Valuation in the renewable energy sector – key aspects and methods

Why is valuation in the RES sector so important?

High-quality valuations in the renewable energy sector are increasingly becoming a critical component for the successful implementation of investments. The complexity of RES projects – from a regulatory, legal, social, economic, and technological perspective – requires a comprehensive approach, with valuations of companies, projects, and intangible assets being an essential element.

How can valuation support the organization and planning of RES projects?

Valuations are necessary as early as the planning and analysis stage of the entire investment. They support, among others:

• securing financing (loans, bonds),
• developing financial models,
• assessing project profitability (e.g., photovoltaic farms),
• determining insurance coverage,
• receiving appropriate compensation from insurers in the event of damage.

Accurate valuations influence investment decisions and enhance credibility in the eyes of banks and investors.

When is a valuation of a RES company required?

The value of a RES business, its shares, or specific projects often needs to be determined in the context of:

• M&A transactions (mergers and acquisitions),
• corporate reorganizations,
• contributions in kind (e.g., organised parts of an enterprise),
• determining remuneration (e.g., exit fees).

Valuation of intangible assets in the RES sector

Key intangible assets in the RES industry include:
• technology and know-how,
• trademarks and licences,
• patents and intellectual property rights.

Valuing these assets enables the calculation of licence fees, royalty rates, and helps assess the project’s competitive advantage and innovation potential.

Commonly used valuation methods in the RES sector

Depending on the objective, project characteristics, and data availability, different valuation methods may be applied:

Income-based methods

• DCF (Discounted Cash Flow),
• Discounted profits or dividends,
• Relief from royalty method.

Asset-based methods

• Net asset value,
• Adjusted net asset value (ANAV),
• Cost, replacement, or liquidation value methods.

Market-based methods

• Multiples,
• Key financial ratios.

Valuation as a tool for RES investors and owners

Valuations provide critical insights for RES asset owners or potential investors, enabling them to assess whether a particular transaction is worthwhile. A high-quality valuation ensures not only methodological accuracy but also a comprehensive approach that reflects the unique factors and risks of the renewable energy sector.

Looking for a professional valuation in the RES sector? Get in touch with our team of experts to learn how we can support your project! >> https://www.mddp.pl/valuations-and-financial-modelling/.