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

July 25th, 2017 No Comments   Posted in financial models

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

Finding an easy-to-use project finance model for a large hydro 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 large hydro power plant. From the preliminary design and cost estimates, the top management would want to know if the business idea of going into large hydro 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) = 2,936 $/kW (target cost)

EPC cost portion = 2,109 $/kW (computed by model)

refurbishment cost = 5% of EPC cost on the 15th year (overhaul)

fixed O&M cost = 14.13 $/kW/year (target cost) = 4,728.61 ‘000$/unit/year (computed by goal seek)

variable O&M cost = 2.00 $/MWh (target cost) = 8.61 ‘000$/MW/year (computed by goal seek)

general admin cost = 100.00 ‘000$/year (target cost)

 

Thermal power plant inputs: (no applicable to large hydro)

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

Plant heat rate = 13,500 Btu/kWh (25.28% 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 = 500.00 MW/unit x 1 unit = 500.00 MW

 

Plant Availability Factor, %                                    57.68% (computed by goal seek)

Load Factor, %                                                     92.00% (assumed)

allowance for losses & own use, %                         2.00% (assumed)

Net Capacity Factor after losses & own use, %    52.00% (target net capacity factor)

Degradation rate, %                                               0.5%

 

construction period = 36 months (start 2014)

operating period = 30 years (start 2017)

 

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

Power plant footprint (ha)                                   40.00

Cost of purchased land (PhP/sqm)                    25.00 (no land lease)

Land cost, $000 $198.82 100.0%
Equipment Cost ex BOP, Transport ($000/MW) $1,842.20 43.0%
Insurance, Ocean Freight, Local Transport, % of Equipment Cost 4.5% 100.0%
Balance of Plant (BOP), % of Equipment Cost 10.0% 80.0%
Transmission Line Distance (km) 25.00
T/L Cost per km, 69 kV ($000/km) $84.00 100.0%
Switchyard & Transformers ($000) $500.00 100.0%
Access Roads ($000/km) $20.00 100.0%
Distance of Access Road (km) 15.00
Dev’t & Other Costs (land, permits, etc) (% of EPC) 2.5% 100.0%
VAT on importation (70% recoverable) 12% 100.0%
Customs Duty 3% 100.0%
Initial Working Capital (% of EPC) 5.0% 100.0%
Contingency (% of Total Cost) 7.5% 55.7%

 

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

Uses of Fund:
   Land Cost $199
   EPC (Equipment, Balance of Plant, Transport) $1,054,662
   Transmission Line Interconnection Facility $2,100
   Sub-Station Facility $500
   Development & Other Costs (Civil Works, Customs Duty) $47,263
   Construction Contingency $81,295
   Value Added Tax $69,536
   Financing Costs $159,156
   Initial Working Capital $52,733
Total Uses of Fund – $000 $1,467,443
                                 – PhP 000 73,808,108
Sources of Fund:
   Debt $1,027,210
   Equity $440,233
Total Sources of Fund $1,467,443

 

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

Local Capital = 56 %

Foreign Capital = 44 %

 

Balance Sheet Accounts:

Receivables = 30 days of revenue

Payables    = 30 days of expenses

Inventory    = 60 days of consumables

 

Imported Capital Equipment:

Customs duty = 3%

Value added tax (VAT) = 12%

VAT recovery = 0% on 5th year of operation

 

Type of input / output VAT = 1 (with VAT)

Type of incentives = 1 (NO incentives)

 

Tax Assumptions:

Income Tax Holiday (yrs) 0
Income Tax Rate % (after ITH) 30%
Property tax (from COD) 2.0%
Property tax valuation rate (% of NBV) 80%
Local Business Tax 1.0%
Government Share (from COD) 0.0%
ER 1-94 Contribution (PhP/kWh) 0.01
Withholding Tax on Interest (Foreign Currency) – WHT 10%
Gross Receipts Tax on Interest (Local Currency) – GRT 1%
Documentary Stamps Tax (DST) 0.5%
PEZA Incentives (% of gross income) – 0% / 5% 0%
Royalty 0%

 

Capital Structure:

Equity Share = 30% at 14.00% p.a. target equity returns (IRR)

Debt Share = 70% (56% local, 44% 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 = 10.58% p.a.

