Energy Technology Expert

Impact of New RE Law and its IRR on Electricity Price

(Feed-In Tariff Calculation Procedure)

Energy Technology Conference & Exhibition 2009

By: Marcial T. Ocampo

Date: December 2, 2009

Venue: New World Hotel, Makati

Outline

• Republic Act No. 9513 (RE Law)
• DOE Circular No. DC2009-05-0008 (IRR)
• DOE Circular No. DC2009-07-0011 (Guidelines)
• Feed-In Tariff System
• Financial Model – before and after RE Law
• Mini Hydro -
• Biomass -
• Wind -
• Solar -

Republic Act No. 9513 (RE Law)

The recent passage of the Philippine Renewable Energy (RE) Law and its Implementing Rules and Regulations (IRR) now clearly defines the legal and regulatory framework for renewable energy investment in the Philippines.  After almost a long 10 year wait, this important piece of legislation has passed deliberations in both chambers of the Philippine Congress and Senate and was signed into law by President Gloria

Summary of Impact of new RE Law

• In summary, the impact of applying all the incentives on first year tariff (also levelized selling price or my proposed feed-in tariff that provides the required 15% p.a. equity IRR given the capital cost and O&M costs) are as follows:
• 1) Mini-hydro (150 mw diversion canal, $500M capital cost, $3,218/kW) = 6.9185 to 4.5630 P/kWh or 34.05% reduction in levelized selling price
• 2) Biomass (22 mw landfill gas, $33M capital cost, $1,500/kW) = 6.8628 to 5.9494 P/kWh or 13.31% reduction in levelized selling price
• 3) Solar PV (150 kW, $0.635M capital cost, $4,246/kW) = 15.7905 to 11.5011 P/kWh or 27.16% reduction in levelized selling price
• 4) Wind Farm (33 MW, $54M capital cost, $1,636/kW) = 12.3156 to 9.7360 P/kWh or 20.95% reduction in levelized selling price
• The above are based on equity structure of 30% equity and 70% debt for solar, wind and biomass and 25% equity and 75% debt for mini-hydro.
• Minimum equity returns for equity investor is 15% p.a. while debt interest is 8.5% p.a.
• All the above RE technologies don’t have subsidy or grants (note the NorthWind has a Danish Grant or subsidy capital).

Basic Policy Concepts of RE Law

1) Setting up of Renewable Portfolio Standards (RPS) which generators, distribution utilities and suppliers of electricity shall source or produce a specific portion of their electricity from eligible RE resources as determined by the National Renewable Energy Board (NREB).

2) Adoption of feed-in tariff scheme which provides an obligation to the power industry to source RE generation at a guaranteed fixed price over a period of time, which should not be less than a period of 12 years, to be determined by the Energy Regulatory Commission (ERC).

3) Establishment of Green Energy Option program, a mechanism to be established by the Department of Energy (DOE), which shall provide end-users the option to choose RE resources as their source of energy.

4) Adoption of Net-Metering program to encourage end-users to participate in renewable energy generation without discrimination from distribution utilities.

5) Transmission and distribution utilities shall provide the needed connection facilities and ancillary services and provide the mechanism for the recovery of such additional costs to provide such service to RE generators.

6) DOE shall encourage the adoption of waste-to-energy systems and biogas systems to convert biodegradable waste materials such as animal manure and agricultural wastes using processes such as anaerobic digestion, fermentation and gasification to produce energy fuels or electricity, subject to the provision of the Philippine Clean Air Act of 1999 (RA 8749) and Philippine Ecological Solid Waste Management Act of 2000 (RA 9003).

7) The DOE shall establish the Renewable Energy Market (REM) as a sub-market of the Wholesale Electricity Spot Market (WESM) for the trading of RE Certificates in order to promote the Renewable Portfolio Standards (RPS).

8) Under the supervision of the DOE, the Philippine Electricity Market Corporation (PEMC) shall issue, keep and verify the RE Certificates from eligible RE facilities.

9) To promote off-grid renewable energy development, the NPC-SPUG, distribution utilities (DUs) and qualified third parties (QTPs) involved in providing rural electricity service shall source a minimum percentage of their annual generation from RE resources in their area is eligible for the issuance of RE Certificates.

10) Establishment of a Renewable Energy Trust Fund (RETF) under the lead supervision of the DOE.  This fund shall be funded from the emission fees collected from all generating facilities consistent with the Clean Air Act, 1.5% of the net income of the PCSO, 1.5% of the net income of PAGCOR and all contributions, grants and donations which shall be income tax deductible.

11) Establishment of the National Renewable Energy Board (NREB) which shall monitor the implementation of this RE law and recommend policies to the DOE.

12) Creation of the Renewable Energy Management Bureau (REMB) under the DOE which shall develop, formulate and implement policies, plans and programs such as the National Renewable Energy Plan (NREP).

DOE Circular No. DC2009-05-0008

1) This DOE Department Circular shall be known as the “Implementing Rules and Regulations of Republic Act No. 9513”, otherwise knows as the “Renewable Energy Act of 2008.

2) Scope of the IRR includes the exploration, development, utilization and commercialization of RE resources such as biomass, solar, wind, hydropower, geothermal and ocean energy including hybrid systems and other emerging RE technologies in the Philippines.

3) The IRR covers the following activities: generation, transmission, distribution, sale and use of electricity, and fuel generated from use of RE resources.

