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:

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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

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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

 

Advanced (ADV) Project Finance Models for Conventional, Fossil, Nuclear and Renewable Energy Power Generation Technologies – Price List and Specs

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 »

Summary of inputs and results for project finance models for various power generation technologies – up to Sep 30, 2014 only

September 14th, 2014 No Comments   Posted in cost of power generation

Summary of inputs and results for project finance models for various power generation technologies – up to Sep 30, 2014 only

Dear Friends,

You only have up to September 30, 2014 to purchase the advanced project finance models for conventional, fossil, nuclear and renewable energy power generation technologies.

Beginning Oct 1, 2014, I will be working full-time with a major IPP in the country and I will take a leave in providing project finance models and Feasibility Study and Market Study preparations for a while.

So don’t dilly dally. Order now before I shut down this website for selling such models.

Cheers,

Energy Technology Selection Expert 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 »

Large-Scale Project Finance Models

Large-Scale Project Finance Models:

  1. Oil Thermal Power Plant – 2,000 US$

  2. Pulverized Thermal Power Plant – 4,000 US$

  3. Advance Coal Thermal Power Plant – 6,000 US$

  4. Geothermal Power Plant – 8,000 US$

  5. Simple Gas Turbine Power Plant – 9,000 US$

  6. Combined Cycle Gas Turbine Power Plant – 10,000 US$

  7. Energy Storage Power Plant – 12,000 US$*
  8. Solar Thermal Power Plant – 14,000 US$*
  9. Fuel Cells Power Plant – 16,000 US$*
  10. Ocean Thermal Power Plant – 18,000 US$*
  11. Ocean Wave Power Plant – 20,000 US$*
  12. Tidal Power Plant – 22,000 US$*
  13. Nuclear Power Plant – 30,000 US$*

*Please inquire about payment options directly to me.


Contents:

1) Input (Assumption) Sheet

2) Report (Summary) Sheet

3) Project Cost Sheet (equipment cost, ocean freight, insurance, taxes & duties, brokerage & local shipping, erection & installation, land & right-of-way, project development & contract management, initial stocks & inventories, manpower mobilization & training, working capital, interest during construction, other capitalized expenses)

4) Construction Sheet (construction schedule, equity/loan drawdown, interest during construction)

5) Model Sheet (escalation of items, starting costs, capacity & degradation, heat rate & efficiency degradation, maintenance & overhaul scheduel, available hours, gross generation, plant use & net generation, transmission/distribution line constraints & losses, net electricity sales, revenue items, expense items, income statement, balance sheet, cash flow statement, project & equity IRR, project & equity payback, debt service cover ratio)

6) Depreciation Sheet (evolution of balance sheet accounts, working capital)

7) Loan Amortization Table (interest & principal repayment)