Due Diligence - Are Wind Farms a good investment?

There is a much public goodwill towards green energy these days.

Investors could be attracted if they believe they can save money on energy bills and do their bit for the climate at the same time. 

Here's an example of financial projections from  a recent prospectus inviting people to invest with the Welsh government in a community-owned windfarm.

But are all windfarms a good investment? And how can you tell?

First you can ask questions about the internal consistency of the numbers.

The tables below show returns to shareholders  over the 25 year lifetime of the project.

The first shows cashflows projected for individual investors and their overall return on investment of 6%

The second shows returns on investment assuming the windfarm was financed entirely by shareholders.

The third shows cashflows for the specific case of Grain Fatha where there is a bank loan and a government grant in place.

Payments to these sources of external finance reduce overall returns to shareholders.