Buying a solar plant: start with cash after debt service
Korea-based 2026 planning model, official sources checked 2026-10-19.
All results are before-tax scenarios using your inputs, not guaranteed investment returns or approval decisions.
This calculator reviews the price of an operating solar plant or a proposed commercial plant acquisition.
Dividing advertised revenue by the purchase price can hide operating costs, principal repayments and a lower price after the existing sales contract ends.
For retirement income, the cash available each year can matter as much as the long-term return.
The model connects initial equity to annual cash flows and reports equity IRR, NPV at your target return and a purchase-price ceiling under the same loan terms.
Its focus is full-output commercial electricity sales and acquisition pricing; rooftop self-consumption savings and agrivoltaic crop-income alternatives require their respective calculators.
It does not recommend listings, inspect equipment or establish permission to acquire or operate the plant.
Align the inputs to one plant and one cost basis
Purchase price and equity
Separate the plant purchase price from additional closing costs.
Include fees, due diligence and unrecoverable taxes only when they are outside the price.
If you assume an existing loan, reconcile whether quoted consideration includes the debt so that the total price and initial borrowing are consistent.
Actual generation and capacity
Choose the arithmetic average of three complete annual generation records or capacity multiplied by annual specific yield.
Do not enter a partial year as a full year or daily hours as annual hours.
Each annual record must not exceed capacity × 8,760, and historical degradation is not applied again to the three-year average.
Contract and REC entitlement
Check the remaining transferable months and the actual total settlement price in the contract.
A bid price can differ from the settlement price for the contract type.
Enter post-contract SMP, REC price, certified weight and the issuance/saleable share as separately documented assumptions.
Operation, debt and exit
Operation and maintenance, insurance and site rent are annual amounts.
Replacement occurs in the selected year; recovery and restoration occur at the analysis end.
The default term is 20 years, but a shorter equipment life or site-use term requires a shorter analysis.
Generation, REC units and the contract transition
First-year Q₀ = three-year average generation or capacity × annual specific yield
Year-t Qₜ = Q₀ × (1−annual degradation/100)^(t−1)
Market price = SMP + REC price × weight × saleable share/100 ÷ 1,000
Annual sales = Qₜ × (fixed share × total contract price + market share × market price)
SMP is entered in KRW/kWh and REC in KRW/REC, so the REC component is divided by 1,000 before addition.
For example, SMP of KRW 100/kWh, REC of KRW 100,000/REC, weight 1 and a 100% saleable share produce KRW 200/kWh.
The weight and share must reflect the plant certificate, grant-related allocation and contractual rights; the model does not guarantee REC revenue for all generation.
Never add REC again to the total fixed-contract price.
With 6 months remaining, half the first-year generation uses the fixed price and half uses the market assumption.
This months/12 allocation does not reproduce seasonal output or actual meter settlement dates.
Avoid deducting curtailment or outage losses twice if they are already in historical output; evaluate additional future loss through a lower-generation scenario.
Principal and terminal debt are investor cash outflows
Initial equity = purchase price + acquisition costs − loan principal
Operating NOI = sales − O&M − insurance − site rent
Equity cash = NOI − interest − principal − balloon − replacement + terminal net recovery
The loan uses fixed annual interest and annual equal-principal repayments.
Interest is calculated on the opening balance; scheduled principal is the original loan divided by its term.
If the analysis ends before the loan matures, all remaining principal is repaid in the final year.
For a fictional KRW 50,000,000 loan at 4% over five years analyzed for only two years, year two deducts KRW 10,000,000 scheduled principal plus a KRW 30,000,000 balloon.
Do not assume that refinancing or a sale will automatically cover a final-year shortfall.
Operating DSCR divides NOI before replacement/restoration by interest, scheduled principal and the balloon.
A value of 1× means arithmetic equality, not a bank approval threshold.
Because replacement and restoration are excluded from this DSCR numerator, review final equity cash as well.
Read IRR, target NPV and the price ceiling together
Equity IRR
IRR is the annual rate that sets the present value of initial equity and later equity cash to zero.
It includes principal repayments and differs from revenue divided by the purchase price.
More debt can increase equity sensitivity without making the investment safer.
Zero initial equity makes IRR inapplicable.
