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:: Volume 11, Issue 2 (4-2022) ::
ieijqp 2022, 11(2): 1-11 Back to browse issues page
A method for uncertainty management of solar power plants in project finance
Hossein Jadidi1 , Afshin Firouzi1 , Mohammad Ali Rastegar * 2, Majid Zandi3
1- Department of Civil Engineering, Science and Research Branch, Islamic Azad University, Tehran, Iran
2- Faculty of Industrial Engineering, Tarbiat Modares University, Tehran, Iran
3- Renewable Energies Engineering Department, Shahid Beheshti University, Tehran, Iran
Abstract:   (2740 Views)

Financing of infrastructures and huge projects such as utility-scale solar power plants is imperative to economic development. From the perspective of investors, financing of infrastructure projects divides into two general methods including lending and partnership. One of the methods based on lending is project finance that is the focus of this study. In loan-based investing, the lower the lender's estimate of the uncertainty (risk) of future project cash flow, the more willing lender would be to invest. The method is a limited recourse; thus, the lender tendency to partnership in the finance deal depends on the reliability on future cash flow of a project. Here, we gather the results of different studies and investigate the uncertainties led to fluctuation of the expected future income of utility-scale solar power plants. Using Monte-Carlo simulations and Maximum Likelihood Estimation, the annual probability distribution of debt service coverage ratio for a 10 MW solar power plant project has been estimated during the loan term, and we use that to calculate the probability of default for each year. Then, using sensitivity analysis of financial indices to various leverages, the appropriate ratio of debt and equity in the structure of project financing are obtained. The presented method of estimating solar power plant project income can be used for other utility-scale solar power plants using specific uncertainties for each location. Our work paves the way to a more reliable decision making for lender(s) and facilitates the process of attraction of investor(s) for project company.
Article number: 1
Keywords: Solar Power Plant, Default Probability, Project Finance, Financial Leverage, Debt Service Coverage Ratio (DSCR), Special Purpose Vehicle (SPV), Profitability Index (PI)
Full-Text [PDF 865 kb]   (630 Downloads)    
Type of Study: Research | Subject: Special
Received: 2021/12/18 | Accepted: 2022/02/16 | Published: 2022/06/19
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Jadidi H, Firouzi A, Rastegar M A, Zandi M. A method for uncertainty management of solar power plants in project finance. ieijqp 2022; 11 (2) : 1
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Volume 11, Issue 2 (4-2022) Back to browse issues page
نشریه علمی- پژوهشی کیفیت و بهره وری صنعت برق ایران Iranian Electric Industry Journal of Quality and Productivity
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