valuation of renewable energy installations
DESCRIPTION
Valuation of Renewable Energy Installations at RICS Rural Land Conference, RAC Cirencester, 14 June 2011TRANSCRIPT
Valuation Renewable Energy Installations
RICS Practice Standards, UK
Draft Guidance Note
Charles Cowap MBA MRICS FAAV MRAC
RICS Rural Land Conference
Royal Agricultural College
14 June 2011
What?
• RICS Guidance Note• Part of the Red Book suite• Guidance on the valuation of
Renewable Energy Installations:– Wholesale– Own Use– Domestic– Electricity– Heat
Scope
• Landlord’s Interest• Owner-operator’s interest• Separately identified asset• As part of a larger asset, eg
rural estate or farm
Adapting Valuation Principles and Methods
• Direct Comparison and the problems of unique differences
• Some use for wind turbines?
Investment Method
• Assessment of Rent Levels• Reversionary Aspects• Layered Rents• Choice of All Risk Yield(s?)• Choice of capitalisation
period• A role for sensitivity analysis?
Layered Rents
Term
Profits Method
• Identify a separate rental income stream for separate capitalisation?
• Arms’ length?
• Veracity of estimated or stated profits
Depreciated Replacement Cost
• Extreme caution!!
• Depreciation rates?
• Relationship to market or other basis of value?
Residual Method
• All the previous problems …
• Plus Developer’s Profit
• Uncertainties over planning, grid connections etc
DCF Methods
• In practice widely undertaken for larger developments
• Market Value??
• Appraisal of worth to investor
• Would the market make same assumptions?
BACK TO BASICS
• Purpose of Valuation
• Scope of investigations to be undertaken
• Assumptions and Special Assumptions
• Preliminary Information
• Capacity and assumed duration
• After uses, continuation, redevelopment
• Reporting Requirements
REPORTING
• Rationale for chosen method(s)
• Detailed consideration of instructions, assumptions, sources and reliability, extent of independent verification
• Sensitivity
• Commentary on Risk?
Some Common Issues
• Development Proposals for new Sites
• Hope Value
• Operator Risk
• Complex lease or agreement terms
• Performance data
Some Common Issues
• Reporting Requirements
• Detailed instructions
• Market evidence
WIDER VALUATION ISSUES .....
• Worth and Value in Use v Market Value and Value in Exchange v Fair Value
• Valuation and other appraisal methods
Find out more …..www.rics.org
Charles Cowap:
http://charlescowap.wordpress.com
@charlescowap
Slides:http://www.slideshare.net/cdcowap