Energy project finance reference. This educational resource covers project investment and financing concepts. It is separate from Jaken Energy’s commercial electricity and natural gas procurement service; it is not a financing offer or a promise of funding.
Merchant power financing and capture-price risk
A merchant generating asset sells output with exposure to market prices instead of relying solely on a fixed long-term contract. Realized revenue depends on when and where it produces. An annual market-average price can misstate the value of a solar or wind profile.
What to evaluate
Use hourly or interval production and location-specific prices. Stress congestion, negative prices, curtailment, capture-rate changes and outages. Distinguish a forecast from a contracted minimum. The financial model should state how much output is hedged, which index settles the hedge and whether volume differences remain exposed.
Build a defensible comparison
Assess collateral calls and hedge termination as well as expected receipts. A project can experience liquidity pressure even when its long-term forecast appears profitable. Lenders and investors set terms based on actual downside risk, sponsor resources and enforceable contracts, not a universal leverage or interest-rate range.
Documents and questions to prepare
- Location and generation-weighted price assumptions
- Hedge volume, basis and collateral
- Operating costs and downside cash flow
- Liquidity and covenant stress tests
For commercial property owners
Start with the property’s actual accounts, lease responsibilities and plans for ownership or sale. Keep commodity procurement, building improvements and project investment as separate decisions. Include the costs you retain and the savings you retain after tenant reimbursement. An improvement that lowers a tenant-paid expense may benefit tenants without producing the same increase in owner income.
Prepare a base case and a downside case using dated evidence for costs, revenue and funding. Any financing rate, tax benefit or return is a project assumption until supported by current documents. Legal, tax, engineering and lender review should follow the actual transaction.
For the existing property’s supply-cost decision, use the contract-cost calculator or request a property energy review.
Primary sources
Reviewed October 12, 2026. Program rules, tariffs and financing terms should be checked again before a transaction.