WACC pre-tax = 12.11% p.a.

WACC after-tax = 8.48% p.a.

 

Results of Financial Analysis:

 

First year tariff (Feed-in-Tariff) = 6.19949 P/kWh = 0.12326 USD/kWh

(at zero equity NPV)

 

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

Item PhP 000 PhP/kWh
Fuel                      – 0.00000
Lubes                7,127 0.00011
Var O&M          6,496,970 0.10252
Total          6,504,097 0.10263
MWh net        63,374,220
SRMC          6,504,097 0.10263
Fix O&M        33,657,041 0.53108
Capital Cost      352,726,856 5.56578
LRMC      392,887,994 6.19949

 

SRMC = 0.10263 PHP/kWh (variable O&M + fuel + lubes)

LRMC = 6.19949 PHP/kWh (capital cost + fixed O&M + regulatory + SRMC)

 

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

IRR          = 14.00    % p.a. (target returns)

NPV        = 0.00     ‘000$

PAYBACK = 10.02    years

 

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

IRR          = 11.65          % p.a.

NPV        = (9,394,578)  ‘000$ (negative since IRR < 14.00%)

PAYBACK = 7.08           years

——————————————————————————————-

The above runs were based on goal-seek to make equity NPV = 0 (to meet equity IRR target of 14.00% 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 – Large Hydro

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

 ADV Large Hydro Model3 – demo5b

ADV Large Hydro 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, click the link below:

Large Hydro 500 mw Power 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 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

 

The Alternatives to Nuclear Power and Expensive Renewable Energy Technologies

September 8th, 2016 No Comments   Posted in cost of power generation, Uncategorized

The Alternatives to Nuclear Power and Expensive Renewable Energy Technologies

Talks about using nuclear energy and reviving the Bataan Nuclear Power Plant (BNPP) and to use rapidly getting cheaper renewable energy such as solar PV and wind are all long-shots in making Philippine electricity cheaper and more reliable.

What the country needs are safe, indigenous and base load power plants.

The nuclear option is a long-way to go as the country needs to develop and upgrade its nuclear regulatory framework (our Philippine Atomic Energy Commission is a research agency, not a nuclear regulator), the BNPP has to be technically, environmentally, geologically and economically studied to see if it is safe, its components are still in good working order or needs to be replaced and upgraded, the country is equipped to handle any nuclear mishaps, accidents, terrorist attacks, and the additional $1 billion to upgrade and make operational and cost of nuclear fuel rods will still allow BNPP to make electricity below grid rate of 5-6 P/kWh. We can’t reduce power costs unless we introduce power plants that are cheaper to build, more efficient to run, environmentally and geologically compliant, and have secure and cheaper sources of fuels. More »

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September 28th, 2014 No Comments   Posted in cost of power generation

Advanced (ADV) Project Finance Models for Conventional, Fossil, Nuclear and Renewable Energy Power Generation Technologies – Price List and Specs (offer up to Sep 30, 2014 only)

Your power generation technology selection expert is pleased to make a final call to all project finance and power plant modelers to purchase the Advanced (ADV) Project Finance Models for Conventional, Fossil, Nuclear and Renewable Energy Power Generation Technologies.

The model consists of the following worksheets/tabs: More »

Why the Philippines is Lacking in Power Supply Always and is Expensive Compared to its Asian Neighbors

September 24th, 2014 No Comments   Posted in cost of power generation

Why the Philippines is Lacking in Power Supply Always and is Expensive Compared to its Asian Neighbors

Following is the outline of my power point presentation on “Why the Philippines is Lacking in Power Supply Always” and  why the Philippines has one of the highest power rate in Asia and the World.

If you need the pdf version, please email me so I could respond to your request.

 “Why the Philippines is Lacking in Power Supply Always”

By: Marcial T. Ocampo

        Energy Technology Selection and Optimization Consultant at

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Philippine Energy Data Analytics Service Provider – from your energy technology expert

April 25th, 2014 No Comments   Posted in energy data analytics

Philippine Energy Data Analytics Service Provider  – from your energy technology expert

You might be interested to look into the latest power supply and demand outlook (forecast 2014-2020) from the DOE.