4)  Provides the framework, responsibilities, functions of various government agencies and their relationship with the NREB.

5)  Provide direction and support to RE developers, manufacturers, fabricators and suppliers of locally produced RE equipment

6)  Provide fiscal and non-fiscal incentives for RE development.

Incentives

1) income tax holiday for 7 years, maximum of 21 years including new RE investments

2) corporate income tax of 10% of net taxable income (versus 30-35%)

3) 10-year exemption from customs tariff duties on imported capital equipment

4) net operating loss carry over (NOLCO)

5) accelerated depreciation (either declining balance method or sum-of-the-years digit method)

6) zero percent (0%) value added tax (VAT) rate

7) cash incentive for renewable energy developers such as qualified third parties (QTPs) in missionary electrification equivalent to 50% of the universal charge on the power needed to service remote area

8) special realty tax (1.5% of net book value = original cost less accumulated depreciation)

9) tax exemption on custom credits

10) tax credit on domestically sourced capital equipment

11) 10-year duty free importation on capital equipment

12) VAT exemption of all types of agricultural equipment and machinery

13) tax rebates on purchase of RE components

14) tax exemption or incentives on hybrid and co-generation systems shall apply only to the equipment, machinery or devices utilizing renewable energy

16) incentives for farmers engaged in the plantation of biomass resources such as crops (jatropha, sugar cane, coconut) and trees shall include duty-free importation and exemption from payment of value added tax on all types of agricultural inputs, equipment and machinery within 10 years

17) tax rebates for purchase of RE components for residential, industrial and community use

18) financial assistance program from government financial institutions (GFIs) such as Development Bank of the Philippines (DBP), Land Bank of the Philippines (LBP) and Philippine Exim Bank which shall provide preferential loan package for the development, utilization and commercialization of RE projects that are duly

19) exemption from the payment of the universal charge being collected by PSALM for the recovery of stranded costs of NPC if the electricity generated is consumed by the generator itself or if it is distributed free of charge in the off-grid area

20) a registered RE developer producing power and electricity from an intermittent RE resource (e.g. wind, solar) may opt to pay transmission and wheeling charge to TRANSCO at the average rate per kilowatthour rate for all other electricity transmitted thru the grid

21) qualified and registered RE generating units with intermittent RE resources shall be considered “must dispatch” based on available energy and shall enjoy the benefit of priority dispatch

Other Provisions of RE Law

• Under this new RE Law, a Renewable Energy Service / Operating Contract similar to that given to oil, gas, geothermal and coal operating contracts shall be required before such RE resource could be exploited by individuals and companies since the state owns all forces of potential energy and natural resources such as kinetic energy from water, marine current and wind, thermal energy from solar, ocean, geothermal heat and biomass.

• As such, any joint venture or co-production sharing agreements with Filipino citizens or corporations or associations at least 60% of the capital is owned by Filipinos subject to Article XII, Section 2 of the Philippine Constitution.

• The government share on existing and new RE development projects, except geothermal energy, shall be 1% of the gross income incidental to and arising from the generation, transmission and sale of electric power.  Gross income shall comprise of gross sales less returns, discounts and allowances, and cost of goods sold.

• Except for government-owned and controlled corporations, the government shall be distributed as 60% national government and 40% local government.

• In the case of geothermal energy, however, the government share shall be 1.5% of gross income from the sale of geothermal electricity less cost of goods sold which shall consist of the direct cost of geothermal steam production.

• The local government share shall further be distributed as follows: province – 20%, city/municipality – 45%, barangay – 35%.

• When the natural resource is located in more than 2 provinces, cities or barangays, the sharing shall be based on the following weights: population – 70%, land area – 30%.

• In the case of highly urbanized cities, the sharing shall be as follows: city – 65%, barangay – 35%.

• All provisions under the WESM rules and Distribution and Grid codes which do not allow “must dispatch” status for intermittent RE resources shall be deemed amended or modified.

• For the purposes of entitlement to the incentives and privileges under this law and IRR, the existing and new RE developers, manufacturers, fabricators and suppliers of locally-produced RE equipment shall register with the REMB and will be issued a Certificate of Endorsement.

• The DOE shall issue a Certificate of Registration to RE Developer holding a valid RE Service / Operating Contract.

• The DOE shall likewise issue a Certificate of Accreditation to RE manufacturers, fabricators and suppliers of locally-produced RE equipment in coordination with the Department of Trade and Industry (DTI).

• The RE sector is hereby declared a priority investment sector that will regularly form part of the Investment Priority Plan (IPP) provided they register with the Board of Investments (BOI).

DOE Circular No. DC2009-07-0011

• This circular provides “Guidelines governing a transparent and competitive system of awarding RE service/operating contracts and providing for the registration process of RE developers

• An RE Service/Operating Contract is a service agreement between the Government and RE Developer to have exclusive right to explore, develop or utilize a particular RE area. The two stages of RE Contract are:

• Pre-Development Stage for preliminary assessment and feasibility study up to financial closing of RE project

• Development/Commercial Stage for the development, production or utilization of RE resources, including construction and installation of relevant facilities up to the operation phase.

Conversion of RE Contracts

• Conversion from Pre-Development Stage to Development/Commercial Stage – the RE Developer shall secure permits, clearances or certificates such as Environmental Compliance Certificate (ECC), Certificate of Non-Coverage (CNC), Water Rights Permit, Free and Prior Informed Consent (FPIC), Certificate of Non-Overlap, Local Government Unit (LGU) endorsement, etc.

