Power & Infrastructure · Renewables & IPPs
Renewables & IPPs Sector Primer
A 45-page primer plus Excel valuation model on renewables and independent power producer equity analysis: PPAs, spark spreads, CAFD and EV/EBITDA by archetype.
2026 Edition · data as of July 2026
- pages
- 45
- sections
- 15
- model sheets
- 10
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The full primer
£25 / ~$32
- 45 pages, 15 sections
- Worked examples and applied cases
- 2026 Edition, data as of July 2026
Excel model
Valuation template
£45 / ~$58
- 10 sheets (.xlsx)
- Runs the primer's worked valuations live
PDF + Excel model Best value
Both files together
£59 / ~$76
- The 45-page primer
- The 10-sheet Excel model
- £70 bought separately · £11 less
Complete Power & Infrastructure Library
All three Power & Infrastructure industries: three primers, three Excel models (Regulated Utilities, Renewables & IPPs, and Transport Infrastructure).
Inside the primer
The 15-section contents, a worked valuation page, and the Excel dashboard.
Contents
- 01 How Generators Make Money
- 02 Listed Generator Types
- 03 The Development and Operating Ladder
- 04 Segments and Sub-Markets
- 05 Revenue Drivers: Generic Revenue Build
- 06 Cost Structure: EBITDA, CAFD and Spark Spread
- 07 Valuation Frameworks
- 08 Worked Example: Multi-Period DCF Valuation
- 09 Applied Cases: Contracted Yieldcos
- 10 Applied Cases: Merchant and Integrated
- 11 Applied Cases: Nuclear, Pipelines and Developers
- 12 The Companies in This Primer
- 13 Key Metrics and Screening
- 14 Risks, Benchmarks and Case Study
- 15 Glossary and Cheat Sheet
Worked examples and applied cases · 45 pages · 15 sections · 2 worked archetypes
The Excel model
Educational material. This primer and its model are not investment advice or a recommendation to buy or sell any security, and they are not personalised. Worked valuations use illustrative calibrations, not fair-value estimates for any company.
A generator's value depends less on how many megawatts it owns than on who has agreed to buy the output and for how long. Power sold under a long-term contract is an annuity; power sold into the wholesale market is a bet on the spread between fuel and electricity prices. The same fleet can carry both, so the first job is to split the cash flow by contract before any multiple is applied.
Renewables and IPP valuation benchmarks by contract profile
Contract profile sets the multiple before technology or fleet size does. These are the primer's reading bands for enterprise value to adjusted EBITDA, with the payout and pipeline marks that sit beside them.
| Profile | Primary lens | Typical range | What sets the position |
|---|---|---|---|
| Contracted renewables or yieldco | EV/EBITDA; CAFD payout | 11-15x EV/EBITDA; payout 80-95% when the sponsor funds growth | Contract life left, leverage, pipeline carried inside EV |
| Integrated retail and merchant | EV/adjusted EBITDA | Often above the 6-9x gas anchor | Retail hedges and baseload mix |
| Merchant gas generator | EV/adjusted EBITDA with hub-price sensitivity | 6-9x | Hub power and gas prices, capacity auction clears |
| Nuclear baseload | Operating earnings; contract margin | No EBITDA band where no adjusted EBITDA is reported | Share of clean output under contract |
| Advanced-stage pipeline | Value per MW | $1.0-1.5M per MW | Drop-down timing; never an operating multiple |
Against a merchant peer at similar leverage, the contracted premium runs +3-5 turns, narrower than the 5.5-turn gap between the band midpoints. Part of any headline premium is pipeline, since a yieldco's enterprise value often carries megawatts that earn no EBITDA yet. Read leverage beside the contract profile: net debt below 5x EBITDA is conservative, and above 7x usually signals recontracting or dividend risk. The primer's DCF discounts contracted cash flows at 6.5% and merchant cash flows at 8.5%.
Worked example: a renewables DCF valuation of a yieldco
Take a hypothetical yieldco with 2.0 GW of wind and solar at a blended 29% capacity factor, output degrading 0.5% a year. It sells power at $80/MWh under contracts with 13 years to run on a 25-year asset life. After that, output earns 85% of a $50/MWh wholesale price. Contracted years are discounted at 6.5%, the merchant tail at 8.5%.
| Step | Amount |
|---|---|
| Year-1 generation (2.0 GW × 29% × 8,760 hours) | 5,081 GWh |
| Year-1 EBITDA at $80/MWh, less $73.2M of fixed opex | $333.3M |
| Year-1 after-tax FCF (85% of EBITDA, less $30M sustaining capex) | $253.3M |
| PV of contract years 1-13 at 6.5% | $2,103M |
| PV of merchant tail, years 14-25 at 8.5% | $246M |
| Plus advanced pipeline (500 MW at $1.25M per MW) | +$625M |
| DCF enterprise value | $2,974M |
| Less net debt | -$1,650M |
| Equity value | $1,324M |
| Per share (200M shares) | $6.62 |
Year 13 still earns $80/MWh. In year 14 the price falls 47% to $42.50, but EBITDA falls 58%, from $309.6 million to $129.1 million, because the opex does not fall with it. The DCF prices that cliff and implies only 8.9x year-1 EBITDA. A flat 13x on the same EBITDA and balance sheet gives equity of $2,683 million, $1,359 million more, partly because it capitalises year one as if the contracts never expire.
