Wind P99, P90, P50 for 1-year and 10-year and Debt Sizing

This page explains how to evaluate probabilities of different wind production before the project reaches financial close.  The tricky part of all of this is to understand the sources of variation that are mean reverting and the sources of variation that are related to modelling errors that do not self-correct. The page also describes how to size debt with alternative parameters.

Debt Sizing with P50 and P99 etc.

It has become standard in the industry to apply different debt service coverage ratios to different wind production cases. A typical scenario is that a 1.35x coverage ratio is applied to the P50 case while either a 1.2x coverage is applied to a P90 ten-year case or a 1.0x coverage is applied to the P99 one year case. The modelling issues can be a little difficult as the debt may be sized on one scenario but the equity IRR is computed from a different scenario. The exercise below applies these concepts.

 

Computing P50 from Historic Wind Data and Power Curves

 

Wind Production Analysis