What is the difference between CAPEX and OPEX?
CAPEX is what you spend to build or buy an asset. OPEX is what you spend to keep it running. The split shapes how a project gets financed.
Capital expenditure, CAPEX, is money spent once to create something that lasts: a mine, a transmission line, a data centre. Operating expenditure, OPEX, is the bill that comes every month afterwards: fuel, wages, maintenance, insurance.
The mix tells you a lot about a business. A solar farm is almost all CAPEX, because sunlight is free and the panels need little attention. A gas power plant costs less to build but pays for fuel every hour it runs. So a solar project lives or dies on the interest rate of its loan, and a gas plant lives or dies on the gas price.
When a company says a project's costs jumped 30%, check which one it means. A CAPEX overrun hurts once and is paid by lenders and shareholders. Rising OPEX hurts for the entire life of the asset.
- CAPEX
- Build or buy. Paid up front, recovered over years
- OPEX
- Run and maintain. Paid continuously
Explainers describe how things generally work. They are not advice for a specific project or country. See our editorial policy.