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Project Finance Model Template for a Biomass Thermal Power Plant – the Financial Worksheet

April 5th, 2016 Posted in Air Safety, power generation

Project Finance Model Template for a Biomass Thermal Power Plant – the Financial Worksheet

Your energy technology selection and project finance modeling expert has just developed a powerful and understandable template for the construction of a project finance model based on an existing ERC (Energy Regulatory Commission) project finance model for renewable energy power projects (e.g. biomass thermal, solar PV, wind, mini-hydro, ocean thermal energy conversion), which was also modified for non-RE power generation technologies such as coal thermal, oil genset, oil thermal, gas thermal, gas combined cycle gas turbine or CCGT, open cycle gas  turbine or OCGT, large hydro, petcoke thermal, combined heat and power (CHP) diesel engine genset (diesel, bunker), gasoline engine genset and OCGT (propane, natural gas), and nuclear power.

The project finance model has the following worksheets (tab):

1) Cover sheet

2) Inputs & Assumptions – construction period, operating period, base years for FIT, CAPEX and OPEX, commercial operating date, unit capacity and total capacity, degradation, availability factor, load factor, gross capacity factor, own use and losses (parasitic load), net capacity factor, gross generation and net generation, equipment cost assumptions ($/kW), operating cost assumptions (fixed O&M $/kW/year, variable O&M $/MWh), local and foreign cost breakdown, local and foreign debt (front end fee, commitment fee, interest, repayment period, grace period, debt service reserve), debt and equity ratios, target equity IRR or target project IRR, tax and incentives assumptions [income tax holiday, income tax rate, property tax rate and valuation rate, local business tax, gov’t share, DOE 1-94 contribution, withholding tax (foreign currency WHT), gross receipt tax (local currency GRT), documentary stamp tax (DST), royalty], NO/BOI/PEZA incentive switch, thermal switch, VAT switch, base foreign exchange rate and forward fixed exchange rate (PhP/USD), base local CPI, annual local CPI escalation and annual foreign CPI escalation (for OPEX and CAPEX items), plant foot print and land cost (or land lease), fuel gross heating value (GHV, Btu/lb), fuel cost (PhP/kg, PhP/liter if liquid) and density (kg/liter if liquid), lube oil rate (g/kWh), lube oil cost (PhP/liter) and density (kg/liter), plant heat rate (Btu GHV/kWh gross) or thermal efficiency (% of GHV fuel input).

3) Tariff Breakdown – fuel, lubes, variable O&M, fixed O&M per kWh; capacity fee (PhP/kW-month) and energy fee (PhP/kWh).

4) Sensitivity Analysis (includes tax regime and incentives table)

5) Construction Period – calculates the all-in capital cost: land cost, equipment and balance of plant, transport and insurance, taxes and duties, project management and regulatory fees, civil works and erection, initial working capital and inventories, and financing cost (front end fee, commitment fee, interest during construction). It then calculates the yearly construction drawdown for debt and equity contributions.

6) Operating Period – calculates the total capacity, gross generation and net generation, electricity tariff (or FIT rate), escalation factors, revenues and operating costs (variable and fixed), balance sheet accounts and cash flow items.

7) Financials – prepares the income and expense statement, balance sheet accounts, cash flow statement, balance sheet, project and equity returns (IRR, NPV, PAYBACK). It also breaks down the levelized tariff and cost into its various components (fuel and lubes, spares, fixed and variable O&M, lease, regulatory fees, property tax, LGU tax, depreciation, interest payment, income tax, total generation cost and net profit per kWh). It likewise computes the debt service cover ratio (DSCR), benefits-to-cost (B/C) ratio, and the major financial ratios such as: liquidity ratios (current ratio, quick ratio), solvency ratios (debt-to-equity ratio, equity ratio, debt ratio), efficiency ratios (asset turnover ratio, inventory turnover ratio), profitability ratios (gross margin ratio, EBITDA ratio, profit margin ratio, return on assets ratio, net profit to asset ratio, return on owners’ equity ratio, return on capital employed or ROCE), and market prospect ratios (earnings per share, price earnings ratio, dividend payout ratio, dividend yield ratio).

8) Asset Base FIT (feed-in-tariff) – calculates the levelized cost of energy (LCOE) using the asset base methodology

For brevity, the Financial Worksheet up to the project and equity returns will be presented so the reader will appreciate the drill-down calculation method applied in this easy-to-read project finance model.

Happy reading. Email me at:

energydataexpert@gmail.com

Your energy technology selection expert.

