How to use the advanced (regulator) biomass power plant project finance model

July 9th, 2017 No Comments   Posted in financial models

How to use the advanced (regulator) biomass power plant project finance model

(Lord God, bless my website and my readers that they will contribute to my charity fund for the jobless, sickly, needy, homeless, hungry and destitute. God Bless you all my friends for reading my blog and ordering my project finance models. Amen.)

Finding an easy-to-use project finance model for a biomass power plant with built-in data is sometimes difficult as some models don’t have the sophistication of a regulator template model as well as the ease of using the model and viewing immediately the results of a sensitivity change in the inputs to the model.

This is now made easy because the Input & Assumptions worksheet (tab) has combined all the input and output information in a single worksheet and placing the reports in other worksheets such as Tariff Breakdown, Construction Period, Operating Period, Financial Reports and Levelized Tariff.

Following is a sample case study on a biomass power plant. From the preliminary design and cost estimates, the top management would want to know if the business idea of going into biomass power development, construction and operation is worth the effort – is it feasible and what are the economic and financial returns for risking capital.

Here are the inputs and outputs of the advanced template model from OMT ENERGY ENTERPRISES:

——————————————————————————————-

Here are the summary of inputs:

all-in capital cost (overnight cost) = 4,114 $/kW (target cost)

EPC cost portion = 2,848 $/kW (computed by model)

refurbishment cost = 10% of EPC cost on the 10th year (overhaul)

fixed O&M cost = 105.63 $/kW/year (target cost) = 5,132.47 ‘000$/unit/year (computed by goal seek)

variable O&M cost = 5.26 $/MWh (target cost) = 27.22 ‘000$/MW/year (computed by goal seek)

general admin cost = 10.00 ‘000$/year (target cost)

 

Thermal power plant inputs:

Gross heating value of biomass fuel = 5,198 Btu/lb

Plant heat rate = 12,186 Btu/kWh (28.00% thermal efficiency)

Cost of biomass fuel = 1.299 PhP/kg = 1,299 PhP/MT

 

Lube oil consumption rate = 5.4 gram/kWh

Density of lube oil = 0.980 kg/Liter

Cost of lube oil = 200.00 PhP/Liter

 

capacity = 50.00 MW/unit x 1 unit = 50.00 MW

 

Plant Availability Factor, %                                         97.08% (computed by goal seek)

Load Factor, %                                                            95.00% (assumed)

Allowance for losses & own use, %                            10.00% (assumed)

Net Capacity Factor after losses & own use, %         83.00% (target net capacity factor)

Degradation rate, %                                                      0.2%

 

construction period = 24 months (start 2014)

operating period = 20 years (start 2016)

 

Capital cost estimation assumptions and % local cost (LC):

Power plant footprint (ha)                                   50.00

Cost of purchased land (PhP/sqm)                    28.65 (no land lease)

Land cost, $000 $284.81 100.0%
Equipment Cost ex BOP, Transport ($000/MW) $1,964.38 24.7%
Insurance, Ocean Freight, Local Transport, % of Equipment Cost 10.0% 100.0%
Balance of Plant (BOP), % of Equipment Cost 35.0% 100.0%
Transmission Line Distance (km) 10.00
T/L Cost per km, 69 kV ($000/km) $20.00 100.0%
Switchyard & Transformers ($000) $569.03 100.0%
Access Roads ($000/km) $20.00 100.0%
Distance of Access Road (km) 10.00
Dev’t & Other Costs (land, permits, etc.) (% of EPC) 10.0% 100.0%
VAT on importation (70% recoverable) 12% 100.0%
Customs Duty 0% 100.0%
Initial Working Capital (% of EPC) 11.0% 100.0%
Contingency (% of Total Cost) 4.0% 50.0%

 

Capital cost breakdown (‘000$): (computed values)