More than one cash-flow sign change can allow multiple roots, so a single IRR is withheld rather than selecting a convenient root; this does not assert that multiple roots necessarily exist.
NPV at the target return
NPV = −initial equity + Σ[annual equity cash ÷ (1+target return/100)^year].
Nonnegative NPV indicates a present-value surplus at the entered target discount rate; negative NPV misses that target.
The target reflects your chosen equity opportunity cost, not a prescribed or recommended return.
A unique negative IRR can be displayed, and NPV remains useful when an IRR root is absent.
Target-NPV purchase ceiling
Bisection finds the highest purchase price with nonnegative target NPV, keeping the absolute loan principal, acquisition costs and future cash flows fixed.
It does not preserve the debt-to-price ratio.
The displayed ceiling is rounded down to whole KRW; acquisition costs remain additional to that price.
An eligible whole-KRW price must still leave both purchase price and initial equity positive after rounding.
The model distinguishes a target missed even at a zero price, infeasibility under fixed debt and positive equity, and a ceiling beyond the KRW 1 trillion numerical support limit.
For non-conventional cash flows, this is an NPV condition rather than a guaranteed single-IRR threshold.
How to use the acquisition calculator
- Reconcile price and separate closing costs, then enter debt and your target return.
If you need living expenses, give particular attention to first-year and minimum annual cash.
- Enter three complete generation years.
For a new plant, use annual specific yield and identify it as an assumption rather than verified operating history.
- Read the sales contract for its total realized price and remaining months.
Confirm transferability and choose a separate conservative market price after expiry.
- Use the actual loan schedule and operating quotes for financing, insurance, rent, replacement and exit.
Shorten the analysis to the usable site and equipment term.
- Mark each of six evidence groups as unconfirmed, assumed or checked, with a reference date for checked records.
Unconfirmed records and missing checked dates withhold the results; changing a label does not remove economic uncertainty.
- Review sensitivity and annual cash flows, then save a TXT statement or print it.
Take the document checklist to the seller and lender and use the same-condition ceiling to support negotiation.
A fictional acquisition example
Assume a 100kW plant produces 100,000kWh annually and costs KRW 100,000,000.
The KRW 50,000,000 loan has 0% interest and five-year equal-principal repayments; annual O&M is KRW 2,000,000.
The fixed price is KRW 200/kWh for 12 remaining months; thereafter SMP of KRW 100 plus REC of KRW 100,000, weight 1 and a 100% saleable share also gives KRW 200/kWh.
Degradation, closing costs, insurance, rent, replacement, recovery and restoration are all zero; the term is 20 years and the target is 10%.
These are fictional inputs, not current market prices or offered financing terms.
Before-tax equity results for the fictional solar plant acquisition| Metric | Result | Meaning |
|---|
| Initial equity | KRW 50,000,000 | Price less initial borrowing |
| Annual cash, years 1–5 | KRW 8,000,000 | 20m sales − 2m operating cost − 10m principal |
| Annual cash, years 6–20 | KRW 18,000,000 | Debt repayment has finished |
| Equity IRR | 22.607564% | Rounded result, not guaranteed performance |
| NPV at 10% | KRW 65,336,279 | Includes initial equity outlay |
| Target-NPV price ceiling | KRW 165,336,279 | KRW 50m fixed loan; rounded down |
| Average annual cash | KRW 15,500,000 | Not the first-year withdrawal amount |
| Final cumulative cash | KRW 260,000,000 | 20-year nominal sum after initial equity |
| Minimum operating DSCR | 1.8× | Before replacement and restoration |
The example deliberately keeps the contract and market prices equal to isolate the effect of principal repayments.
Actual post-contract prices or rent may change; this is not a typical solar return benchmark.
Interpret price and generation sensitivity
The model compares post-contract market prices at −20%, base and +20%, and all-year generation at −10%, base and +10%.
A market-price change leaves the fixed-contract price unchanged, so market scenarios are identical when the contract covers the entire analysis term.
Generation changes affect the fixed-contract years too, with an upper cap of capacity × 8,760.
Each row changes one factor rather than combining lower prices and lower generation.
For a combined downside, change the underlying inputs and save a separate statement, including any replacement-year living-expense shortfall.
These stress widths are planning choices, not statistical confidence intervals or probabilities of future prices.
Practical acquisition decisions
Check a high advertised revenue yield
Add omitted operating costs and principal repayments to recalculate equity IRR and available cash.
