Practice Test Geeks(REP) Certified Renewable Energy Professional Practice Test
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Project Finance and Economics Flashcards

7 cards from real REP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Project Finance and Economics flashcards as text

  1. What is the primary function of a 'P50' energy production estimate in renewable project finance?

    Answer: The production level with a 50% probability of being exceeded, used as the base-case revenue forecast

    P50 represents the median (50th percentile) energy production forecast; lenders often size debt to P90 output (exceeded 90% of the time) for conservative coverage.

  2. Which of the following is a key advantage of using a sale-leaseback structure in renewable energy project finance?

    Answer: It allows the developer to receive upfront capital while retaining operational control through the lease

    In a sale-leaseback, the developer sells the project to a tax equity investor or lessor and leases it back, immediately monetizing the asset while continuing to operate it.

  3. What does 'sensitivity analysis' reveal in a renewable energy project financial model?

    Answer: How changes in key input variables (e.g., energy price, capacity factor) affect project returns and debt coverage

    Sensitivity analysis systematically varies one or more assumptions to show how project metrics (IRR, DSCR, NPV) respond to adverse or favorable changes in inputs.

  4. In the context of renewable energy project finance, what is 'interest rate risk' and how is it typically managed?

    Answer: The risk that floating interest rates will rise, increasing debt service costs; typically managed with interest rate swaps or fixed-rate debt

    Projects with variable-rate construction or term loans use interest rate swaps (pay-fixed, receive-floating) to convert floating exposure to a predictable fixed obligation.

  5. A project sponsor contributes $20M in equity to a $100M wind farm. What is the project's debt-to-equity ratio?

    Answer: 4:1

    Debt = $100M − $20M = $80M; debt-to-equity = $80M ÷ $20M = 4:1, indicating significant financial leverage.

  6. What is the role of an 'independent engineer' (IE) in renewable energy project finance?

    Answer: To provide third-party technical verification of energy yield estimates, construction plans, and contractor capabilities for lenders

    Lenders hire an IE to independently validate the technical assumptions (resource assessments, equipment specs, contractor track record) underpinning the financial projections.

  7. Which of the following best describes 'curtailment risk' and its financial impact on a renewable energy project?

    Answer: The risk that grid operators will instruct the project to reduce or stop output, resulting in lost revenue

    Curtailment occurs when the grid cannot absorb available renewable generation; the project loses energy sales it cannot recover, directly reducing cash flow and debt coverage.