Uses of Fund:
   Land Cost $285
   EPC (Equipment, Balance of Plant, Transport) $142,417
   Transmission Line Interconnection Facility $200
   Sub-Station Facility $569
   Development & Other Costs (Civil Works, Customs Duty) $14,442
   Construction Contingency $6,305
   Value Added Tax $9,253
   Financing Costs $16,563
   Initial Working Capital $15,666
Total Uses of Fund – $000 $205,700
                                 – PhP 000 10,346,113
Sources of Fund:
   Debt $143,990
   Equity $61,710
Total Sources of Fund $205,700

 

Local and Foreign Cost Components (from individual cost item):

Local Capital   = 59 %

Foreign Capital = 41 %

 

Balance Sheet Accounts:

Receivables = 30 days of revenue

Payables      = 30 days of expenses

Inventory     = 60 days of consumables

 

Imported Capital Equipment:

Customs duty = 0%

Value added tax (VAT) = 12%

VAT recovery = 70% on 5th year of operation

 

Type of input / output VAT = 0 (none)

Type of incentives = 2 (BOI incentives)

 

Tax Assumptions:

Income Tax Holiday (yrs) 7
Income Tax Rate % (after ITH) 10%
Property tax (from COD) 1.5%
Property tax valuation rate (% of NBV) 80%
Local Business Tax 1.0%
Government Share (from COD) 1.0%
ER 1-94 Contribution (PhP/kWh) 0.01
Withholding Tax on Interest (Foreign Currency) – WHT 10%
Gross Receipts Tax on Interest (Local Currency) – GRT 5%
Documentary Stamps Tax (DST) 0.5%
PEZA Incentives (% of gross income) – 0% / 5% 0%
Royalty

 

Capital Structure:

Equity Share = 30% at 16.44% p.a. target equity returns (IRR)

Debt Share   = 70% (59% local, 41% foreign)

 

Debt Terms:

Local & Foreign Upfront & Financing Fees 2.00%
Local & Foreign Commitment Fees 0.50%
Local All-in Interest Rate excluding tax 10.00%
Local Debt Payment Period (from end of GP) (yrs) 10
Foreign All-in Interest Rate excluding tax 8.00%
Foreign Debt Payment Period (from end of GP) (yrs) 10
Local and Foreign Grace Period from COD (mos) 6
Local and Foreign debt Service Reserve (mos) 6

 

Foreign Exchange Rate:

Base Foreign Exchange Rate (PhP/US$) – 2013            48.0000 (construction)

Forward Fixed Exchange Rate (PhP/US$) – 2014           50.2971 (operating)

 

Escalation (CPI):

Annual Local CPI – for OPEX        0.0%            4.0%      for CAPEX (to model construction delay)

Annual US CPI – for OPEX            0.0%            2.0%      for CAPEX (to model construction delay)

 

Weighted Average Cost of Capital:

WACC pre-tax           11.67%

WACC after-tax        10.50%

WACC                         11.37%

 

Results of Financial Analysis:

 

First year tariff (Feed-in-Tariff) = 7.39755 P/kWh = 0.1471 USD/kWh

(at zero equity NPV)

 

Short run marginal cost (SRMC) and Long run marginal cost (LRMC):

Item PhP 000 PhP/kWh
Fuel        10,951,959 1.535
Lubes                8,734 0.001
Var O&M        2,085,235 0.292
Total        13,045,928 1.829
MWh net        7,132,655
SRMC        13,045,928 1.829
Fix O&M        7,453,730 1.045
Capital Cost        32,264,546 4.523
LRMC        52,764,204 7.398

 

Equity Returns: (30% equity, 70% debt)

IRR           = 16.44     % p.a. (target returns)

NPV         = 0.00     ‘000$

PAYBACK = 7.27     years

 

Project Returns: (100% equity, 0% debt)

IRR           = 13.22         % p.a.

NPV         = (1,451,954)   ‘000$ (negative since IRR < 16.44%)

PAYBACK = 6.24         years

——————————————————————————————-

The above runs were based on goal-seek to make equity NPV = 0 (to meet equity IRR target of 16.44% p.a.).

