Posted on December 10, 2021
Wind Farms Valuation Know the Industrys Value Drivers
When talking about the energy sector, there is sort of a monopoly that alternate energy industries are trying to break. But none of them is established strong enough to break the existing patterns. However, with time, new businesses are entering the domain with wind farms and similar services, evolving technologies and market swings still remain one of the largest impacting factors.
Thus, evaluating such a business as wind farms needs careful analysis of the following factors for accurate results.
Power Purchase Agreements
When utility companies sign Power Purchase Agreements with energy companies, the latter gets a long-term earning source. While PPAs usually last for long tenures such as five to twenty years, some businesses do get short-term contracts (hedge agreements) for testing or special requirements. Thus, taking into consideration all the regular and hedge agreements can help assess the service provider better.
Capacity Factor
In general terms, capacity translates to how much power a wind farm can generate. A wind farm should produce enough energy and sell it to meet the running costs and make a considerable profit. However, the capacity not only depends on how much land or equipment the energy company owns but natural factors like the wind as well. Specialized researches in this domain can help find the best locations and durations to generate the most power through winds.
Besides, factors like tax credits, a company’s reputation, and potential for growth can also impact the value of a business. Hiring experienced professionals for professional valuation services can help wind farm owners get the best insights into their company’s worth.