Wind farm business plan and bank loan: method and financial model

The business plan of a wind farm follows the same logic as a solar business plan, with specifics of its own: more variable generation, a higher capacity factor, and a decommissioning provision not to be forgotten. Here is the method.

1. Generation: power curve and wind

Generation comes from crossing the turbines' power curve with the site wind data (speeds, distribution). From this you derive a yield in P50/P90, after losses (wake effect between machines, technical availability, electrical losses). The wind capacity factor (often 25 to 40% onshore) is higher than solar.

2. Revenue: contracted then market

Onshore wind is often supported by a contract for difference / feed-in premium (awarded through tenders), then switches to market sale at end of contract. As with solar, the model must handle the contract-to-merchant transition and indexation.

3. CAPEX, OPEX and decommissioning

• CAPEX: turbines, foundations, grid connection, civil works, development.
• OPEX: maintenance contract (often high in wind), insurance, leases, royalties, and WindIFER (the French IFER tax on onshore turbines, an annual lump sum per MW) — omitting it overstates the IRR.
• Decommissioning: regulatory provision to restore the site, included at end of life.

4. The loan: how a bank finances a wind farm

A wind farm is funded through project finance: the lender does not rely on the developer's balance sheet but on the ability of the farm to repay on its own, out of its own cash flows. That is what separates a wind project loan from an ordinary corporate credit — and what explains the thickness of the package requested.

How much will the bank lend?

Two constraints apply, and the lower one wins:

• Gearing: commonly 70 to 85% of total cost, the balance coming from equity and shareholder loans.
• DSCR sizing: the amount that the cash available for debt service can support while holding a target cover every year — often around 1.15 to 1.20 during the contract, and more on the merchant tail, where price is no longer guaranteed.

In wind, because the gap between P50 and P90 is wider than in solar (see §6), it is very often the DSCR computed on P90 yield that sets the final amount, not the gearing cap.

Tenor, rate, repayment profile

Maturity sits around 15 to 18 years, with an implicit rule: it stays short of the end of the power sale contract plus a safety margin (the tail). The rate is usually fixed through a swap, so debt service does not depend on markets. As for the repayment profile, it is rarely straight-line: it is sculpted to the cash-flow shape, so that cover stays constant instead of following the ups and downs of generation.

What the lender requires beyond the loan itself

• Security: pledge over the project company's shares, assignment of receivables, direct agreements over contracts and insurance.
• Debt service reserve account (DSRA), funded with one to two instalments ahead.
• Distribution lock-up while a ratio is breached, and often a mandatory prepayment clause sweeping part of excess cash into principal repayment.
• Decommissioning provision in place, plus construction and performance guarantees.

Bank debt or crowdfunding?

Both come up in the same breath, yet they fund different things. Senior bank debt funds construction and operation: tens of millions of euros, over 15 to 18 years, secured on the assets, and repaid before any distribution to shareholders. Crowdfunding carries far smaller tickets — a few hundred thousand euros, over 3 to 7 years, often as bonds at developer level — and mainly covers the development phase, tops up equity and anchors local acceptance of the project. In the cash waterfall it is repaid after senior debt service. A credible funding plan therefore has both, each on its own floor.

What you conclude from it

Once the loan is sized, you compute the IRR (project and equity), the NPV, the DSCR and the LCOE to judge returns and bankability at once. These two questions are not the same: a project can be attractive to its shareholder and refused by the bank, or comfortably financed while paying equity poorly.

5. From farm to portfolio

A wind developer often runs several farms: consolidation (holding/SPV, corporate debt, sell-downs) and the NAV valuation of the portfolio then become central — exactly what the method of the renewable financial business plan covers.

6. Measuring the wind: uncertainty at the core

Unlike solar, whose irradiation is well mapped, wind generation depends on a local, turbulent resource. Hence the importance of a measurement campaign (mast or LiDAR) on site, sometimes over several years, correlated with long-term data. The business plan must show the yield uncertainty: the gap between P50 and P90 is generally wider than in solar, which directly affects the amount of debt a bank will accept.

7. Risks specific to wind

• Acceptability and appeals: litigation can delay commissioning — a schedule risk to model.
• Wind variability: a poor wind year reduces revenue; the P90 and DSCR must absorb this risk.
• Heavy maintenance: wind OPEX (large components, access) is proportionally higher than in PV.
• Repowering: at end of life, replacing machines with more powerful ones can extend the site's value — an option to value separately.

To estimate returns quickly (adapting yield and CAPEX to the wind profile), you can start from the ROI calculator.

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