You can perform sensitivity analysis and save the results in a case column (copy paste value).

You can breakdown the tariff ($/kWh) into its capital ($/kW-month) and variable cost recovery ($/kWh) portions.

You can prepare all-in capital cost breakdown showing interest cost during construction and does model the impact of project construction delays.

You can show the evolution of capacity and generation (degradation) during the operating period and show other revenues, expenses and balance sheet accounts as they change over time during operation years.

You can show the income & expense statement.

You can show the cash flow statement.

You can show the balance sheet.

You can show the debt service cover ratio (DSCR) as it computes the cash flow available for debt service.

It also computes the benefits to cost ratio (B/C) of the project.

Finally, it computes the other financial ratios such as:

LIQUIDITY RATIOS

SOLVENCY RATIOS

EFFICIENCY RATIOS

PROFITABILITY RATIOS

MARKET PROSPECT RATIOS

 

Download the sample file below:

Model Inputs and Results – Biomass Cogeneration

 

Download the complete demo model for a biomass power plant in PHP and USD currencies are shown below:

ADV Biomass Cogeneration Model3 – demo5b

ADV Biomass Cogeneration Model3 (USD) – demo5b

If you have actual data from your OEM and EPC suppliers, kindly share the data with me or simply enter your live data into the above models and see how the results will change immediately before your eyes. Please email me back the updated demo model with your new data so you may share it will all our readers of this blog.

 

To purchase the PHP and USD models at a discount (only USD400 for two models), click the link below:

Biomass Cogeneration Project Finance Model Ver. 3 – in USD and PHP Currency

Biomass Gasification Project Finance Model Ver. 3 – in USD and PHP Currency

Biomass IGCC Project Finance Model Ver. 3 – in USD and PHP Currency

Biomass WTE Project Finance Model Ver. 3 – in USD and PHP Currency

Biomass WTE-pyrolysis Project Finance Model Ver. 3 – in USD and PHP Currency

 

You may place your order now and avail of a package for the unlocked model with free guidance on using it. The list price of the biomass model is USD1,400 and I will give you one-hour free for assistance in putting your input data into the model (via telephone or email or FB messenger).

Your energy technology selection expert.

Email me for more details and how to order off-line:

energydataexpert@gmail.com

Visit our on-line digital store to order on-line

www.energydataexpert.com

www.energytechnologyexpert.com

 

Biomass Energy Project Finance Model Template (Financials Tab) – free demo

April 15th, 2016 No Comments   Posted in project finance modeling

Biomass Energy Project Finance Model Template (Financials Tab) – free demo

This is the latest project finance model template (financials tab or worksheet) that your energy technology selection expert has developed for biomass energy (cogeneration, direct combustion, gasification, IGCC, WTE) and all other fossil and thermal power plants (burns fossil fuel). Familiarize with the template and if interested, get the full unlocked version for your immediate use. I can also provide data input service or customize further the model.

More »

Cogeneration (CHP) Biomass Power Project Finance Model

May 8th, 2014 2 Comments   Posted in cogeneration

Cogeneration (CHP) Biomass Power Project Finance Model

A new and powerful tool for analysing the technical and economic viability of cogeneration (combined heat & power) using biomass fuel such as wood chips, agri-wastes, bagasse, wood-wastes is now available in the market to calculate your feed-in-tariff (FIT) rates or IRR and payback periods.

Your technology expert is pleased to announce the availability of a new cogeneration (combined heat & power or CHP) biomass power project finance model.

Be the first to use this powerful tool in analysing your biomass resource potential and convert it to useful energy and power. More »

Project Finance Models for CLEAN DEVELOPMENT MECHANISM (CDM EDITION)

June 27th, 2012 No Comments   Posted in renewable energy

Project Finance Models for CLEAN DEVELOPMENT MECHANISM (CDM EDITION)

Yes, your energy technology selection and business development expert has developed a low-cost set of project finance models for CDM professionals (engineers, business development, investment bankers, managers) and novice professionals who want to learn and start their career in financial modeling of renewable energy projects.

