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Investment in an Operating Solar (PV) Power Plant


Investment in an Operating Solar (PV) Power Plant is a financial model which deals with the evaluation of an opportunity to acquire a minority share in an already operating solar power plant. The model generates the three financial statements as well as the cash flows and calculates the relevant metrics (cash on cash, Internal Rate of Return, payback period, Net Present Value, Debt Services and Loan Life Coverage Ratios).

So, a quick overview of the model, in the contents tab you can see the structure of the model and by clicking on any of the headlines to be redirected to the relevant worksheet.

On the Timing tab you are able to feed the general information for the model such as: model name, responsible, timeline of the model and date and currency conventions. Additionally, there is a description of the color coding of the model in the same tab. Inputs are always depicted with a yellow fill and blue letters, call ups (that is direct links from other cells) are filled in light blue with blue letters while calculations are depicted with white fill and black characters. There is also a color coding for the various tabs of the model. Yellow tabs are mostly assumptions tabs, grey tabs are calculations tabs, blue tabs are outputs tabs (that is effectively results or graphs) and finally light blue tabs are admin tabs (for example: the cover page, contents, and checks).

Moving to the Inputs Tab: (in yellow whatever can be amended as an assumption): detailed inputs for revenues for 3 solar assets (remaining useful life, purchase power agreement remaining years, tariffs prices, capacity assumptions, energy generation, and degradation factors), profitability for each asset (as a percentage of revenues), financing assumptions (interest rate, target debt service coverage ratio, target equity internal rate of return, acquisition share consideration), valuation assumptions (valuation multiples, cost of equity, and discount rate premiums).

In the Outputs Tab: everything is aggregated here into the relevant statements: profit and loss, balance sheet and cash flow.

In the Valuation tab, a valuation is performed for the entire project, as well as for each asset separately. A series of sensitivities are performed on the discounted cash flows, or in the multiple’s valuation. We also calculate the various feasibility metrics such as internal rate of return, net present value, cash on cash, payback period on a project basis as well as on an equity basis. Finally, debt service and loan life coverage ratios are calculated.

In the Visuals Tab, various graphs present the investment & operating costs as well as the energy generation potential. Then multiple charts present the performance of the project from revenues to bottom line along with debt, and cash flows which results in a valuation on a project basis as well as on an equity basis together with the internal rate of return of the project and payback period metrics.

Moving to the Scenarios tab, you can select from one of the three scenarios: base case, bull case, bear case. You can change the assumptions of each scenario on the right side of the worksheet. The scenario outputs are automatically calculated below, and the model is updated accordingly.

The Summary is instantly updated with the main output metrics of the model such as IRR, Shareholder Value, Cash on Cash Multiple, and other general assumptions for financing, valuation, operations, and investment metrics, coupled with various graphs.

Checks: A dedicated worksheet that makes sure that everything is working as it should!

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