About the 25-Year Cashflow
A solar cashflow projection builds a year-by-year financial model of a plant's revenues (savings or PPA income), operating expenses, debt service, and taxes — showing the free cashflow available to equity holders in each year and the cumulative return profile over the project's life.
How to calculate it
- 1Project gross energy yield: Year-1 generation × (1 − 0.5%)ᵗ for each year t.
- 2Value generation at retail tariff (rooftop) or PPA rate (utility/C&I), applying contractual escalation.
- 3Deduct annual O&M (typically 1–2% of capex/year, escalating at CPI).
- 4Deduct depreciation (for book purposes) and interest expense to compute PBT; apply tax rate for PAT.
- 5Add back non-cash items (depreciation) to compute operating cashflow; subtract debt principal for free cashflow to equity.
- 6Discount all free cashflows at the equity hurdle rate to derive equity NPV and IRR.
Worked example
A 100 kW rooftop system: capex ₹55 L, 70% debt at 9%, 30% equity ₹16.5 L. Year-1 generation 1.45 L kWh at ₹8/kWh = ₹11.6 L revenue, minus ₹55K O&M, minus ₹3.47 L interest, minus depreciation → tax on EBIT. After-tax operating cashflow ≈ ₹7.8 L; debt service (EMI) ≈ ₹5.7 L → equity FCF Year 1 ≈ ₹2.1 L on ₹16.5 L equity = 12.7% equity yield in Year 1, rising annually.
What you can calculate
- Year-by-year
- Debt service
- Free cashflow
- IRR & NPV
Frequently asked questions
What is the typical cashflow pattern for a rooftop solar plant?
Year 0: large negative cashflow (capex). Years 1–25: steady positive cashflows from savings, rising with tariff escalation and falling slightly with panel degradation. The crossover (cumulative cashflow turns positive) happens at the simple payback point — typically 3–7 years for Indian rooftop systems.
How does debt financing change the cashflow profile?
Debt reduces the upfront equity outlay but adds EMI obligations in the early years. In the first few years, EMI may exceed savings (cashflow negative for equity). Once the loan is repaid, equity cashflows jump sharply. IRR on equity typically rises with leverage up to the point where debt service risk increases.
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