It includes the existing 2011 installed capacity, plus constructed 2012-2013, plus committed 2014-2016 projects, then forecast peak demand, total reserves, total supply available.

Aside from the committed, there is also a list of indicative projects as well as future capacity additions for base load, mid-merit and peak load from the power development plan of DOE (from their optimized expansion planning modelling exercise). More »

New 2013 Price List of my Project Finance Models & Technical Tool Kits

January 17th, 2013 1 Comment   Posted in financial models

New 2013 Price List of my Project Finance Models & Technical Tool Kits

After the successful sale of my models and tool kits, I am happy to annouce the new price lists of my financial models, optimization tools and power plant emission calculation tool kits.

Order now this Christmass and get a whooping 50% discount on all articles and models. Hurry, this offer ends December 31, 2013. And if you buy two articles or models, the third one will be free! Order now and email me.

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CDM Mini-Hydro Model2.xls

June 25th, 2012 No Comments   Posted in renewable energy

CDM Mini-Hydro 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.

Mini-hydro or run-of-river system is carried out mostly in the mountains where a slowly snaking terrain will lend itself to conveying the water via a canal headrace with minimal head loss and then dropping the water head thru the penstock to the power turbines and exiting to the tailrace to rejoin the river flow. As such, it does not need a dam but rather a diversion weir to divert water to the canal headrace. More »

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June 24th, 2012 No Comments   Posted in renewable energy

MTO Mini-Hydro Model.xls

Mini-hydro or run-of-river system is carried out mostly in the mountains where a slowly snaking terrain will lend itself to conveying the water via a canal headrace with minimal head loss and then dropping the water head thru the penstock to the power turbines and exiting to the tailrace to rejoin the river flow. As such, it does not need a dam but rather a diversion weir to divert water to the canal headrace.

This MTO first-year tariff model for mini-hydro makes use of the basic assumptions of the country’s RE regulator for rated capacity (0.9 MW), capacity factor (80%), plant own use (2.9%), and transmission line loss (0.061%). More »

ADV Mini-Hydro Model.xls

June 24th, 2012 No Comments   Posted in renewable energy

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Mini-hydro or run-of-river system is carried out mostly in the mountains where a slowly snaking terrain will lend itself to conveying the water via a canal headrace with minimal head loss and then dropping the water head thru the penstock to the power turbines and exiting to the tailrace to rejoin the river flow. As such, it does not need a dam but rather a diversion weir to divert water to the canal headrace.

This advanced feed-in-tariff model for mini-hydro makes use of the basic assumptions of the country’s RE regulator for rated capacity (1 x 6.0 MW), capacity factor (48%), plant own use (2%), and 0.50% plant degradation rate. More »

Get Your Energy Technology Articles the Easy Way – Shopping Cart

June 19th, 2012 No Comments   Posted in energy technology expert

Get Your Energy Technology Articles the Easy Way – Shopping Cart

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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 »

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February 5th, 2012 2 Comments   Posted in Clean Development Mechanism

Modeling Clean Development Mechanism (CDM) Impact on Renewable Energy Economics

Your energy technology expert has updated its project finance models for renewable energy.

It now includes standard clean development mechanism (CDM) modeling to determine the economic impact of including carbon emission reduction (CER) credits to the overall economics of renewable energy sources (biomass cogeneration, biomass direct combustion, biomass gasification, solar PV, wind, mini-hydro, ocean thermal energy conversion).

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January 27th, 2012 1 Comment   Posted in renewable energy

Renewable Energy Investments and Fiscal Reforms will Ensure Sustainable Economic Growth and Avoid Greek-like Financial Meltdown

I would like to share my views with the purpose of suggesting what would be the sustainable economic and energy development path for our country, the Philippines.

With the passage of the Renewable Energy (RE) Law, the government thru the DOE, NREB, ERC, NGCP/TRANSCO, PEMC/WESM, NPC/NPC-SPUG, DUs, ECs, power generators (IPPs, IPPAs), NGOs, etc, and with the assistance of donor countries and financial institutions such as the WB, ADB, UNDP, USAID, AUSAID, etc, have developed the IRR and other pertinent regulations for the implementation of the RE Law, including the provision of feed-in-tariff (FIT) that will be paid to RE developers and generators so that it may provide non-fossil power generation to meet future demand of power as well as replace/augment supplies due to retirement of conventional and fossil power generation sources.

