Not all proposed wind farms are economically viable. The role of the financial analyst is to determine which are financially sound. The main variables to consider are the quality of the wind resource, the finance costs, the sale price of generated power, and the overall cost of the project.
“The financial analyst must understand and be able to translate various inputs, such as capital costs, operation & maintenance costs, land lease costs, taxes, wind resource potential, future power prices and project risks into a robust and defensible pro-forma model,” says Ari Pribadi, senior vice president of Marathon Capital, LLC .
Wind developers provide a lot of this information. “You have to have a healthy auditors’ skepticism to push back on assumptions that are coming from the development team,” says Dan Rustowicz, chief manager for RedWind Consulting. “You must also know the current market ‘realities’ and reflect it in a model that will ultimately drive the go or no go decision.”
Rustowicz points out that, “You only read about the projects that successfully achieve commercial operation. The reality is that approximately only one in three projects actually are successfully developed and built.”
Developers can invest hundreds of thousands of dollars into a project and have a vested interest in seeing the project realized. The financial analyst however must offer an unbiased perspective to be effective.
“You can come across very optimistic wind developers,” says Rustowicz. “Most wind energy developers have the best wind, the best location, and the best project. You have to be able to sift through various projects to separate the ‘pretenders’ from the contenders.”
Under the current economic climate, financial analysts need to be even more diligent than before. “Banks are more conservative now as to technology choices and are really pressure testing the financial model,” says Rustowicz. “If the model is not tight, you will lose credibility.”
In addition to an MBA, Pribadi also finds his power plant design engineering background an asset. Rustowicz earned a bachelor’s degree in accounting and has an MBA. He finds an accounting background, an ability to comprehend finance theory and concepts, and strong interpersonal and research skills to be important qualities for a financial analyst.
Photo Credit: Kiril Lozanov of EcoEnergy LLC
Sarah Lozanova is passionate about the new green economy and is a regular contributor to environmental and energy publications and websites, including Energy International Quarterly, ThinkGreen.com, Triple Pundit, Green Business Quarterly, Renewable Energy World, and Green Business Quarterly. Her experience includes work with small-scale solar energy installations and utility-scale wind farms. She earned an MBA in sustainable management from the Presidio Graduate School and is a co-founder of Trees Across the Miles, an urban reforestation initiative.