Financial Analysis of Storage and Renewable Energy
Battery storage - the next big thing?
The Financial Analysis of Storage and Renewable Energy program will address a variety of contract and loan structuring issues associated with wind and solar energy projects as well as battery storage. The program is designed to investigate how various project finance techniques and contract structures can be used to achieve competitive power prices while maintaining a satisfactory equity return.
The program will begin by discussing distinctive project finance features of facilities that depend on wind, hydro or solar resources. Subsequent sessions will address the theory underlying liquidated damages for delay, and performance as well as design of other incentives that is inherent in different contract structures. Nuanced project finance issues associated with structuring debt for renewable projects will be discussed, including under what conditions the DSCR drives debt capacity and when the debt to capital ratio is instrumental.
The program will be taught with a combination of theoretical discussions, term sheet review and focused financial models.
How you will benefit
- Understand the theoretical issues with computing LCOE and the importance of cost of capital for renewable and storage projects
- Learn the differences in contract structures for renewable projects and dispatchable projects and how a single price structure can distort incentives for efficient construction and operation
- Understand storage and cost characteristics of alternative batteries and how different structures work in alternative markets
- Gain an understanding of financing components that influence the bid price required to meet a required rate of return on equity and can result in relatively low prices with reasonable returns
- Understand the importance of debt sizing constraints and what strategies are relevant when the debt to capital constraint applies relative to when the debt service coverage ratio drives the debt size
- Learn how to compute P50, P90 and P99 for different projects driven by resource risk
- Understand the difference between mean reverting resource variation and estimation mistakes that do not correct as the basis for 1-year P90 and 10-year P90
- Learn under what conditions debt sculpting can affect returns and how synthetic sculpting can be used to increase returns when the DSCR constraint applies
- Understand the theory of credit spreads, variable rate debt and interest rates in different currencies and compute the implied probability of default that in inherent in credit spreads
- Learn how to evaluate the costs to equity investors and the benefits to lenders for various credit enhancements including DSRA accounts, cash flow sweeps and covenants
Edward Bodmer teaches a number of modeling courses and is a consultant who specializes in financial analysis and modeling. He is a former banker and has taught courses for major corporations and financial institutions around the world for many years. Visit his website to see some samples of models: www.edbodmer.com. He received an MBA specializing in econometrics (with honors) from the University of Chicago and a BSc in Finance from the University of Illinois (with highest university honors).
For more information on this and other programs offered by Amsterdam Institute of Finance, visit the Amsterdam Institute of Finance website.
Members of CFA Society Netherlands receive a 10% discount on Amsterdam Institute of Finance programs! The discount is applicable to all programs offered by AIF. To claim your 10% discount please send an email to firstname.lastname@example.org with your CFAID number and ask for the discount code.
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Amsterdam Institute of Finance is registered with CFA Institute as an Approved Provider of continuing education programs. This program is eligible for 18 CE credit hours as granted by CFA Institute. If you are a CFA Institute member, CE credit for your attendance at this event will be automatically recorded in your CE Diary.