Valuation of Operating Solar Project

-How would a solar project acquired right around COD with a 15-20 year PPA be priced? We've got cap rates in real estate but it seems like valuation methods are slightly different with renewables. Typically the project would be valued based on a NPV analysis of future cash flows. Most investors are levered buyers, so you would look at NPV of levered equity cash flows. The levered discount rate for a utility scale PV project in the United States could range from 8-12% depending on the % of cash flows that are contracted vs. merchant over the useful life, type of offtake contract (busbar vs. hub settled), offtaker credit quality, project location, and how aggressive/conservative post-PPA merchant prices are assumed. Often investors will want to get 100% of their capital back within the PPA tenor.

-What would be a typical unlevered return that you'd expect to see right now on a domestic solar farm with a 15-20 year PPA from an IG off taker? I'm more familiar with levered discount rates mentioned above. I would say unlevered would probably be in the 7-10% range right now given where rates are.

-Are deals for operating renewable assets being negotiated in which you see the renewable developer selling and staying involved either through a lease or management contract? It is common to see developers sell anywhere from 25-100% of project. Some developers also provide asset management services and that could stay with original developer, but often the big asset owners (Brookfield for example) have their own internal asset management teams that will take it over. Some developers create separate landco entities and lease land to their own projects for various tax and economic reasons.

-What has been the impact of tax credit transfers? Will developers sell projects with the tax credit still available for the buyer to transfer or syndicate? How is transferability being viewed relative to tax equity partnerships? Tax credit transfers are being used primarily on projects that are riskier that traditional tax equity is less interested in financing, or by smaller developers that do not have TE relationships. Tax equity is typically more accretive to the developer. A buyer of a project at or near COD, would likely expect that TE or tax credit buyer is lined up (if you are including the proceeds in their valuation).

-What is the minimum asset price level that it makes sense for the large infrastructure investors / renewable operators to play? What does the buyer and seller pool look like below that price range?  The big infra players probably would not be interested in buying a single asset unless it was massive (over $1bn in capex). There are other middle market funds that might be interested like a Greenbacker or strategics that might buy a single project, but probably would be higher priced than the discount rates I mentioned above.

-What does a typical term loan look like for an operational solar asset? What issues does a long term ground lease (35+ years) create for financeability? 

Similar to the answer on valuation, it varies widely depending on the riskiness of the asset. It could be priced anywhere from S + 150 to S + 300. Sizing amortization is typically around the PPA tenor, sometimes with a bit of merchant tail, with DSCRs of 1.3x for contracted revenue and 2.0x for uncontracted revenue.