The primer shows the 25-year schedule, runs the same DCF on a merchant gas plant to measure the contracted premium, and grids value per share across contract price and discount rate. The Excel model does the same with your own fleet.
Which renewables and IPP valuation method fits which company
| Company type | Primary method | Check with | Why |
|---|---|---|---|
| Contracted yieldco | CAFD payout; contracted EV/EBITDA | Net debt/EBITDA; contract life left | Distributions are the equity story |
| Merchant or integrated generator | Adjusted EBITDA with hub-price sensitivity | Free cash flow before growth; retail hedge disclosure | Earnings move with power and gas prices |
| Nuclear baseload | Operating earnings; contract margin | Share of clean output under contract | Some report no adjusted EBITDA to put a multiple on |
| Global developer | Backlog GW; parent free cash flow | Net debt/EBITDA | Growth and credit bind first |
What the full primer adds
The primer builds the tools in order: how generators make money, the listed company types, the development and operating ladder, then the revenue build from capacity, utilisation and price and the cost side with EBITDA, cash available for distribution and the spark spread. Two worked examples, a contracted yieldco and a merchant combined-cycle plant, run a multi-period DCF from first input to value per share. Applied cases follow on Constellation Energy, Vistra, NRG Energy, Brookfield Renewable, Clearway Energy and AES. Screening closes with contracted share, the CAFD payout, leverage and EV/EBITDA read by archetype.
Free guides on the site cover the individual pieces, so you can revise one idea without reopening the PDF: PPA vs merchant generation, spark spreads, capacity factors by technology, generation capacity and mix by company, yieldco CAFD, CAFD vs free cash flow and the contracted premium. Research profiles for Constellation, Vistra, NRG, Brookfield Renewable, Clearway and AES run the same screens on filed results. The companion Excel model spans ten sheets, from a contracted-yieldco tab and a merchant-plant tab through the contracted-premium and CAFD screens to a live sensitivity grid, so swapping in your own generator rebuilds the valuation from its contract profile up.
Sheets: Quick Start, Instructions, Assumptions, Contracted Yieldco, Merchant CCGT, Valuation Summary, Contracted Premium, CAFD & Payout, Sensitivity, Dashboard.
Renewables and IPP valuation: free guides
Renewables and IPP valuation FAQ
- How do you value a renewable energy company or IPP?
- Split the cash flow by contract before applying any multiple. Contracted output is valued on a DCF at a low rate for the contract term and a higher merchant rate after it, and a yieldco is then read on cash available for distribution (CAFD) and its payout. A merchant generator is valued on adjusted EBITDA built from the spark spread, the power price less the fuel cost per MWh. EV/EBITDA bands act as the cross-check: 11-15x for contracted renewables, 6-9x for merchant gas.
- What EV/EBITDA multiple do yieldcos trade on?
- The primer's reading band for contracted renewables and yieldcos is 11-15x adjusted EBITDA, against 6-9x for merchant gas. At similar leverage the contracted premium runs +3-5 turns. Strip out the development pipeline before reading a premium as contract quality: in the worked example $625M of pipeline, 21% of enterprise value, earns no EBITDA and accounts for most of the headline premium.
- What is a sustainable CAFD payout ratio?
- The primer screens 80-95% of CAFD as sustainable when the sponsor funds growth. Above 95%, a yieldco has no room to absorb a late project without sponsor drop-downs. The screen applies to yieldcos only: merchant corporations report free cash flow before growth, which is retained for growth capex and is not a distribution metric.
- What discount rate is used in a renewables DCF?
- The primer's worked example discounts contracted cash flows at 6.5% and steps to 8.5% once the power purchase agreement expires; its merchant gas plant is discounted at 8.5% throughout. The step matters because expiry does two things at once. The price falls to the merchant level and the risk rises, while fixed operating costs stay where they were.
- Why do contracted renewables trade at a premium to merchant generators?
- Contracted cash flows move less when wholesale prices fall, so the market pays more per dollar of EBITDA. The premium lasts only as long as the contracts do. When an agreement expires the same megawatts reprice at hub levels, which is why remaining contract life belongs beside any yieldco multiple.
See this methodology applied to a real company:
Brookfield Renewable (BEP) →