> For the complete documentation index, see [llms.txt](https://docs.suno.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.suno.finance/overview/overview.md).

# Financial model

How future project income becomes a valuation, and how that value supports uWatt.

Suno values a solar project's remaining income using **discounted cash flow (DCF)**: an estimate of what the cash it is expected to generate in the future is worth today. This values its earning potential, rather than simply its construction cost.

## How it works

The model projects electricity production and sales over the project's remaining operating life, then subtracts operating costs, equipment replacements, fees, and applicable project-level withholding. Local-currency cash flows are converted into US dollars.

It then discounts those future amounts to today's value. Money expected later is worth less than money received now, and less certain income receives a larger discount. The discount rate combines a base interest rate with allowances for country and project risk. Adding the discounted amounts gives the project's estimated net asset value, or NAV.

## Main assumptions

* **Production and lifetime:** expected output, available operating history, declining panel efficiency, and the years of operation remaining.
* **Revenue:** electricity contract prices and their adjustments, plus applicable certificate sales or other income.
* **Costs:** maintenance, equipment replacements and downtime, Suno fees, and applicable withholding.
* **Economic conditions:** inflation, exchange rates, and the interest-rate and risk assumptions used to discount income.

As operating history becomes available, measured production and costs inform the estimates. Sensitivity analysis shows how selected changes in assumptions affect value; it is not a prediction of the worst possible outcome.

## What the model produces

The output includes a year-by-year cash-flow projection, a project value in US dollars, and a value per pWatt after applicable withholding. Saved valuation inputs and results make the calculation reproducible. They remain estimates, not guaranteed sale prices or investment returns.

## How it affects the Reserve and uWatt

Authorized reports bring project valuations on-chain. These values support project conversion into uWatt and the valuation of the Reserve's project holdings. Together with cash and financial instruments, those holdings determine total Reserve backing.

Dividing backing by uWatt supply gives backing per token. The desk reference is the lower of that amount and $1. For example, $1.15 of backing supports the $1 reference with a $0.15 buffer; $0.95 of backing lowers the reference to $0.95. Fees and payout safeguards also apply, as explained in [Using uWatt](/for-depositors/uwatt.md).

{% hint style="info" %}
**Valuation is not cash.** A valuation increase strengthens reported backing; it does not itself add withdrawal cash or fund staking rewards.
{% endhint %}

Secondary-market prices are set by buyers and sellers.

## Explore the calculation

The [Suno valuation engine repository](https://gitlab.com/suno-finance/suno-valuation-engine) contains the calculation logic and tests. This explanation follows [version 1.1.1](https://gitlab.com/suno-finance/suno-valuation-engine/-/tree/631488e486bc800989586dddcd371e2d54200748).


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