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Criteria for photovoltaic project finance: Trade-offs in banks' and equity investors' decision making
Type
applied research project
Start Date
02 September 2010
End Date
31 May 2013
Status
completed
Keywords
Photovoltaic
Project Finance
Bankability
Conjoint Analysis
Description
Recent developments in photovoltaic (PV) project finance have reinforced the need for investigating the preferences of and criteria applied by banks and equity investors in such renewable power generation projects. In 2009, after the credit crisis, the financial markets appeared to be liquid again. But, as a consequence of the credit crunch, fundraising has become more challenging as banks began demanding higher loan securities and project evaluation as a whole has become stricter.
The objective of this study is to empirically measure the relative importance of criteria influencing the decision making of banks ("bankability of projects") and equity investors in large-scale (in MW-range), ground mounted PV projects. Specific attention is given to qualitative aspects of project assessment. The overarching goal is to generate conclusions on trade-offs banks and equity investors make when evaluating PV projects. Specific recommendations will be given to various stakeholders such as project developers (e.g. effective project design in order to increase funding probability), banks and equity investors (e.g. own and peer preferences and trade-offs related to project features), module producers (e.g. implications on module bankability) and service providers (e.g. consulting services in PV project due diligence).
The study is organized in two parts: The first part comprises semi-structured in-depth expert interviews with different market actors. The aim is twofold: (1) to learn more about the criteria that banks and equity investors use for their investment decision-making, while focusing on qualitative aspects and trade-offs between decision criteria; (2) to increase our understanding about the meaning of bankability as a major investment criterion with distinct qualitative characteristics. Part two includes a quantitative, web-based survey based on a conjoint experiment to define the importance of and trade-offs between PV project attributes by international banks and equity investors.
The objective of this study is to empirically measure the relative importance of criteria influencing the decision making of banks ("bankability of projects") and equity investors in large-scale (in MW-range), ground mounted PV projects. Specific attention is given to qualitative aspects of project assessment. The overarching goal is to generate conclusions on trade-offs banks and equity investors make when evaluating PV projects. Specific recommendations will be given to various stakeholders such as project developers (e.g. effective project design in order to increase funding probability), banks and equity investors (e.g. own and peer preferences and trade-offs related to project features), module producers (e.g. implications on module bankability) and service providers (e.g. consulting services in PV project due diligence).
The study is organized in two parts: The first part comprises semi-structured in-depth expert interviews with different market actors. The aim is twofold: (1) to learn more about the criteria that banks and equity investors use for their investment decision-making, while focusing on qualitative aspects and trade-offs between decision criteria; (2) to increase our understanding about the meaning of bankability as a major investment criterion with distinct qualitative characteristics. Part two includes a quantitative, web-based survey based on a conjoint experiment to define the importance of and trade-offs between PV project attributes by international banks and equity investors.
Member contributor(s)
Partner(s)
Good Energies Chair for Management of Renewable Energies, Institute for Economy and the Environment (IWÖ-HSG), University of St.Gallen; Centre for Sustainability Management (CSM), Leuphana University of Lüneburg; Nordic International Management Institute
Funder(s)
Topic(s)
Photovoltaic
Project Finance
Bankability
Conjoint Analysis
Method(s)
Semi-Structured Interviews
Conjoint Analysis
Range
HSG Internal
Range (De)
HSG Intern
Division(s)
Eprints ID
70415
5 results
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1 - 5 of 5
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PublicationWie ein Zauberwort : Einem Mythos gleich geistert die Bankability durch die Solarbranche. Dabei kann man sie aktiv nutzen, um Marktvorteile zu sichern(SunMedia Verlag, 2012-03-01)
;Olbert, SebastianAde, ValentinType: newspaper articleJournal: Erneuerbare EnergienVolume: 22Issue: 3 -
PublicationThe Myth of Bankability : Definition and Management in the Context of Photovoltaic Project Financing in Germany(goetzpartners & COLEXON, 2011)
;Lüdeke-Freund, Florian ;Flink, Christoph ;Olbert, SebastianAde, ValentinReport - Germany is the lead market for the global PV industry During the past years, Germany witnessed a remarkable boom in solar photovoltaic (PV) installations. Favorable regulatory frameworks as well as a maturing global PV industry, offering continuously lower prices, were just two of the main drivers leading to the industry's expansion. Though, an increasing inflow of capital was another necessary factor for this development. Monitoring the new capacity installations in Germany reveals a high confidence level of investors and financial institutions in the industry's financial opportunities, as the financial crisis and the following economic downturn did not lead to a significant slowdown in total PV installations. Although being a rooftop market mainly, Germany also accounts for the most ground-mounted megawatt installations globally with 1.4 GW of newly installed capacity in 2010. Bankability receives increased attention Nonetheless, the financial crisis has also left its mark. In 2008 and 2009 credit markets were mainly dried up, due to the collapse of some major financial institutions. Liquidity in the financial markets, at that time, had become a major issue for large-scale PV projects. As a consequence of the credit crunch, banks needed to recondition their lending criteria and the assessment process for project finance became stricter. Banks began to "cherry-pick" projects of outstanding quality and as a result the bankability of projects, project components and stakeholders received increasing attention.Type: work report -
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PublicationBankability - Definition | Bedeutung | Management( 2011-03-11)
;Lüdeke-Freund, Florian ;Olbert, Sebastian ;Flink, ChristophAde, ValentinType: presentation -
PublicationDeterminants of Credit Allocation for Photovoltaic Projects : Research Outline and Preliminary Findings from Conjoint Experiments with German Financing Experts(Centre for Sustainability Management, Leuphana University of Lüneburg, 2010)
;Lüdeke-Freund, FlorianType: working paper