• Conversion from Existing Service Contract/Agreement to RE Contracts under this Circular – holders of existing contract are deemed to be provisionally registered as RE Developer under the Act.  The DOE shall issue a provisional certificate upon submission of Letter of Intent (LOI) for conversion of RE Contract.

Application Requirements

• For RE Contracts during Pre-Development and Development/Commercial Stages, all RE resources and hybrid systems – the RE applicant must be a Filipino or if a corporation, must be at least 60% owned by Filipinos and duly registered with SEC.

• For geothermal resources, the applicant must be a Filipino.

• Legal Requirements

• Technical Requirements

• Financial Requirements

• Application and Processing Fees

Awarding of RE Contracts

RE Contracts shall be awarded thru:

• Open and Competitive Process – all areas for open and competitive selection shall be posted by the DOE in its website
• Direct Negotiation – If there is only one applicant for an RE area, the RE applicant is given 30 days to complete its submission.  If two or more interested applicants over the same RE area, the REMB shall prioritize and endorse to the Review Committee for evaluation.

Feed-In Tariff System

Hydro Power : run-of-river

• Impoundment – typical large hydropower system use an impoundment facility like a dam to store river water in a reservoir; water may be released either to meet changing electricity needs or to maintain a constant reservoir level or to meet irrigation needs.

• Diversion – also called run-of-river, channels a portion of a river through a canal or penstock to run a turbine; may not require the use of a dam.

• Pumped storage – when demand for electricity is low, say at night or weekend, a cheap source of electricity like nuclear power will pump water from a lower reservoir to an upper reservoir, where it is released back to the lower reservoir to generate electricity during periods of high or peak electrical demand

Impoundment Hydropower

Diversion Hydropower

Pumped Storage

Sizes of Hydropower Plants

• Large hydropower – US DOE defines large hydropower as facilities having capacity of greater than 30 MW. With regular maintenance, it could generate power for over 50 years.

• Small hydropower – capacity greater than 0.1 MW and up to 30 MW.

• UNDP/WB: 100 kW- 1 MW is mini hydro, 1 MW to 5-30 MW is small hydro).

• Micro hydropower – capacity of up to 100 kW.

Water Turbine Technologies

• Pelton turbine – has one or more jets of water impinging on the buckets of a runner that looks like a water wheel; used for high-head sites (50 to 6,000 ft) and as large as 200 MW.

• Francis turbine – has a runner with 9 or more fixed vanes;  water enters the turbine in a radial direction with respect to the shaft and discharge in an axial direction; will operate form 10 to 2,000 ft of head and generate up to 800 MW.

• Propeller turbine – has a runner with 3-6 fixed blades like a boat propeller; water passes thru the runner and drives the blades; can operate from 10 to 300 ft of head and as large as 100 MW.

• Kaplan turbine – type of propeller turbine in which the pitch of the blades can be changed to improve performance, and can generate up to 400 MW.

Cost of Hydropower

The EIA estimates the overnight capital cost of hydropower:

US $ / kW

Big hydro (> 50 MW)           1,000-3,000

Small hydro (< 20 MW)        800-1,200

Micro hydro (< 100 kW)            2,500*

* PCIERD (P1,000,000 for 8 kW at P50/$)

• Generation cost:

US $ / kWh

Levelized cost of power            6.4 – 13.8 cents

Big hydro (> 50 MW)           0.044

Small hydro (< 20 MW)        0.03 – 0.05

Micro hydro (< 100 kW)                 n.a.

BIOMASS ENERGY

Bio-Power Technologies:

• Direct combustion – burning of biomass in excess air, producing hot flue gases that are used to produce steam in a boiler, steam drives turbine generators to produce electricity

• Co-firing – practice of introducing biomass in high-efficiency coal fired boilers as a supplementary energy source; been evaluated for pulverized coal, fluidized bed and spreader stokers

• Renewable fuel cells – hydrogen may be obtained from biomass and fed to fuel cells to produce power, heat and water

• Gasification – biomass gasification for power production involves heating biomass under oxygen-deficient conditions to produce a medium or low calorific gas. The “biogas” is then used as fuel in a combined cycle power plant with gas turbine and steam turbine cycles.

Renewable Fuel Cell Power from Biogas

Cost of Bio-Power:

• Bio-power plants tend to be smaller than coal-fired power stations with boiler sizes around 50 MW, since it would be economic to transport the fuel over short distances only.

Cost of Waste-to-Power

• Amount of wastes produced in developed countries was estimated by IEA to be 426 million MT/yr, a potential output of 191 TWh/year.

• Landfill gas leaks out an equal mixture of CH₄ and CO₂. Global potential is 13,000 MWh in 1995.

Benefits from Biomass & Wastes

• Biomass is a renewable fuel and is environmentally benign - carbon burnt did not come from fossil fuels but from atmospheric CO₂ during photosynthesis; mitigates global warming.

• Gasifier-fuel cell - results in net CO₂ reduction because of the higher efficiency of fuel cell and being CO₂-neutral; can be the carbon sink needed to avoid global warming

• Solves waste disposal problem – burning of agricultural and municipal solid wastes reduces the garbage dumped into sanitary landfill

• Perennial plants will stabilize land – reduce soil erosion when planted in barren lands dedicated to energy plantations

• Mitigates acid rain - biomass does not contain sulfur unlike fossil fuels; does not emit SO₂; minimize respiratory illness and corrosion in buildings.

