling - Asset Management - Transmission charges - Insurance
Other assumptions - Project life or how long you project cash flows (typically 25-35 years) - Availability (wind turbine manufacturers will have warranties for this, typically 97-97%) - Curtailment - NCF (wind studies are needed to find capacity factor. Totally depends on region. For example, PJM project could be 32% while a ERCOT project could be 45%) - Terminal value? (Typically none)
What are your cash flows? 1) CF from power generation. Key considerations - who is your offtake? (PPA, hedge, merchant?), PPA is easy, it's a stated $/MWh for 100% of your generation. Merchant is simple too, but just using market prices. Hedges are tricky and depend on what you're hedging at (P50 v P90). Nameplate capacity of turbines x hours in a year x net capacity factor = power generation * $ MW/h 2) RECs - typically bundled into PPAs 3) Capacity payments - you don't always see these. Not necessary to know as buyers may not ascribe value to them 4) PTC tax credit - based on production
What is your discount rate? - Let's say 7.75-8.00% with a 100bp premium for a hedged project and a 200bp premium for a merchant project
I'm missing a lot but this is the basics.
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