On several occasions, it has been articulated by both local and foreign experts that RE power generation is the sustainable way to go to meet the country’s energy and power needs in the future because: More »

Shopping Cart for my Power Generation and Fuel Cycle Technology Power Pt Presentation and Articles – new price list

August 13th, 2011 No Comments   Posted in power generation

Shopping Cart for my Power Generation and Fuel Cycle Technology Power Pt Presentation and Articles – new price list

Due to the tremendous interest and response from avid readers to this blog, your energy technology selection and business development expert is now automating the order taking, payment and downloading of its various power generation power pt presentable and articles as well as project finance models.

Here is the new price list for my energy data base, power plant emission, feed-in-tariff, renewable energy resource assessment and project finance models for conventional, renewable and nuclear energy.

If you are investing in energy and power generation projects in the Philippines or any other country, please email me so you could outsource to me the gathering of all energy, oil and power consumption, demand and projections to support the market study of your feasibility studies. More »

Shopping Cart for my Project Finance Models and LP Load Dispatch Models – new price list

August 13th, 2011 No Comments   Posted in cost of power generation

Shopping Cart for my Project Finance Models and LP Load Dispatch Models – new price list

Due to the tremendous interest and response from avid readers to this blog, your energy technology selection and business development expert is now automating the order taking, payment and downloading of its various energy technology articles as well as project finance models.

Here is the new price list for my energy data base, power plant emission, feed-in-tariff, renewable energy resource assessment and project finance models for conventional, renewable and nuclear energy. More »

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August 8th, 2011 5 Comments   Posted in cost of power generation

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Japan recently announced that it intends to wean away from Nuclear Power. So in the meantime, it has to rely on diesel gensets, oil thermal, coal thermal and combined cycle gas turbines firing oil and natural gas or LNG. This model will help you determine the economic feasibility and the first year tariff to meet equity returns as well as project returns including payback period of a coal-fired power plants (pulverized, CFB, IGCC) and compare with conventional (oil, gas, natural gas, hydro, geothermal) and renewable technologies (biomass, solar, wind, mini-hydro, ocean thermal energy conversion). More »

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August 8th, 2011 No Comments   Posted in cost of power generation

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Japan recently announced that it intends to wean away from Nuclear Power. So in the meantime, it has to rely on diesel gensets, oil thermal, coal thermal and combined cycle gas turbines firing oil and natural gas or LNG. This model will help you determine the economic feasibility and the first year tariff to meet equity returns as well as project returns including payback period of a nuclear power plant and compare with conventional (oil, gas, natural gas, hydro, geothermal) and renewable technologies (biomass, solar, wind, mini-hydro, ocean thermal energy conversion). More »

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August 8th, 2011 2 Comments   Posted in cost of power generation

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Japan recently announced that it intends to wean away from Nuclear Power. So in the meantime, it has to rely on diesel gensets, oil thermal, coal thermal and combined cycle gas turbines firing oil and natural gas or LNG. This model will help you determine the economic feasibility and the first year tariff to meet equity returns as well as project returns including payback period. More »

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August 8th, 2011 6 Comments   Posted in cost of power generation

Simple Cycle Gas Turbine Power Plant Model

Japan recently announced that it intends to wean away from Nuclear Power. So in the meantime, it has to rely on diesel gensets, oil thermal, coal thermal and combined cycle gas turbines firing oil and natural gas or LNG. This model will help you determine the economic feasibility and the first year tariff to meet equity returns as well as project returns including payback period. More »

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August 8th, 2011 2 Comments   Posted in Uncategorized

Oil Thermal Power Plant Model

Japan recently announced that it intends to wean away from Nuclear Power. So in the meantime, it has to rely on diesel gensets, oil thermal, coal thermal and combined cycle gas turbines firing oil and natural gas or LNG. This model will help you determine the economic feasibility and the first year tariff to meet equity returns as well as project returns including payback period. More »

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August 8th, 2011 No Comments   Posted in cost of power generation

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Japan recently announced that it intends to wean away from Nuclear Power to Renewable Energy such as Geothermal Energy. This model will help you determine the economic feasibility and the first year tariff to meet equity returns as well as project returns including payback period. More »