Global Carbon Cycle

WIND  ENERGY

Philippine Wind Potential

Philippine Monthly Wind Power

Basic Principles and Components of a Modern Wind Turbine

Cost of Wind Power

• Cost of wind power (EIA):

Resource type                                  Intermittent, predictable

Capacity factor                                 20 – 44 %

Real levelized cost (1998$)              4 – 6 cents / kWh

Construction lead time                      1 – 3 years

Overnight capital cost                    $857 / kW

Fixed O&M costs                 $0.256 / kW / year

Variable O&M, $/kWh                     nil

• Availability factor of 90% and load factor of 30-40%, sometimes higher at 45% during favorable wind patterns;  because of this 1/3 average load factor, a wind farm would be 2.5 times as large as a conventional power plant of same rating and 80% load factor.

• Cost of generating wind power in US (EPRI) – $0.05/kWh

• Competitive tender bids in UK – as low as $0.032/kWh

Future Cost of Wind Power

SOLAR ENERGY

Philippine Solar Radiation Map

Photovoltaic Principle

Photovoltaic Power Plant Diagram

Cost of Solar-Electric Power

• The EIA estimates the cost of solar photovoltaic (1996):

Resource type                          Intermittent, predictable

Capacity factor                        16 – 30 %

Real levelized cost (1998 $)    17 – 21 cents / kWh

Overnight capital cost               $3,135 / kW

Fixed O&M costs             $0.097 / kW / year

Variable O&M, $/kWh            nil

Efficiency, %                 12 – 24

• Construction lead time       0 – 2 years

Real levelized cost (1998 $)    2 – 13 cents / kWh

Overnight capital cost               $2,060 / kW

Fixed O&M costs             $0.046 / kW / year

Variable O&M, $/kWh            nil

Mini-Hydro Financial Model

• Overnight capital cost ($/kW) and economic life (yr)

• Cost of Capital (% equity and IRR, % debt and interest) : WACC

• Fixed O&M Cost, $/kW/yr

• Variable O&M Cost, $/kWh; Water, Fuel & Lube Costs

• Property Tax, Income Tax, Property & Business Interruption Insurance, Lease, Regulatory Costs

• Exchange Rate, PhP/$

• Escalation Rate: US CPI, RP CPI

• Depreciation Rate: [(1 + RP)/(1 + US) – 1] x 100%

• Rated Capacity (kW) and derating (%/yr); efficiency

• Overhaul cycle (yr) and capacity recovery (%)

• Capacity Factor, % of RC

• Annual Generation, kWh/yr

• Electricity Tariff, PhP/kWh or $/kWh

• Carbon Reduction Credits ($/MT), Ave Carbon Intensity (kg CO2/kWh)

• DCF IRR, NPV, payback

• First year tariff to meet equity IRR (also known as DCF-ROE).