Just follow this link to order, pay and download your favorite renewable energy project finance model – CLEAN DEVELOPMENT MECHANISM EDITION. More »

Project Finance Models for FEED-IN-TARIFF REGULATOR

June 27th, 2012 1 Comment   Posted in renewable energy

Project Finance Models for FEED-IN-TARIFF REGULATOR

Yes, your energy technology selection and business development expert has developed a low-cost set of project finance models for government feed-in-tariff regulators and novice professionals who want to learn and start their career in financial modeling of renewable energy projects.

Just follow this link to order, pay and download your favorite renewable energy project finance model – FEED-IN-TARIFF REGULATOR EDITION. More »

Project Finance Models for PROFESSIONALS

June 27th, 2012 No Comments   Posted in renewable energy

Project Finance Models for PROFESSIONALS

Yes, your energy technology selection and business development expert has developed a low-cost set of project finance models for professionals (engineers, business development, investment bankers, managers) and novice professionals who want to learn and start their career in financial modeling of renewable energy projects.

Just follow this link to order, pay and download your favorite renewable energy project finance model – PROFESSIONAL EDITION. More »

Project Finance Models for STUDENTS

June 27th, 2012 No Comments   Posted in renewable energy

 Project Finance Models for STUDENTS

Yes, your energy technology selection and business development expert has developed a low-cost set of project finance models for students (college, masteral, PhD) and novice professionals who want to learn and start their career in financial modeling of renewable energy projects.

Just follow this link to order, pay and download your favorite renewable energy project finance model – STUDENT EDITION. More »

CDM Biomass Cogeneration Model2.xls

June 25th, 2012 No Comments   Posted in renewable energy

CDM Biomass Cogeneration Model2.xls

In addition to the worksheets found in the ADV models of the regulator, 5 additional tabs or worksheets have been added (Capex, Opex, Revenues, Project IRR and Sensitivity) into the CDM model which is a financial evaluation without taxes (that distort the economic and technical performance) and debt (pure equity investment). For the RE project to benefit from CDM credits, the project IRR should not be more than 15% p.a.

Biomass cogeneration system is carried out mostly in the countryside where biomass is abundant from agricultural activity such as sugar cane fields. More »

MTO Biomass Cogeneration Model.xls

June 24th, 2012 No Comments   Posted in renewable energy

MTO Biomass Cogeneration Model.xls

Biomass cogeneration system is carried out mostly in the countryside where biomass is abundant from agricultural activity such as sugar cane fields.

This MTO first-year tariff model for biomass cogeneration makes use of the basic assumptions of the country’s RE regulator for rated capacity (34 MW), capacity factor (75%), plant own use (10%), and transmission line loss (3%). More »

ADV Biomass Cogeneration Model.xls

June 24th, 2012 No Comments   Posted in renewable energy

ADV Biomass Cogeneration Model.xls

Biomass cogeneration system is carried out mostly in the countryside where biomass is abundant from agricultural activity such as sugar cane fields.

This advanced feed-in-tariff model for biomass cogeneration makes use of the basic assumptions of the country’s RE regulator for rated capacity (2 x 17 MW), capacity factor (80%), plant own use (10%), and 0.20% plant degradation rate. More »

Get Your Project Finance Models the Easy Way – Shopping Cart

Get Your Project Finance Models the Easy Way – Shopping Cart

You can now order on-line your project finance models the easy way – via the Shopping Cart.

