Learning from the pros: Financial modeling workshop

IESE constantly strives to enhance students’ education by connecting them with professionals. This weekend we had the amazing opportunity to attend a financial modeling workshop given by Jaime Linares, from the Structured Finance and M&A team at Fotowatio Renewable Ventures. The session was a great opportunity for students to learn about the fundamentals of the electricity system in Spain, get up to date with current market trends, and introduce students to the basics of project finance modeling.

It was a pleasure to listen to active professionals in the sector discuss the current energy capacity and generation mix of Spain, its evolution with the rise of renewables, and how these developments have affected the price formation mechanism of the wholesale electricity market. During the session, we learned about how different technologies make their economic offers in the market given the use of marginal cost pricing, and how such pricing regulation translates into lower average prices as renewables increase their presence in the generation mix. 

Founded in Madrid in 2006, FPV has solar entered solar markets in Australia, the Middle East, India, Africa, USA and Latin America
Founded in Spain in 2006, FPV has now entered emerging solar markets in Australia, the Middle East, India, Africa, USA and Latin America

These discussion points gave us a deeper understanding of the economic environment of electricity generation in the current pool system, and we learned how renewables require additional revenue stability to foster their development. Touching on the future of the sector, we also reviewed our renewable energy targets and talked about policy measures, such as the renewable energy auctions taking place this week in Spain, that are aimed to provide the required stability to reach such targets.

Following these insights, Jaime then gave us an update on how renewable’s technology costs have been evolving with time. He explained what the main investment (€/MW), operational (equivalent working hours) and financial (leverage and DSCR) figures are that renewable investors can obtain in the market today. It is interesting to cross check the resulting leveled costs of electricity that such numbers yield, with the prices that will result from this week’s national auctions in order to see how quickly renewables are increasing their cost efficiency.

To learn more about the company Fotowatio Renewables Ventures (FRV), visit their website.

Finally, the session ended with a workshop focused on building professional project finance models for renewable energy projects. Jaime took us through the fundamentals of project finance such as stability of revenues and non-recourse debt. We even had the opportunity to see how Jaime himself structures the different parts of a valuation model (giving us a guide so that we could later do it ourselves step by step). It was delightful to finish the valuation and close the circle using all the inputs that we had previously discussed in the first part of the session.

The genuine interest, good questions, and high level of IESE student participation made the session very interactive and successful. We love these initiatives from our IESE energy club and we cannot wait until the next one!

For more exciting insights on IESE Energy Club’s initiatives and events, see our other blog posts.