Capital Cost – Old Law

First Year Tariff – Old Law

Levelized Tariff – Old Law

Capital Cost – New RE Law

Levelized Tariff – New RE Law

First Year Tariff – New RE Law

Thank You

Marcial T. Ocampo

Energy  & Business Development Consultant

Tel (63-2)-931-3713

Tel/Fax (63-2)-932-5530

Mobile (63-915)-606-7949; (63-922)-866-9598

Email mars_ocampo@yahoo.com

Website www.energytechnologyexpert.com

	PROJECT FINANCE MODEL: MINI-HYDRO POWER			Mini-Hydro power generation plant
				(C) Copyright 2009 by Marcial T. Ocampo (November 2009)
	INSTRUCTIONS			NOTE: NEEDS TO BE UPDATED IN VIEW OF THE NEW RENEWABLES ENERGY LAW AND ITS IRR
	(This example is in PhP Thousand, except for the unit prices which are in PhP)
	Year 0 reflects the starting assumptions, which will be applicable starting in year 1.
	Blue cells must be filled out by the user.
			0	1	press ctrl + e to converge model
	CALCULATION OF GROSS OPERATING MARGIN		NPV-FC	NPV-ROE	used	IRR	years
		24	(3,876.63)	0.00	0.00	15.00%	10.42
	A) Operating income, ’000 US$	365		Year	0	1	2
					2009	2010	2011
	Days per year			days / year	365	365	365
	Hours per day	capacity factor	43.00%	hours / day	10.32	10.320	10.320
	Rated Capacity	rated capacity	155.400	MW	155.400	155.400	155.400
	Gross Generation			MWh	585,361	585,361	585,361
	Less: Power Plant Own Use		1.00%	MWh	5,854	5,854	5,854
	Net Generation			MWh	579,507	579,507	579,507
	Less: Transmission Line Lose		1.00%	MWh	5,795	5,795	5,795
	Net Electricity Sales			MWh	573,712	573,712	573,712
		-34.05%	PhP/kWh	PhP/$
	Electricity tariff for sales to the network (US$/kWh)	6.9185	4.5630	47.00	0.0971	0.0971	0.0971
	Annual increase of the tariff	0.00%	0.00%	0.00%		0.0%	0.0%
	Electricity volume of sales to the network (mWh)			MWh	573,712	573,712	573,712
	Annual increase of the volume						0.0%
	Income from sales to the network, ’000 US$					55,698.37	55,698.37
	Other operating income from the installation, ’000 US$	tourist fee	1,000		0	-	-
	Annual increase of this operating income					0.0%	0.0%
	Total other operating income, ’000 US$					0.00	0.00
	TOTAL OPERATING INCOME					55,698.37	55,698.37
	Annual increase						0.0%
0
1	B) Expense, ’000 US$	333,615.53	EPC		0	1	2
170.91	Price of the diverted water (PhP/m3)					0.0000	0.0000
24.55	Annual increase of the price	head, m	flow, cms	kW		0.0%	0.00%
1000	Specific water consumption rate (m3/MWh)	146.36	117.26	155,400		2,716	2,716
9.81	Annual increase of specific water consumption rate	2	77.7	155,400		0.0%	0.00%
94.2%	Consumption volume of diverted water (m3/year)			0		1,590,101,885	1,590,101,885
98.0%	Annual increase of these volumes		months	working capital
$/kWh	Expenses for diverted water fee (fuel)	% of EPC	2	0.00	0.00	0	0
0.00250	Maintenance of water turbine/generator (spares)	0.140%	2	77.84	467.06	467.06	467.06
0.00157	Utilities (fuel, lubes, electricity, water)	0.136%	2	75.62	453.72	453.72	453.72
	Maintenance of the rest of the plant	0.200%	2	111.21	667.23	667.23	667.23
	Personnel expense	0.200%	2	111.21	667.23	667.23	667.23
	Land lease, rent	0.210%	2	116.77	700.59	700.59	700.59
	Taxes, Insurance, services, and others	0.200%	2	111.21	667.23	667.23	667.23
$/kW/yr	Annual increase of these expenses	1.09%	6.50%	% of GR		0.0%	0.0%
0.0200	Total O&M expenses		$/kW/yr	0.0174	2,702.29	3,623.06	3,623.06
	DSRF Expense	0.30%	of DSRF			76.60	73.00
	Special Privilege Tax – 2%	2.00%	of Electricity Revenue			1,113.97	1,113.97
2.50%	Special Realty Tax – 2.5%	1.50%	of Depreciated Project Cost			5,446.89	5,243.48
	DOE 1-94 : 0.01 PhP/kWh sales	0.01	PhP/kWh sales	0.000213		123.30	123.30
	Total Regulatory Expenses					6,684.15	6,480.74
	TOTAL OPERATING EXPENSE					10,383.82	10,176.81
	Annual increase						-2.0%
	GROSS OPERATING MARGIN					45,314.55	45,521.57
	Annual increase						0.46%
	PROFIT AND LOSS STATEMENTS
	In ’000 US$			Year	0	1	2
	Operating income					55,698.37	55,698.37
	Operating expense					10,383.82	10,176.81
	Operating gross margin					45,314.55	45,521.57
	- Depreciation & amortization					13,560.72	13,560.72
	- Interest					22,813.69	20,412.25
	PROFIT BEFORE TAX					8,940.15	11,548.60
30%	(Tax rate) and Income Tax Holiday (ITH) years	10%	6			0%	0%
7	- Income tax					0.00	0.00
	PROFIT AFTER TAX					8,940.15	11,548.60
	Percentage of increase						29.18%
	NET CASH FLOW
	In ’000 US$			Year	0	1	2
	Net profit after tax					8,940.15	11,548.60
	Addback:
	Depreciation & Amortization					13,560.72	13,560.72
	Working Capital
	Salvage Value
	Add:
	DSRF Income	4.00%	DSRF Income			1,021.32	973.29
	Less:
	Principal Repayment					28,252.24	28,252.24
1	Profit Sharing	0.00%	of income after tax			0.00	0.00
$50,000	Social Benefit Fund – Host Community	0	per month			0.00	0.00
$5.00	ADD: Carbon Emission Credits	0.650	0.000	kg CO2/kWh	3.251	1,825.81	1,825.81
4.00%	NET CASH FLOW					-2,904.25	-343.82
$1,200	Percentage of increase						0.0%
	((0.065 -0.000) kg CO2/ kWh x MWh x 1000 kWh/MWh x MT/1000 kg x $5.00/MT x (100%- 4%) – 1,200 $) x M$/1000$
	Initial investment in fixed assets and capitalized expenses				376,696.58
	Project Cash Flow	11.15%	10.13%	WACC	-376,696.58	45,314.55	45,521.57
		IRR	NPV	-84,151.03	-376,696.58	39,403.96	34,420.84
			check	29,803.27	-376,696.58	41,148.29	37,535.77
			cumulative	0	-376,696.58	-331,382.02	-285,860.46
			project payback	8.30
	Invested capital			25.00%	94,174.14
	Equity Cash Flow	15.00%	15.00%	Equity IRR	-94,174.14	-2,904.25	-343.82
		IRR	NPV	0.00	-94,174.14	-2,525.43	-259.98
			check	0.00	-94,174.14	-2,525.43	-259.98
			cumulative	0	-94,174.14	-97,078.39	-97,422.21
			equity payback	10.42
	CALCULATION OF CASH FLOW FOR DEBT SERVICE
	In ’000 US$			Year	0	1	2
	Operating gross margin					45,314.55	45,521.57
	- Income tax					0.00	0.00
	- Increase in working capital needs (WCN)					5,472.23	0.00
	- Profit Sharing					0.00	0.00
	+ DSRF Income					1,021.32	973.29
	- Social Benefit Fund					0.00	0.00
	+ Carbon Emission Credits					1,825.81	1,825.81
	Cash flow available for debt service (CFD)					42,689.45	48,320.67
	CALCULATION OF DEBT SERVICE COVERAGE RATIO (DSCR)
	In ’000 US$			Year	0	1	2
	Cash flow available for debt service (CFD)					42,689.45	48,320.67
	Annual debt service (DS)					51,065.93	48,664.49
		min	ave	max
	DEBT SERVICE COVERAGE RATIO (DSCR)	0.836	1.209	1.574		0.84	0.99
	CALCULATION OF DIVIDENDS PAYABLE
	In ’000 US$			Year	0	1	2
	Cash flow available for debt service (CFD)				0.00	42,689.45	48,320.67
	Annual debt service (DS)				0.00	51,065.93	48,664.49
	CF available for dividends (CFDiv = CFD-DS)				0.00	0.00	0.00
	Accumulated CFDiv				0.00	0.00	0.00
	Current year profit after tax				0.00	8,940.15	11,548.60
	Accumulated profit: limit for dividend payable				0.00	8,940.15	20,488.75
	Select smaller accumulated value				0.00	0.00	0.00
	Accumulated dividend payable (select positive only)				0.00	0.00	0.00
	Annual dividend payable				0.00	0.00	0.00
	CALCULATION OF NPV, IRR AND PAY-BACK ACCORDING TO INVESTED CAPITAL AND DIVIDENDS PAYABLE
	In ’000 US$			Year	0	1	2
	Invested capital				94,174.14
	Annual dividend payable				0.00	0.00	0.00
	Discount rate to be applied for NPV calculation				15.00%	15%	15%
	Discount factor for this rate			1	1.0000	1.1500	1.3225
	Discounted dividends				0.00	0.00	0.00
	Present value of dividends				90,297.51
	NPV of the investment				-3,876.63
	In ’000 US$			Year	0	1	2
	Investment schedulle	14.62%	15.00%	Equity IRR	-94,174.14	0.00	0.00
	IRR OF THE INVESTMENT	IRR	NPV	-3,876.63	-94,174.14	0.00	0.00
			check	-3,876.63	-94,174.14	0.00	0.00
			cumulative	0	-94,174.14	-94,174.14	-94,174.14
			equity payback	10.34
	BALANCE SHEET ACCOUNTS
	Calculation of WCN:
	Cash needed for operations (+)	3.000	months of expenses	1.63%		905.77	905.77
	Receivables (+)	1.000	months of revenue	8.33%		4,641.53	4,641.53
	Stocks (+)	2.000	months of fuel & chemicals	0.14%		77.84	77.84
	Suppliers(-)	1.000	months of payables	0.27%		152.91	152.91
	WCN	9.82%	% of operating income			5,472.23	5,472.23
	CALCULATION OF DEPRECIATION
47.00	In ’000 US$	$/kW	kW	Year	0	1	2
	Initial investment in land	$10,000	1.00		10.00
$1,694	Freight on Board = FOB USA = $/kW	$1,694	155.40		263,228.70
5%	Ocean Freight = FRT = 5% x FOB	5%			13,161.43
1%	Insurance = INS = 1% x FOB	1%			2,632.29
	Cargo, Insurance & Freight = CIF = FOB + FRT + INS				279,022.42
12%	Value Added Tax = VAT = 12% x CIF	0%			0.00
3%	Customs Duty = (CIF + VAT) x (% Duty) x (1 + % VAT)	0%			0.00
	Duty-Paid Landed Cost = DPLC = CIF + VAT + Duty				279,022.42
3%	Local Freight Cost = LFC = 3% x CIF	3%			8,370.67
	Delivered Cost at Site = DCS = DPLC + LFC				287,393.09
5%	Installation Cost = IC = 5% x FOB	5%			13,161.43
	Total EPC = DCS + IC				300,554.53
10%	Contingency (10%) = EPC x 10%	10%			30,055.45
1%	Documentary Stamps (1%) = EPC x 1% = DS	1%			3,005.55
$2,147	Total Fixed Assets (EPC + Contingency + DS)				333,615.53
	Depreciation term (years)	salvage value	10.00%	12,010.16	25	333,625.53
	Development costs (modeler)		2.00%		6672.51
12%	Other Costs including taxes, contingencies		0.00%		0.00
	Carbon Emission Registration & Consultancy				50.00	45,675.33