Once you have decided to purchase, proceed to order via the shopping cart and pay thru PayPal thru your bank account or your credit card and download immediately the models. More »

The Paradigm Shift from Nuclear Energy to Renewable Energy – the Fukushima debacle

April 16th, 2011 4 Comments   Posted in nuclear energy and power

The Paradigm Shift from Nuclear Energy to Renewable Energy – the Fukushima debacle

The recent nuclear meltdown incident in one of the 15th largest nuclear power plant in the world as a result of a sequence of events starting with an Intensity 9.0 earthquake that initiated a 10-15 meter tsunami wave within minutes (leaving little time for safe evacuation in spite of adequate tsunami warning by civil and military authorities) that engulfed as far as 10-20 kilometers inland along the flat lands of northeastern Japan, and in the process destroying buildings, roads, bridges, flinging ships inland and disabling the backup diesel generation system of the Fukushima nuclear power plant.

There are newspaper accounts that the earthquake isolated the Fukushima nuclear power plant from the grid, and with a non-operable backup diesel generation backstopped only by an 8-hour battery pack, the world was indeed very close to a China-syndrome type nuclear power plant meltdown. Only the timely use of seawater pumped using crude methods to cool the reactor core and the spent fuel pool prevented a full meltdown. Up to now, the nuclear power plant operator has not succeeded in stabilizing the cooling water system and has relied on pumping and spraying sea water over the damaged nuclear reactors and exposed spent fuel rod cooling pools, leading to leakage of hot radioactive and contaminated sea water into the sea thru the minute cracks on the reactor building’s damage floors. More »

New Simplified Calculation Procedure for Levelized Cost of Energy (LCOE) and Feed-in Tariff

July 28th, 2010 3 Comments   Posted in cost of power generation

New Simplified Calculation Procedure for Levelized Cost of Energy (LCOE) and Feed-in Tariff

As part of the on-going technical preparations for the proposed mini-conference on the Mindanao Power Crisis this coming late August or early September 2010 and the main conference on “Energy & Climate Change”, the workshop coordinator, Mr. Marcial T. Ocampo, has prepared the simplified calculation procedure for calculating the levelized cost of energy (LCOE) and levelized selling price (tariff) for conventional and renewable energy resources.

The result of the simplified formulas using the US NREL formula for generation cost and the RP MTO formula for selling price were compared with the results from a full-blown project finance model and the variance between the two methods were minimal in most of the power generation technologies analyzed.

The input data came from the IEPR research summary of 2007 and from internationally published data on power generation technology by noted experts such as Paul Breeze and yours truly, Marcial Ocampo. More »

ENERGY & CLIMATE CHANGE: A Complete Review of Power Generation Technologies and Impact on Climate Change

July 15th, 2010 5 Comments   Posted in energy & climate change

For:    ________________________ (name of suggested speaker/presentor, discussant/reactor, contributor/donor, exhibitor, participant)

From:  Marcial T. Ocampo

former Executive Director, Philippine Council for Industry & Energy Research & Development (PCIERD)

Department of Science & Technology (DoST)

Republic of the Philippines

Subject: Invitation to Conference on Energy & Climate Change as Speaker/Presentor, Discussant/Reactor, Contributor/Donor, Exhibitor, Participant (top management by invitation)

————————————-

Dear Sir/Madam:

In view of the need to provide stakeholders’ input into the development of a new energy strategy of the incoming administration of President Aquino towards sustainable development, I would like to invite you to solicit your interest and participation on the proposed conference on

ENERGY & CLIMATE CHANGE:  A Complete Review of Power Generation Technologies and Impact on Climate Change

Date: tentative September-October 2010

Venue: To be arranged More »

Municipal Solid Waste (MSW) to Power Project

July 3rd, 2010 11 Comments   Posted in feed-in tariff

Municipal Solid Waste (MSW) to Power Project

This is a power point presentation with a project finance model for calculating feed-in tariff (FiT).

The FiT is a renewable energy charge paid to renewable energy (RE) developers for providing power to the grid.  It is paid for by the Transco operator who collects a renewable energy charge (REC) from all consumers of electricity in the country.  By being spread out to all consumers, the burden of a higher FiT compared to the average grid rate is shared equally by all citizens and consumers alike since they will benefit from the positive impact of RE on global warming and climate change issues.

More »