For a new plant, preserve unverified generation and sales terms as assumptions; a favorable return cannot establish permits or grid availability.
Negotiate an operating-plant price
Compare three complete years and the remaining contract instead of relying only on an unusually strong recent year.
Include inverter life, lease expiry and restoration responsibility before comparing the ceiling to the offer.
A lower price alone cannot resolve all operating or legal risks.
Plan retirement withdrawals
Even an IRR above your target can coexist with negative cash in a repayment or replacement year.
Review first-year cash, the annual minimum and final debt settlement, then prepare a separate monthly liquidity plan.
Model limits and documents to prepare
- Cash occurs at year-end; O&M, insurance, rent and each price segment are constant.
Monthly irradiance, prorated settlement, inflation, grace periods, floating interest and prepayment fees require separate review.
- This is a before-tax model, without automatic income tax, corporate tax, acquisition-tax rates, VAT refunds or refund timing.
Use the same VAT basis for revenues and costs and budget unrecoverable taxes and cash timing separately.
- A published 20-year contract term does not restart on acquisition.
Check site rights, generation permits, business-transfer approval, sales-contract transfer, REC entitlement, grid terms and curtailment.
- Evidence statuses, dates and notes accompany saved inputs.
Retain assumptions as assumptions; do not replace an unconfirmed amount with zero merely to obtain results.
- Collect generation records, the sales contract, the actual repayment schedule and permit, site, replacement and restoration documents.
Calculations run in the browser; save/check action analytics exclude amounts, source notes and reference dates.
Frequently asked questions
Why is this different from revenue divided by price?
Equity IRR accounts for initial borrowing, interest and principal, operating costs, replacement, exit and their timing.
A revenue-only ratio omits those items and is a different measure.
Should REC be added to the fixed price?
No.
The contract input is the total realized settlement price including REC.
Confirm that any quoted bid price has been converted for the actual contract type before using it.
Why divide the REC price by 1,000?
REC uses a 1,000kWh reference and the entered price is KRW/REC.
Apply the weight and actual issuance/saleable share, then divide by 1,000 before adding to SMP in KRW/kWh.
Does acquisition restart the contract?
The model does not assume that.
Enter the transferable remaining months and separately confirm approvals, contract changes, REC rights and the usable site term.
Is a withheld or negative IRR an error?
The model distinguishes zero equity, no root, a root outside the supported range and non-conventional cash flows.
Multiple sign changes withhold a single IRR; a unique negative return is displayed as negative.
Does the price ceiling preserve the financing ratio?
No.
It keeps the absolute loan amount and closing costs fixed while testing target NPV.
Re-enter financing if it changes with the price; non-conventional cash flows do not support interpreting this as a guaranteed single-IRR threshold.
Does DSCR above 1× guarantee repayments?
It only indicates that operating NOI covers the modeled annual debt service.
It excludes replacement and restoration from the numerator and does not guarantee tax or monthly liquidity coverage, so review equity cash and reserves separately.
Does this establish tax or actual settlement amounts?
No.
It is a before-tax scenario.
Confirm transaction-specific taxes, VAT treatment, actual monthly repayments, contract transfer and REC issuance with the responsible institutions and qualified advisers.
Official sources and update basis
Rule year 2026; official sources checked 2026-10-19 through direct National Law Information OPEN API requests.
Renewable Energy Act Articles 12-5 and 12-7 use Law 21462, promulgated 2026-03-17 and effective 2026-09-18, MST284289.
Decree Article 18-7 uses Presidential Decree 36586, promulgated 2026-08-18 and effective 2026-09-18, MST288793, including grant-related REC allocation.
Electric Utility Act Articles 7 and 10 use Law 21467, promulgated 2026-03-17 and effective 2026-09-18, MST284383, as context for permits and business-transfer approval.
Korea Energy Agency contract/unit guidance and KPX statistics provide context; the calculator does not automatically establish current prices, certified weights or transfer eligibility.
Demand-weighted average SMP can differ from settlement at an individual plant.
Recheck legislation, REC issuance rules, actual generation, contracts, debt terms, site rights and restoration responsibility before transacting.
Save a separate statement whenever assumptions change so that negotiation effects remain traceable.
Review the ceiling using your plant inputs