Friday, October 30, 2009

Another data point in windfarm valuation


By now, you will have seen Centrica's announcement on the sales of 50% interests in windfarms at Lynn, Inner Dowsing (offshore) and Glens of Foudland (onshore).

The key section is here: Centrica also announced that it has agreed the sale of a 50 per cent equity stake in its Lynn, Inner Dowsing and Glens of Foudland wind farms to the US-based investment management company TCW for a cash consideration of £84 million, and entered into agreements to raise approximately £340 million of non-recourse project finance facilities from a consortium of banks for these assets. The transactions value the wind farms at approximately £460 million in aggregate.

Using a 10% discount rate, and what we think are reasonable electricity and ROC prices (£60/MWh and £37/MWh respectively), we see the values (100%) as:

Glens of Foudland (26MW) - £35 million
Lynn (81 MW) - £134 million
Inner Dowsing (81 MW) - £134 million
Lynn (extension, 90 MW)- £181 million
Inner Dowsing (extension, 90 MW) - £181 million

So we get a total of £675 million for 100% of the windfarms - a considerably higher number. We have to drop the power price to less than £40/MWh or increase the discount rate to around 15% to get the value to line up with Centrica's valuation.

Also, Centrica announced that the 270 MW of Lincs would cost some £725 million - £2.69 million per MW installed. Not bad - less than the equivalent (announced) amount for Greater Gabbard. I wonder if this suggests turbine prices are weakening somewhat?

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