What is DSCR, and why does it decide how much debt you get?

DSCR is a year’s cash flow available for debt service divided by that year’s debt service, interest plus principal. A DSCR of 1.30 means the project generates $1.30 for every $1 it owes the lender that year.

How is it calculated?

DSCR_year = CFADS_year / debt service_year

CFADS is the year’s cash flow after operating costs and taxes and before debt service. See CFADS.

Why does it set the debt?

The credit agreement usually sets a minimum DSCR the project has to meet: a covenant. Lenders typically test it against a conservative production case such as P90. The actual level depends on the lender, the market and how much price risk the project carries. When you compare cases (P50 vs. P90), keep in mind that lenders often set different targets for each.

The consequence is direct: a year’s debt service can’t exceed that year’s CFADS divided by the target DSCR. For example, with $1.31 million of CFADS and a 1.31 target, that year can carry at most $1 million of debt service.

What to check

• Minimum DSCR, not just the average. The covenant breaks in the worst year.
• P99 DSCR as a stress test: does a very bad year still cover debt service?
• How the debt is shaped. A level payment has to fit the worst year; sculpted debt matches each payment to that year’s cash flow.
• Reserves. A debt service reserve account (DSRA) protects against a weak year, but ties up cash.

Related ratios: LLCR compares the present value of cash flow over the loan life with outstanding debt, and PLCR does the same over the whole project life.

Limits

• DSCR does not carry over between projects. It depends on each plant’s price, debt and tenor, and on whether the credit agreement defines CFADS before or after taxes.
• One senior debt tranche. Heliosolve doesn’t model multiple tranches or tax equity structures.
• Validated against measured data at one plant. The energy chain was checked against the NIST Ground Array (−1.1% against 371 MWh measured): one plant, not a fleet.
• No track record with lenders yet. No financings have closed on Heliosolve reports so far, and each lender sets its own target DSCR.

→ Full methodology: P50 vs P90: the number your debt is sized against.

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