Global Business News

Solid Financial Plans are Required for Big Windfalls

3 min read

The same groups that work to finance and promote new gas plants in New England will also be making big windfall profits from big wind farms, if New Hampshire’s proposed wind-turbine project becomes a reality.

The Wall Street Journal recently reported that the stock performance of the wind-turbine industry has significantly outperformed the broader market.

The wind business offers big profits, and big risks: Even if wind is a better product to sell than conventional gas-fired generation, wind power is still a risky business for investors. Wind power can be the poster child for falling power prices.

Economic profits from big wind-farm projects will come from many variables, including that the wind business is a relatively inexpensive way to manufacture big chunks of materials.

Financial risks to investors should also be addressed in big wind-farm proposals.

For example, in a financial disclosure form filed with the Securities and Exchange Commission, First Wind reported, in 2015, nearly $75 million in loan losses to investors. That amounts to about 25 percent of First Wind’s investment in the project.

The losses were due to nearly $90 million in loans for a different wind project called Pine Ridge Energy. Pine Ridge eventually was halted by the state.

The losses highlight the complicated financial risks to investors for big wind projects. Investors may be in for big payouts if big wind-power projects start generating profit quickly, and investors are in the middle of a bubble that enables them to make financial gains while their investments are still in the ground.

Clearly, investors should be properly invested in solid financial plans that plan for those kinds of big payoffs and big risks.

For instance, solid financial plans will include tax benefits.

A wind farm may have lots of federal and state tax breaks. Wind-energy advocates, in their desire to promote wind energy, will be advocating for federal and state tax breaks.

Those tax breaks will be valuable to investors in wind-energy projects, and investors should receive them.

How financial plans will pay for big wind farm projects remains a mystery.

I’m not aware of a company in the wind business today that offers financial plans for wind-energy projects. That’s not a surprise to those who have paid attention to the financial history of the wind-power industry.

The short-term financial plans offered for wind projects often include large write-offs. They may also include one-time wind-power plant financing charges that may be temporary.

In the long-run, however, investors want a solid financial plan that covers important factors, like how big wind turbines should be, whether they can scale in size and how much power generation capacity investors should see at the end of each phase of a project.

Also, investors need to examine what financial metrics should be used to evaluate the financial performance of the wind-energy projects.

It’s ultimately about looking at the bigger picture. For instance, when investors are looking to get into the gambling industry a real money online casino Canada would play host to makes for a great choice right not, because of various market and operational factors.

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