Project Finance vs. Renewable Energy Project - What are the Big Differences
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Differences between project finance and renewable energy.
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Glossary
Power Purchase Agreement Project financeTranscript
Well, firstly, we have guaranteed revenue. We have a power purchase agreement with a party we call an offtaker who guarantees to buy the amount of electricity produced by the project.
The lifecycle is normally in line with the length of time that that power purchase agreement operates for. Even if the equipment could potentially last longer, normally we would terminate the model. At the point at which the PPA power purchase agreement expire.
We would model a ramp-up, we wouldn't normally turn on all the equipment at 100% capacity. As soon as it's all built, we would gradually turn it on and allow it to reach full power As fast as technical engineering issues allow. It's not restricted by how much the customers want to buy. The customer is already committed to buy all the power that's generated by this facility. And in many countries, government plays a very active role in encouraging investment through tax breaks, incentives, sometimes direct subsidies, or just creating a marketplace that is friendly towards renewable energy projects and the cash flows. All the capital expenditure usually is at the beginning. During the operating phase, there's little to no capital expenditure. It is just operating revenue and operating costs during that second period, the operations phase.