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Strategies & Market Trends : Wind Power

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To: sageyrain who wrote (161)	5/1/2007 6:53:40 PM
From: Sam Citron	Read Replies (1) of 230

The basic reason I am looking at returns of greater that 10-12% is from my understanding that when they build a windfarm, they contract all of the electricity output for a period of about 20 years (15-25 yrs anyway) at a certain rate that guarantees them a 10-12% cash on cash return. However FPL retains all green credits and at the end of the term owns a fully depreciated asset that could go on generating lots of electricity for a very long time with very low variable cost. (mainly I guess renewed lease on the land and maintenance expenses, but the profitability should be much greater from their next round of contracts). While much depends on the price of electricity in the future and inflation, I would guess the true IRR is closer to 18%. As far as guessing when diminishing marginal returns from inferior sites set in, it's a big world out there, and it includes many offshore areas. Sam

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