	Initial investment in capitalized expenses				7,276.35
	Amortization term (years)	salvage value	10.00%	261.95	25
	Working Capital:
	Working capital (initial stocks – fuel) – 2 months				0.00
	Working capital (initial spares – installation) – 2 months				77.84
	Working capital (mobilization – utilities) – 2 months				75.62
	Working capital (mobilization – maintenance) – 2 months				111.21
	Working capital (mobilization – personnel expense) – 2 months				111.21
	Working capital (pre-paid expense – advance rent) – 2 months				116.77
	Working capital (pre-paid expense – taxes, insurances, etc) – 2 months			603.84	111.21	340,901.88
	Interest During Construction:
	Dev’t fees (loan arranger)		1.00%		3,409.02
	Front end fees (loan arranger)		1.00%		3,409.02
	Commitment fees (bank)		0.50%		1,704.51
12%	Interest During Construction (bank) – 12 months		8.00%		27,272.15
	Amortization term (years)	salvage value	10.00%	1,288.61	25
$2,424	Total Investment (land, fixed, capitalized expenses, working capital)				376,696.58
	Depreciation of fixed assets					12,010.16	12,010.16
	Amortization of capitalized expenses					261.95	261.95
	Amortization of interest during construction					1,288.61	1,288.61
	TOTAL DEPRECIATION & AMORTIZATION EXPENSE					13,560.72	13,560.72
	Evolution of fixed assets and capitalized expenses			Year	0	1	2
	Land (non-depreciable)				10.00	10.00	10.00
	Gross fixed assets				333,615.53	333,615.53	333,615.53
	Accumulated depreciation				0.00	12,010.16	24,020.32
	Net fixed assets				333,615.53	321,605.37	309,595.21
	Gross capitalized expenses				7,276.35	7,276.35	7,276.35
	Accumulated amortization				0.00	261.95	523.90
	Net capitalized expenses				7,276.35	7,014.41	6,752.46
	Gross capitalized interest during construction				35,794.70	35,794.70	35,794.70
	Accumulated amortization				0.00	1,288.61	2,577.22
	Net capitalized interest during construction				35,794.70	34,506.09	33,217.48
	Total Depreciable Assets (fixed assets, capitalized expenses, IDC)				376,686.58	363,125.86	349,565.14
	DEBT SERVICE CALCULATION
	In ’000 US$			Year	0	1	2
	Total Initial investment				376,696.58
30%	% to be financed by capital		Equity IRR	15.00%	25%
	% to be financed by non refundable subsidy		Subsidy	0.00%	0%
	% to be financed by debt		Debt Interest	8.50%	75%
	Initial amount of capital		WACC	10.13%	94,174.14
	Amount of subsidy				0.00
	Initial amount of debt				282,522.43
	Repayment term (years)			28,252.24	10
	Constant Repayment Method:
	Annual repayment					28,252.24	28,252.24
	Amount of debt at year end				282,522.43	254,270.19	226,017.95
	Average amount of debt					268,396.31	240,144.07
	Reference interest rate (Libor or other)				6.00%	6.00%	6.00%
	Spread				2.50%	2.50%	2.50%
	Interest rate of debt		(1 = constant, 0 = mortgage)		8.50%	8.50%	8.50%
	Interest based on average amount of debt		1			22,813.69	20,412.25
	Declining Balance Method:
	Beginning Balance					282,522.43	263,478.24
	Interest		0	15.24%	8.50%	24,014.41	22,395.65
	Principal repayment			43,058.60	10	19,044.19	20,662.94
	Remaining balance				282,522.43	263,478.24	242,815.30
				Year	0	1	2
	Beginning Balance					282,522.43	254,270.19
	Annual amount of interest					22,813.69	20,412.25
	Annual amount of principal					28,252.24	28,252.24
	Annual debt service (principal + interest)					51,065.93	48,664.49
	Ending Balance				282,522.43	254,270.19	226,017.95
	Debt Service Reserve Fund	6	months			25,532.96	24,332.24
	DSRF Income	4.00%	DSRF Income			1,021.32	973.29
	Withholding Tax on Forex Fund	7.50%	WhTax
	DSRF Expense	0.30%	DSRF Expense			76.60	73.00
	BALANCE SHEET
	BALANCE SHEET BEFORE DIVIDEND PAYMENT
	In ’000 US$			Year	0	1	2
	Cash needed for operations				0.00	905.77	905.77
	Additional cash (if negative, it would represent additional debt)				0.00	-11,223.61	-14,366.53
	Receivables				0.00	4,641.53	4,641.53
	Stocks				0.00	77.84	77.84
	Land				10.00	10.00	10.00
	Fixed assets (net)				333,615.53	321,605.37	309,595.21
	Capitalized expenses (net)				7,276.35	7,014.41	6,752.46
	Capitalized interest during construction (net)				35,794.70	34,506.09	33,217.48
	Total assets				376,696.58	357,537.39	340,833.75
	Suppliers				0.00	152.91	152.91
	Debt				282,522.43	254,270.19	226,017.95
	Shareholder’s advances
	Current year profit after tax				0.00	8,940.15	11,548.60
	Accumulated reserves				0.00	0.00	8,940.15
	Subsidy				0.00	0.00	0.00
	Capital				94,174.14	94,174.14	94,174.14
	Total liabilities and net worth				376,696.58	357,537.39	340,833.75
	Variance				0.00	0.00	0.00
