How Much Are Your Wind Royalties Worth?

February 15, 2021

  • General Rule: The true value of any wind royalty is unique and various terms and conditions related to each specific royalty need to be analyzed to determine value.

 

  • What is Madison Street Energy’s (MSE) Process for Valuing Wind Royalties? To ensure that a potential seller receives the highest possible valuation for their wind royalty, MSE, has devised a streamlined process that analyzes specific key economic and non-economic characteristics of each wind lease royalty so that it can quickly determine the accurate value. We can provide the royalty owner with an offer price in as quickly as 24 hours after we have received or have been given access to information/documentation that allows us to analyze the following “Wind Royalty Value Impact Matters”:

 

  • Lease Related Royalty Information:
    • Royalty Calculation: a review of the clauses in your lease that describe how the wind lease royalties and any other payments are calculated.
    • Factors affecting the Royalty Calculation: information about the following matters:
      • The number, manufacturer, and location of the wind turbines and/or nameplate capacity of megawatts to be produced from wind turbines located on your land.
      • If applicable, the number of acres of land that you have leased in comparison to the overall number of acres being leased for the entire project.
    • Royalty Payment Amounts: the dollar amount of each royalty and any other payment that has been received since the project started operating.

 

  • Rights of the Project Owner to Cease Payment of Royalties:
    • Review of lease clauses that explain if/when the lease can be terminated for any reason and whether any early termination fee needs to be paid.
    • Financial Strength and Experience of Project Owner: an experienced financially strong project owner is less likely to default on payments of royalties owed.
    • Existence of a power purchase agreement: if the project owner has an offtake agreement providing it consistent income then it unlikely to will not have money to pay the wind royalty.
  • Lease Term:
    • Base Term: The approximate time the project started operating and the number of years remaining on the base term of the lease paying royalties.
    • Extension Options: The number of years that the lease may be extended by the project owner.

Final Thoughts: Why does MSE go through this whole process when other wind royalty buyers are able to instantly calculate royalty prices?

Although there are plenty of sources that will provide you with an immediate valuation of your royalties, it is important to know that the prices provided are generally estimates, not the true value of your royalties. Make sure to read the fine print on any immediate royalty valuations. Best-case scenario, these other sources will indicate in the fine print that the quotes provided are mere estimates subject to the total change. Some sources may fail to provide any such disclaimer, thereby giving the royalty seller no way of knowing that they are almost always likely to be disappointed at a later date when it comes to closing time.

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