Renewable Energy ABS Waterfall Engine
ABS means asset-backed securities. Cash from 2,500 loans is distributed through a waterfall: senior notes are paid first, while junior notes absorb losses first.
Central findingThe structure protects senior notes in the named stress scenario, but junior losses accelerate once collateral damage exhausts the available protection.
Evidence
The result in context
- Synthetic renewable-energy loan pool
- £100m
- UK solar loans modelled
- 2,500
- Validation tests
- 52
- Stress net collateral loss
- 26.43%
- Class C is fully impaired; Class B loses 34.73%; Class A remains whole.
On this page
Question
How do defaults, prepayments, recoveries, reserves and structural triggers transmit through a securitisation capital structure?
A deterministic cash-flow and priority-of-payment model for a synthetic portfolio of UK solar loans.
What is this?
A loan pool translated into investor cash flows
The engine models defaults, voluntary prepayments, lagged recoveries, reserves and overcollateralisation across a £100m synthetic pool. Cash is then allocated to Class A, B and C notes in strict priority order.
Overcollateralisation, or OC, is the excess of collateral over note balance. It acts as protection until losses and structural leakage consume it.
Architecture
Collateral first, capital structure second
Loan-level events roll into monthly collateral cash flows. The waterfall then applies fees, interest, principal, reserve movements and trigger rules before updating each note balance.
This separation makes it possible to validate the collateral mechanics independently from the payment waterfall.
Interactive evidence
Collateral amortises across the 239-month base case
Ending collateral balance, £m.
Read: The pool pays down over time; the capital-structure charts below show how that cash is allocated rather than creating a second pool balance.
Data table · 239 verified rows
| Date | Ending Balance Gbp | Ending Balance Gbp M |
|---|---|---|
| 2026-07-31 | 98,818,658.38227 | 98.818658 |
| 2026-08-31 | 97,647,789.64673 | 97.64779 |
| 2028-09-30 | 71,525,966.905421 | 71.525967 |
| 2030-12-31 | 49,160,937.273002 | 49.160937 |
| 2033-02-28 | 32,197,919.06659 | 32.197919 |
| 2035-05-31 | 18,384,923.404544 | 18.384923 |
| 2037-07-31 | 8,994,612.363984 | 8.994612 |
| 2039-10-31 | 3,298,094.962275 | 3.298095 |
| 2041-12-31 | 1,359,855.408858 | 1.359855 |
| 2044-03-31 | 246,205.588086 | 0.246206 |
| 2046-04-30 | 0 | 0 |
| 2046-05-31 | 0 | 0 |
Interactive evidence
Sequential paydown protects the junior notes until losses arrive
Base-case ending note balance, £m.
Read: Class A amortises first, followed by Class B and Class C under the modelled priority of payments.
Data table · 239 verified rows
| Date | Class A | Class B | Class C |
|---|---|---|---|
| 2026-07-31 | 68.906561 | 12 | 8 |
| 2026-08-31 | 67.822544 | 12 | 8 |
| 2028-09-30 | 41.784784 | 12 | 8 |
| 2030-12-31 | 19.338835 | 12 | 8 |
| 2033-02-28 | 2.314711 | 12 | 8 |
| 2035-05-31 | 0 | 0.452106 | 8 |
| 2037-07-31 | 0 | 0 | 0 |
| 2039-10-31 | 0 | 0 | 0 |
| 2041-12-31 | 0 | 0 | 0 |
| 2044-03-31 | 0 | 0 | 0 |
| 2046-04-30 | 0 | 0 | 0 |
| 2046-05-31 | 0 | 0 | 0 |
Results
Loss location matters as much as total loss
In the downside case, 9.57% net collateral loss produces no note loss. In the named stress case, 26.43% net collateral loss fully impairs Class C and removes 34.73% of Class B principal, while Class A remains whole.
The point is not that senior notes are always safe. It is to make the sequence and boundary of protection visible under a defined scenario.
Interactive evidence
Waterfall scenario explorer
Change the collateral scenario to see which layer absorbs the loss.
Cash follows the normal priority of payments; all note principal remains intact.
Interactive evidence
Stress losses are concentrated in the junior capital
Principal loss as a percentage of original tranche balance.
Read: Under stress, Class C is fully written down and Class B loses 34.73%; Class A remains whole in the tested scenarios.
Data table · 3 verified rows
| Scenario | Class A | Class B | Class C |
|---|---|---|---|
| Base | 0 | 0 | 0 |
| Downside | 0 | 0 | 0 |
| Stress | 0 | 34.733451 | 100 |
Interactive evidence
Class C absorbs the first material loss combinations
Class C principal loss across annual default and recovery assumptions.
Read: The loss surface makes the interaction explicit: higher defaults and lower recoveries push the junior tranche rapidly toward a full write-down.
Data table · 25 verified rows
| Annual Cdr Pct | Recovery Rate Pct | Loss Pct |
|---|---|---|
| 1.5 | 30 | 0 |
| 1.5 | 45 | 0 |
| 1.5 | 75 | 0 |
| 3 | 30 | 0 |
| 3 | 75 | 0 |
| 5 | 45 | 0 |
| 5 | 75 | 0 |
| 7 | 45 | 21.239346 |
| 7 | 90 | 0 |
| 9 | 45 | 79.001667 |
| 9 | 75 | 0 |
| 9 | 90 | 0 |
Validation
The waterfall is checked as an accounting system
Fifty-two automated tests cover cash conservation, allocation order, balance evolution and scenario outputs. The scenario explorer uses the model’s fixed base, downside and stress outputs.
Limitations
What this evidence does not establish
- The collateral pool is synthetic and is not evidence of realised renewable-energy loan performance.
- The displayed scenarios are deterministic model states, not forecasts of a marketed security.
Source and reproducibility
Trace the evidence
Source code, evaluation outputs and supporting material are available in the repository.
View repository- Tranche balancesdata/processed/base_tranche_cashflows.csvCommit / evidence ID: 526f4e32e8e6e07c17a328975b0de0ae3a8888de
- Tranche lossesdata/processed/tranche_scenario_analytics.csvCommit / evidence ID: 526f4e32e8e6e07c17a328975b0de0ae3a8888de
- Collateral and sensitivity outputsdata/processed/loss_sensitivity.csvCommit / evidence ID: 526f4e32e8e6e07c17a328975b0de0ae3a8888de