xFigureFinance is an independent financial advisor, we know the renewable energy sector, the opportunities for raising capital and we are able to negotiate the best financing for the construction of solar power plants.
The xFigureFinance team’s 30+ years of combined experience shows that the factors that make sense and validate an SPP investment decision are highly complex and require a good understanding of the legal framework, the stages involved in building the plant, and the financing options available. Although it requires good preparation and a large initial capital, this type of investment becomes a champion in returns, here’s why:
- Market principle
The renewable electricity generation sector has seen significant development over the last 10 years.
First, in the period 2007-2012 Bulgaria was the poorest member state with the highest fixed prices for the purchase of renewable energy. This led to a short-lived boom in the construction of renewable energy capacities, a feeling of political interference and unnecessary bonusing of renewable energy producers at the expense of Bulgarian citizens.
This is the reason why in mid-2012 the Bulgarian government said it could not fulfill the long-term power purchase agreements, as the production had jumped many times and imposed a number of fees on the most numerous PV projects.
And while in Bulgaria renewable energy investments were frozen for the period 2012-2020 and small projects up to 30 kW were happening, globally the technology was developing and equipment for solar projects became cheaper by over 70% in the last 10 years.
Thus, the improved price of the equipment now makes the investment fully market-based without the need for feed-in tariffs and premiums for RES producers, and without the investor bearing the political risk of the Bulgarian government.
The fact is that currently the cost of energy produced by solar plants is between EUR 55 and EUR 60s per MWh, at current exchange prices of over EUR 200.
- Good predictability
This type of project is characterized by a high degree of predictability of key assumptions such as sunshine, performance, level of operating costs and, consequently, revenue, profit and return.
We build financial models for solar plants based on long-term statistics of sunshine, high-end equipment performance, and long-term projections of electricity price and plant maintenance costs. Good predictability is one of the elements that attract investors to the sector and that make projects attractive for structuring long-term financing.
- High returns
Let’s talk in numbers here and say that these types of projects are extremely close to the passive income prospect, with the project having less than 10% operating costs after initial construction and actually over 90% of the revenue left to pay back the financing or directly to the investor.
It is difficult to say what percentage of profitability the projects generate, as each plant has specifics, but to summarize: the xFigure Finance team manages to structure long-term profitability for a 20+ year period of min. 15%, for the projects we are working on, under conservative electricity price scenarios and without significant additional revenues from green certificates.
- Prospective sector
The transition to green energy has long been a fact. Perhaps we do not need to cite the European directive Fit for 55%, according to which the volume of carbon emissions in 2030 should be 55% less than in 1990. This, in turn, leads to a reduction in the volume of carbon allowances in the EU and naturally to an increase in the price of allowances. Needless to say, with only a 2.2% reduction in quota volume from the start of 2021, the price has doubled from EUR 30 per ton at the start of the year to EUR 90 at the start of 2022. And to quote leading analysts in the sector, electricity price forecasts including the carbon emissions component of fossil power plants are expected to remain at sustained levels above EUR 100 until 2035.
In the face of these prospects, solar power generation is becoming the cheapest source of power generation and an opportunity for sustained good income from several channels (selling electricity and selling green certificates).
Building a solar power plant (SPP) is a long-term investment in a fast-growing industry characterized by high returns and passive income, provided that the key steps of project structuring are approached with extreme care.
xFigureFinance is an independent financial advisor who stands on the side of the client from Idea to funding, knows the ins and outs of the process, the financing terms, and the opportunities to improve the return on the Project.