Cash Flows of a Solar ProjectWhen making the decision to finance a project, investors and lenders look at the cash flows of the project and their timings. A project that is "economically viable" needs to satisfy lenders, investors as well as the buyer. |
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In - Flows
Out - Flows
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The diagram below shows a typical cash flow profile for a solar photovoltaic power project with a large capital outlay at the start followed by stable cash flows over the next 20 years.
The capital outlay for the project sponsor can be reduced by adding debt to the project ("levered"). Due to the cpaital intensity, payback periods, i.e. the time it takes to get the original investment back, are relatively long. In the example below it is between 8-9 years. A detailed financial model is required to assess individual projects. |