Please download the sample model below:

ADV Biomass Cogeneration Model3 (new) – Copy

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(see the Financials worksheet for the project finance template)

Income Statement Yr 0 Yr 0 Yr 1 Yr 2
Net Generation                    –                    –        363,540        362,813
Revenues                    –                    –      2,384,791      2,380,022
O&M Cost                    –                    –        (837,861)        (836,744)
Fuel Cost                    –                    –        (558,204)        (557,087)
Lube Oil Cost                    –                    –              (445)              (444)
O&M Cost                    –                    –        (220,696)        (220,696)
Spare parts, tools, & equipment and refurbishment cost                    –                    –          (58,516)          (58,516)
G&A Cost                    –                    –              (430)              (430)
Land Lease                    –                    –                    –                    –
Local Taxes                    –                    –        (114,267)        (133,638)
Property Tax                    –                    –          (93,261)          (88,839)
Local Business Tax                    –                    –                    –          (23,848)
Government Share                    –                    –          (17,371)          (17,323)
ER 1-94 Contribution                    –                    –            (3,635)            (3,628)
EBITDA                    –                    –      1,432,233      1,409,210
Depreciation                    –                    –        (368,477)        (368,477)
Interest Expense on Foreign Debt                    –                    –        (321,075)        (321,075)
Interest Expense on Local Debt                    –                    –        (271,524)        (271,524)
Earnings Before Income Tax                    –                    –        471,158        448,134
Current Income Tax (Expense) Credit                    –                    –                    –                    –
Net Income (Loss) After Tax                    –                    –        471,158        448,134
Retained Earnings and Capital
Retained Earnings, BB                    –                    –                    –        471,158
Net Income (Loss) After Tax                    –                    –        471,158        448,134
RE Before Distributions                    –                    –        471,158        919,292
On-shore Cash Distribution to Shareholders                    –                    –                    –        (196,557)
Retained Earnings, EB                    –                    –        471,158        722,734
Capital Account, BB                    –      1,283,761      2,653,530      2,653,530
Equity infusion      1,283,761      1,369,769                    –                    –
Return of Capital                    –                    –                    –                    –
Capital Account, EB      1,283,761      2,653,530      2,653,530      2,653,530
Balance Sheet Accounts
Receivables:
Revenues                    –                    –      2,384,791      2,380,022
Balance of revenues                    –                    –        196,010        195,618
(Increase) Decrease in Receivables                    –                    –        (196,010)              392
Payables:
O&M Cost                    –                    –        220,696        220,696
Spare parts, tools, & equipment and refurbishment cost                    –                    –          58,516          58,516
G&A Cost                    –                    –              430              430
Total O&M and G&A Expenses                    –                    –        279,642        279,642
Balance of accounts payable                    –                    –          22,984          22,984
Increase (Decrease) in Accounts Payable                    –                    –          22,984                    –
Inventory:
Fuel Cost                    –                    –        558,204        557,087
Lube Oil Cost                    –                    –              445              444
Total Fuel and Lube Costs                    –                    –        558,649        557,532
Balance of inventory                    –                    –          91,833          91,649
(Increase) Decrease in inventory                    –                    –          (91,833)              184
Input VAT credit: (receivable)
Fuel Cost                    –                    –        558,204        557,087
Lube Oil Cost                    –                    –              445              444
O&M Cost                    –                    –        220,696        220,696
Spare parts, tools, & equipment and refurbishment cost                    –                    –          58,516          58,516
G&A Cost                    –                    –              430              430
Total VATable Expenses                    –                    –        838,291        837,174
Balance of input VAT credit                    –                    –                    –                    –
(Increase) Decrease in Input VAT credit                    –                    –                    –                    –
Output VAT debit: (payable)
Total VATable Revenues                    –                    –      2,384,791      2,380,022
Balance of output VAT payable                    –                    –                    –                    –
Increase (Decrease) in output VAT payable                    –                    –                    –                    –
Land Cost (non-depreciable)            7,163          14,325          14,325          14,325
Initial Working Capital (non-depreciable)        337,407        674,814        674,814        674,814
VAT on Imported Equipment (non-depreciable)        199,277        398,554        398,554        398,554
Depreciation Schedule
Property, Plant and Equipment – beginning balance                    –      3,735,355      7,757,406      7,388,930
Acquisition of Property, Plant and Equipment      3,735,355      4,022,051                    –                    –
Depreciation                    –                    –        368,477        368,477
Property, Plant and Equipment – ending balance      3,735,355      7,757,406      7,388,930      7,020,453
All-in Capital Cost (non-depreciable + depreciable)      4,279,202      8,845,100                    –                    –
Debt Drawdown      2,995,442      3,196,128                    –                    –
Equity Drawdown      1,283,761      1,369,769                    –                    –
Total Drawdown      4,279,202      4,565,898                    –                    –
Local Debt Schedule
Debt – beginning balance                    –      1,772,188      2,579,481      2,579,481
Local Debt Drawdown      1,772,188      1,890,920                    –                    –
Interest Payment                    –                    –        271,524        271,524
Principal Payment                    –                    –                    –        257,948
Debt – ending balance      1,772,188      3,663,108      2,579,481      2,321,533
Amortization (Interest + Principal)                    –                    –        271,524        529,472
Foreign Debt Schedule
