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Every ratio a lender tests starts with one line: how much energy the plant sells, at what price.
Riverbend, year 1:
Why R0.95? The offtaker stays on its Eskom Megaflex account. For each wheeled kWh, Eskom credits that account with its loss-free energy rate (the WEPS rate before network losses), less the slice of the generation capacity charge built into it: R1.64/kWh in year 1, weighted to the tracker's output by time of use. The offtaker's own network charges continue either way, so that credit is what the PPA has to beat. At R0.95 the offtaker saves 42%. The sponsor's floor, where the equity just earns its 16% cost of equity, is R0.84. The price sits between the two.
Then the model rolls it forward for 20 years:
- Degradation follows the module warranty, 0.4% of nameplate a year after year 1: year-20 output is 92.3% of year 1.
- The tariff rises with CPI, by at least 3% and at most 6% a year: 3% a year with CPI on target, R1.67/kWh by year 20.
- Generator charges rise at CPI + 2%, from 0.9% of PPA revenue.
- The year-12 inverter overhaul (R31.1m in that year's rand) is paid from a reserve built over the three years before.
One assumption worth testing is degradation. On the warranty's 0.4% a year the equity IRR is 21.6%; on an engineer's 0.5%, 21.4%; on hot-climate field data of 0.75%, 20.7%.
What degradation does your model use, and does year 1 carry its own step?
Next: the 18 months before the first kWh.
Riverbend Solar is an illustrative case study: a fictional deal with no real counterparty.