Project Finance Models of Thermal Electricity Power Plants

This web page includes selected examples of project finance models for thermal plants and nuclear plants.  Particular issues that arise in thermal power plant project finance models include timing of major overhauls, modelling different contracts and the connection between the PPA and other contracts and assessing liquidated damages.  Other issues include standard financing issues with circular references and sculpting. Modelling details of when scheduled outages occur with different capacity factors is a continuing problem and I have tried to provide different examples in the selected examples below.  On this page I also include implementing a print macro and the general notion of using a model to evaluate the bidding process. Models also include evaluation of selected contract provisions including the variance between expected and actual heat rates.

Modelling the Timing of Major and Minor Maintenance Overhauls

Some of the models below demonstrate how to incorporate scheduled maintenance after running a given number of hours (e.g. 40,000 hours) and then has maintenance that lasts a certain amount of time. For a nuclear plant you may have the number of days between an outage and you may want to evaluate how to incorporate outages with different lengths and different outage lengths.  For a nuclear plant you can start by defining cycles of outage that depend on the number of days between a cycle and the number of outage days for re-fueling. The analysis of outages depends in large part on being careful with dates. In the screenshot below, the timing between maintenance and the number of days of maintenance is taken from an input sheet with alternative scenarios.  A sub-total date is computed from the total days of outage and a final date is computed from the total days including the outage date. Once the planned outage is computed, the unplanned outage is derived from the input capacity factor.



IPP Model with Target and Actual Parameters

Thermal plants with PPA agreements in large part involve setting up a model that compares commitments made for the capacity charge, the contract heat rate, the availability and the start date at the commitment date (the financial close or the engagement date). These commitments are compared to the actual performance of the plant. The first model available below named IPP model includes maintenance outages, degradation of heat rates and most importantly inclusion of variables that reflect risks of actual parameters being different from variables that were agreed to at the financial close of a project.

Project Finance Model with Commitments and Target Variances and Resolution of Circular References with UDF


The video below describes features of the model and the general idea of setting targets in a PPA agreement.  It is a bit long and has some swearing but you can also see how to use the model for bidding.  Note that the goal seek that is in the title is only possible because the circular references are resolved with a UDF. To see how this works and how to implement in your models, you can go to the circular reference section.




A set of power point slides that works through the various contract issues with details from actual contracts is available for download below. These slides explain mathematical equations that you often see in the contracts and the economic principles behind how to set incentives and penalties in contracts.

Power Point Slides that Review Various General Risk Techniques in Project Finance (e.g. Risk Matrix)


A related example of a thermal project finance model is demonstrated in the model you can download below. This is a case where back-to-back contracts are modelled in a detailed manner.  For example the contract heat rate is partially covered by and O&M contract and so forth.


Project Finance Model Example with Modelling of Back to Back Contracts and Exposure and Back-up

Natural Gas Development with Technical Parameters, Outages and Print Macro

The second model is a model of a natural gas plant development.  It includes options for different technical parameters and the print macro that contains a user form that you can use for different options. This second model of a combined cycle plant with different technical options is available for download by pressing the button below.


Project Finance Model of Natural Gas Combined Cycle Plant with Technical Details and Print Macro


Combined Cycle Model with Merchant Tail

The model available for download below includes operating characteristics of a combined cycle and analysis of merchant spark spreads.  The analysis includes review of historic merchant margins and maintenance outages.

Project Finance Model of Natural Gas Combined Cycle Plant with Merchant Prices including Historic Analysis


It has (I think) a flexible detailed print macro that you can apply to your models. I suggest looking at the print model and then the associated video that describes how to implement the macro. The third file below includes demonstrates how to evaluate a classic IPP project with risks associated with incentive elements of a PPA tariff. The file show aspects of a four part PPA tariff with risks, debt sizing and functions for resolving circularity. Risks are associated with availability, heat rate variation, O&M expenses and other factors. In addition to solving circular references with functions, the file also includes methods to present sensitivity and scenario analysis. These files are documented in videos that are listed at the bottom of the page.




Modelling of a Coal Plant with Copy and Paste Rather than UDF’s for Resolving Circular References

The last file in the set below demonstrates the modelling of a coal project without functions for circular references. It uses a case study in the label that resulted in very high returns to U.S. investors who really did not take risk.