Debt – beginning balance                    –      1,223,254      3,612,089      3,612,089
Foreign Debt Drawdown      1,223,254      1,305,209                    –                    –
Interest Payment                    –                    –        321,075        321,075
Principal Payment                    –                    –                    –        361,209
Debt – ending balance      1,223,254      2,528,462      3,612,089      3,250,880
Amortization (Interest + Principal)                    –                    –        321,075        682,284
Proceeds from VAT recovery
Beginning Balance                    –        199,277        398,554        398,554
VAT on Imported Equipment        199,277        199,277                    –                    –
Recovery from sale of Tax Credit Certificate on VAT                    –                    –                    –                    –
VAT Recovery Expense                    –                    –                    –                    –
Ending Balance        199,277        398,554        398,554        398,554
Other Cash/Non-cash Adjustments
Other Assets, Beginning Balance                    –        337,407        674,814        674,814
Initial Working Capital from Construction Period        337,407        337,407                    –                    –
End of model period adjustment                    –                    –                    –                    –
Other Assets, Ending Balance        337,407        674,814        674,814        674,814
Cash Flow Statement
Cash Flow from Operating Activities:
EBITDA                    –                    –      1,432,233      1,409,210
(Increase) Decrease in Receivables                    –                    –        (196,010)              392
Increase (Decrease) in Accounts Payable                    –                    –          22,984                    –
(Increase) Decrease in inventory                    –                    –          (91,833)              184
(Increase) Decrease in Input VAT credit                    –                    –                    –                    –
Increase (Decrease) in output VAT payable                    –                    –                    –                    –
Proceeds from VAT recovery                    –                    –                    –                    –
Current Income Tax (Expense) Credit                    –                    –                    –                    –
Other Cash/Non-cash Adjustments                    –                    –                    –                    –
Cash Flow from Operations                    –                    –      1,167,375      1,409,785
Cash Flow from Investing Activities:
Additions to Land
Uses of Funds During Construction    (4,279,202)    (4,565,898)                    –                    –
Cash Flow from Investing Activities    (4,279,202)    (4,565,898)                    –                    –
Cash Flow from Financing Activities:
Debt Drawdown      2,995,442      3,196,128                    –                    –
Equity Contribution      1,283,761      1,369,769                    –                    –
Interest Expense on Foreign Debt                    –                    –        (321,075)        (321,075)
Interest Expense on Local Debt                    –                    –        (271,524)        (271,524)
Foreign Debt Amortization                    –                    –                    –        (361,209)
Local Debt Amortization                    –                    –                    –        (257,948)
Cash Flow from Financing Activities      4,279,202      4,565,898        (592,599)    (1,211,756)
Net Cash Flow for the Period                    –                    –        574,776        198,030
Cash, Beginning Balance                    –                    –                    –        574,776
Net Cash Flow for the Period                    –                    –        574,776        198,030
Cash Balance before Distributions                    –                    –        574,776        772,805
Cash Distribution to Shareholders                    –                    –                    –        (196,557)
Return of Capital to Shareholders                    –                    –                    –                    –
Cash, Ending Balance                    –                    –        574,776        576,248
Required Debt Service Reserve Balance                    –                    –        605,878        576,248
Balance Sheet
Assets
Cash                    –                    –        574,776        576,248
Receivables                    –                    –        196,010        195,618
Inventory                    –                    –          91,833          91,649
Input VAT Credit                    –                    –                    –                    –
Other Current Assets        337,407        674,814        674,814        674,814
Current Assets        337,407        674,814      1,537,433      1,538,329
Land            7,163          14,325          14,325          14,325
Property, Plant and Equipment – net      3,735,355      7,757,406      7,388,930      7,020,453
Other Long-term Assets        199,277        398,554        398,554        398,554
Total Assets      4,279,202      8,845,100      9,339,242      8,971,662
Liabilities and Equity
Accounts Payable                    –                    –          22,984          22,984
Output VAT Payable                    –                    –                    –                    –
Current Liabilities                    –                    –          22,984          22,984
Long-term debt      2,995,442      6,191,570      6,191,570      5,572,413
Total Liabilities      2,995,442      6,191,570      6,214,554      5,595,397
Capital Contributions      1,283,761      2,653,530      2,653,530      2,653,530
Accumulated Retained Earnings                    –                    –        471,158        919,292
Accumulated Dividend Distributions                    –                    –                    –        (196,557)
Total Equity      1,283,761      2,653,530      3,124,688      3,376,264
Total Liabilities and Equity      4,279,202      8,845,100      9,339,242      8,971,662
Balance Sheet Check:                    –                    –                    –                    –
Equity Internal Rate of Return
Equity Investment by Shareholders    (1,283,761)    (1,369,769)                    –                    –
Cash Distribution to Shareholders                    –                    –      1,601,475      1,986,800
Return of Capital to Shareholders                    –                    –                    –                    –
Net Cash Flow to Shareholders    (1,283,761)    (1,369,769)      1,601,475      1,986,800
Equity Payback Period    (1,283,761)    (2,653,530)    (1,052,055)        934,745
Equity Internal Rate of Return – Nominal     1.53  
Project Internal Rate of Return
Uses of Funds During Construction    (4,279,202)    (4,565,898)                    –                    –
Cash Flow from Operations                    –                    –      2,799,952      3,168,926
Net Project Cash Flow    (4,279,202)    (4,565,898)      2,799,952      3,168,926
Project Payback Period    (4,279,202)    (8,845,100)    (6,045,148)    (2,876,222)
Project Internal Rate of Return – Nominal       2.91

 

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