Valuation of a partially constructed Solar PV Module Plant
Introduction
We have been assigned to evaluate a Photo voltaic Panel manufacturing plant that was admitted to CIRP under IBC. The plant was under construction when it was admitted into CIRP & construction has been stopped thereafter.
The majority of the plant & machinery were installed when the constriction stopped.
The challenges we faced
- Major pieces of equipment were imported and is first to be set up in India
- Availability of Raw material
- Cheaper Imports
The problem leading to impairment in value
- Any bidder who takes over the company has to deal with expired statutory approvals & terminated contracts
- Deterioration in plant & machinery
- Cost escalation
- Huge CAPEX requirement for completion.
Our approach
A valuation approach was needed to arrive at valuations that could be used to obtain maximum value for the lenders, considering that the plant had been partially constructed and required substantial investment to complete.
The solution we offered
Valuation of these assets under the consideration of growing concerns after completion of balance plant & machinery.
Alternately, the valuation of assets on a piecemeal basis.
Conclusion:
This approach facilitated the lenders to take a decision to dispose of this plant in the best possible manner to recover debts.
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FAQs:
1. What is the purpose of valuating a solar PV module plant?
The valuation helps determine the plant’s fair market value for purposes like mergers, acquisitions, financing, or compliance reporting.
2. Which factors affect the valuation of a solar PV module plant?
Key factors include production capacity, technology used, operational efficiency, asset condition, and current market demand for solar modules.
3. How is the value of a solar PV plant determined?
Valuers use approaches like the cost approach, market approach, and income approach, considering both tangible and intangible assets.
4. Is valuation required for a solar PV plant during insolvency or restructuring?
Yes, accurate valuation is crucial for creditors, investors, and regulators to assess asset worth and plan recovery strategies.
5. Can valuation impact funding or investment in a solar PV plant?
Absolutely. A fair valuation can help secure better financing terms, attract investors, and improve business negotiations.