Case Study — Apr 14, 2025
A Bank Works with a Well-Known Provider of U.S. Power Market Insights to Minimize Project Financing Risks
THE CLIENT:
A large bank providing financing to the U.S. power industry
USERS:
The project finance team
Power markets are dynamic, and the acceleration of the energy transition injects significant variability and uncertainty. Differing electricity prices due to diverse operating locations and models, market rules, climate change, and demand fluctuations increase price volatility and can affect the accuracy of power plant valuations. This makes it challenging for financial institutions that provide loans for power infrastructure development to identify potential weak spots and minimize risks.
The project finance team at this large bank is responsible for assessing many requests by developers for U.S. power plant financing and needs to fully understand potential plant profitability and any vulnerabilities. Given the long-term nature of these loans, this requires being aware of numerous issues, including supply and demand balances, plants in development, the number of projects in a region, renewable energy trades, pricing, regulations and alternative revenue sources.
Members of the team sought a reputable information provider that could offer deep insights into the dynamic power market, plus power curves that are bankable (i.e., suitable for securing investments) being highly respected and widely used throughout the industry. They also wanted an intuitive platform to easily track all the requisite pieces of information and prepare detailed financial analyses.
Pain Points
Members of the project finance team were struggling to keep up with the many requests from developers for financing U.S.-based plants given the amount of information that needed to be reviewed for each project. Not being power experts, they worried about doing extensive analysis in-house, which could generate inaccurate results. They wanted to find a respected information provider to assist with the analysis, while helping them save time and reduce costs. The provider would enable the team to:
- Quickly deliver reliable power valuations using a transparent and easily understood methodology.
- Undertake multiple forecasting scenarios and adjust the financial assumptions as needed to meet their requirements.
- Screen for power projects, portfolios and companies to understand market activity and peer group performance.
- Build and analyze potential new power plants and portfolios.
- Simulate a project or portfolio sale.
The team contacted S&P Global Market Intelligence ("Market Intelligence") to learn more about the firm's offerings.
The Solution
Market Intelligence specialists described Power Evaluator, a power plant valuation suite available on S&P Capital IQ Pro, a robust desktop solution. Power Evaluator integrates S&P Global’s best-in-class asset-level data, 40,000+ machine-learning-powered nodal forecasts and physical risk metrics to deliver reliable, lightning-fast power valuations that can be done simultaneously. Built with multiple power forecasting scenarios and adjustable financial assumptions, Power Evaluator would give the project finance team the ability to:
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Simulate mergers, acquisitions or divestitures of any plant or portfolio |
Power Plant Asset Finder lets users screen for any power plant across the U.S. and display and shade assets using 100+ metrics, from capture price to asset value to wildfire exposure. Users can then prepare a custom portfolio of assets for analysis, combining companies, fleets or individual assets. |
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Quickly perfom power plant valuations |
A valuation dashboard and workbenches let users compare plant valuations using multiple forecasting scenarios and 40,000+ machine-learning-powered nodal forecasts. The analysis can be customized with 30+ adjustable financial assumptions, and users can download pricing curves and a complete pro forma of their portfolio. They can also quantify the impact of physical risks on a portfolio or asset. |
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Assess the viability of projects |
The Asset Builder seamlessly integrates weather data, forecasting information and nodal pricing within a sophisticated tool tailored to deliver accurate projections of the future value of a project. |
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Understand forward prices of power markets and power plants |
Power price forecasts on S&P Capital IQ Pro enable clients to value assets with 20-year power-forward curves projecting electricity prices and renewable energy credit (REC) forecasts drilled down to the hourly level, supported with research insights. |
Key Benefits
Members of the project finance team realized that Power Evaluator would substantially improve the group's efficiencies, enable them to handle many more valuations simultaneously and increase their confidence level with the analyses. They knew they could rely on 30+ years of power price forecasting from S&P Global Market Intelligence, S&P Global Commodity Insights and IHS Markit and subscribed to the solution. They now can save many hours of work and:
- Quickly understand the fuels and technologies that are in demand and which projects are viable.
- Deploy diverse forecasting scenarios to gain valuable insights into the potential fluctuations of projects.
- Work with existing plants or hypothetical new builds.
- Use screening tools to identify similar transactions to help fine-tune valuations.
- Assess eight climate risk indicators: extreme heat, extreme cold, fluvial flood, drought, tropical cyclone, wildfire, water stress and coastal flooding.
Importantly, the S&P brand is well known, and the resulting power curves are bankable since they are highly respected and widely used throughout the industry.
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