	BALANCE SHEET AFTER DIVIDEND PAYMENT
	In ’000 US$			Year	0	1	2
	Cash needed for operations				0.00	905.77	905.77
	Additional cash (if negative, it would represent additional debt)				0.00	-11,223.61	-14,366.53
	Receivables				0.00	4,641.53	4,641.53
	Stocks				0.00	77.84	77.84
	Land				10.00	10.00	10.00
	Fixed assets (net)				333,615.53	321,605.37	309,595.21
	Capitalized expenses (net)				7,276.35	7,014.41	6,752.46
	Capitalized interest during construction (net)				35,794.70	34,506.09	33,217.48
	Total assets				376,696.58	357,537.39	340,833.75
	Suppliers				0.00	152.91	152.91
	Debt				282,522.43	254,270.19	226,017.95
	Shareholder’s advances
	Current year profit after tax
	Reserves				0.00	8,940.15	20,488.75
	Subsidy				0.00	0.00	0.00
	Capital				94,174.14	94,174.14	94,174.14
	Total liabilities and net worth				376,696.58	357,537.39	340,833.75
	Variance				0.00	0.00	0.00
	Calculation of Dividends Payable
	Gross Margin					45,314.55	45,521.57
	Income Tax (-)					0.00	0.00
	Increase in Working Capital (-)					5,472.23	0.00
	Profit Sharing (-)					0.00	0.00
	DSRF Income (+)					1,021.32	973.29
	Social Benefit Fund (-)					0.00	0.00
	Carbon Emission Credits (+)					1,825.81	1,825.81
	Cash flow available for debt service (CFD)					42,689.45	48,320.67
	Annual debt service (DS) = Interest + Principal					51,065.93	48,664.49
	CF available for dividends (CFDiv = CFD-DS)					0.00	0.00
	Accumulated CFDiv				0.00	0.00	0.00
	Current year profit = Income After Tax					8,940.15	11,548.60
	Accumulated profit: limit for dividend payable				0.00	8,940.15	20,488.75
	Accumulated dividend payable				0.00	0.00	0.00
	Annual dividend payable				-94,174.14	0.00	0.00
	Investor 1	60.00%			-56,504.49	0.00	0.00
	Investor 2	30.00%			-28,252.24	0.00	0.00
	Investor 3	10.00%			-9,417.41	0.00	0.00
		100.00%
	CASH FLOW STATEMENT			Year	0	1	2
	OPERATIONS
	Net Income (after tax)					8,940.15	11,548.60
	Add:  Depreciation & Amortization					13,560.72	13,560.72
	(Increase) / Decrease in Receivables					-4,641.53	0.00
	(Increase) / Decrease in Inventories					-77.84	0.00
	Increase / (Decrease) in Accounts Payable					152.91	0.00
	Net Cash flow from Operations					17,934.40	25,109.32
	INVESTMENTS
	Additions to PP&E		333,615.53		-333,615.53	0.00	0.00
	Additions to Capitalized Expenses		7,276.35		-7,276.35	0.00	0.00
	Additions to Capitalized IDC		35,794.70		-35,794.70	0.00	0.00
	Additions to Land		10.00		-10.00	0.00	0.00
	Net Cash flow Used for Investments		376,696.58		-376,696.58	0.00	0.00
	Cash flow before Financing				-376,696.58	17,934.40	25,109.32
	FINANCING
	Increase (Decrease) in Shareholder Advances				0.00	0.00	0.00
	Increase (Decrease) in Long-term Debt		282,522.43		282,522.43	-28,252.24	-28,252.24
	Increase (Decrease) in Subsidy		0.00		0.00	0.00	0.00
	Increase (Decrease) in Capital Stock		94,174.14		94,174.14	0.00	0.00
	Net Cash flow from Financing		376,696.58		376,696.58	-28,252.24	-28,252.24
	NET CASH FLOW				0.00	-10,317.84	-3,142.92
	Add: Beginning Cash Balance					0.00	-10,317.84
	ENDING CASH BALANCE				0.00	-10,317.84	-13,460.77
	Levlized Profit and Cost of Electricity			Year	0	1	2
	Discounting Rate, % p.a.	15.00%	47.00		NPV
	Electricity sales	MWh	PhP/kWh	$/kWh	3,710,889	573,712	573,712
0.0971	TOTAL OPERATING INCOME	000 US$	4.5630	0.0971	360,268.69	55,698.37	55,698.37
fuel	Expenses for diverted water fee (fuel)	000 PhP	0.0000	0.0000	0.00	0.00	0.00
variable O&M	Maintenance of water turbine/generator (spares)	000 US$	0.0382	0.0008	3,019.16	467.06	467.06
	Utilities (fuel, lubes, electricity, water)	000 US$	0.0371	0.0008	2,932.90	453.72	453.72
	Maintenance of the rest of the plant	000 US$	0.0546	0.0012	4,313.08	667.23	667.23
	Personnel expense	000 US$	0.0546	0.0012	4,313.08	667.23	667.23
fixed O&M	Land lease, rent	000 US$	0.0574	0.0012	4,528.74	700.59	700.59
	Taxes, Insurance, services, and others	000 US$	0.0546	0.0012	4,313.08	667.23	667.23
	DSRF Expense	000 US$	0.0041	0.0001	323.27	76.60	73.00
regulatory	Special Privilege Tax – 2%	000 US$	0.0913	0.0019	7,205.37	1,113.97	1,113.97
	Special Realty Tax – 2.5%	000 US$	0.3480	0.0074	27,473.50	5,446.89	5,243.48
	DOE 1-94 : 0.01 PhP/kWh sales	000 US$	0.0101	0.0002	797.53	123.30	123.30
Others
1	Depreciation & amortization	000 US$	1.1102	0.0236	87,658.50	13,560.72	13,560.72
1	Interest	000 US$	0.9337	0.0199	73,721.41	22,813.69	20,412.25
1	Income tax	000 US$	0.1077	0.0023	8,503.44	0.00	0.00
	Total Cost		2.9017	0.0617	229,103.04	46,758.22	44,149.77
	Net Profit		1.6613	0.0353	131,165.64	8,940.15	11,548.60