Simple project evaluation spreadsheet model - World Bank

Simple project evaluation spreadsheet model

Africa Electricity Institute Practitioner Workshop

15 November 2011 -- Dakar, Senegal

Chris Greacen

Two very different models...

Used by: What it does:

Excel financial model

"Financers" (also project developers, regulators, researchers)

HOMER

"Engineers"

(also project developers, regulators, researchers)

Models cashflow and return on investment

Optimizes component selection to minimize levelized cost of energy (LCOE) in hybrid minigrids

Simple project viability evaluation model

Inputs Project Inputs Plant Capacity

Capacity Factor Annual Generation # Connections

500

68% 2,978 882

KW Mwh

Generation Costs Generation Soft Costs

Grid Connection Grid Extension Total Investment REA Grants Investment (excl. grants)

USD 000sTSH Mn

1,484 2,226

670

1,005

389

584

596 3,139 441

894 4,709 $662

$2,698 $4,047

47% 21%

12% 19%

Revenues

Tsh /kwh

Tanesco

87%

360.0

Business

11%

360.0

Households & Inst. 3%

100.0

Average Tariff

355.8

Carbon Revenues

9.0

Operating Costs USD 000sTSH Mn

Salaries

30

$45

Maintenance

31

$47

Fuel Costs

0

$0

Other

0

$0

Total

61.4

92.1

US c/kwh 24.0

24.0 6.7 23.7 0.6 US c /kwh 1.01 1.05

0.00 0.00 2.1

Outputs Project Returns Project IRR

Equity IRR Project NPV Equity NPV

21.1%

38.4% $1,436 $501

Cost recovery Tariff Capital Investments Operating Costs

Output Per Watt Capital Recovery Total

6.28 2.1

5.96 15.35 17.4 261

$/W c/ kwh

Kwh / W c/ kwh c/ kwh TSH / kwh

Other Inputs Construction Time Collection Efficiency Distribution losses Tariff inflation CPI Terminal value Exchange Rate

1.5 90% 5% 2.0% 6.0% 0.0 1,500

Years

times exit FCF TSH / USD

Capital Structure Equity Share Required returns Loan Rate Loan Grace Period Loan Term WACC***

30% 15% 15%

3 15 11.9%

Equity REA grant Loan

USD 000s TSH Mn Schedule

501

751 Construction

441

662 Operations

2,197 3,296

Other Assumptions

Depreciation period

Corporate Tax rate

Tax holiday

1 67% 0%

2 33% 67%

20 Years 30%

0 Years

3 0% 100%

4 0% 100%

Cash Flow $ '000s

1

2

3

4

5

6

7

Investment

$2,093 $1,046

$0

$0

$0

Increase in WC

$0

$31

$0

$0

$0

Equity

$628

$314

$0

$0

$0

Debt

$1,465 $732

$0

$0

$0

Residual

8

9

10

11

12

13

14

15

Value*

Revenue (c/ kwh) Total Revenues Operating Costs Operating Cash flow

24.3 $0 $0 ($2,093)

24.8 $492 $43 ($597)

25.3 $753 $69 $684

25.8 $768 $73 $694

26.3 $783 $78 $705

26.8 $798 $82 $716

27.3 $813 $87 $726

27.8 $829 $92 $737

28.4 $846 $98 $748

28.9 $862 $104 $758

29.5 $879 $110 $769

30.1 $896 $117 $780

30.7 $914 $124 $790

31.3 $932 $131 $801

31.9 $950 $139 $811

Depreciation

$0

$157 $157 $157 $157 $157

$157

$157

$157 $157 $157

$157

$157 $157 $157

Loan Payments Interest Principal

Loan Balance

$0

$0

$0

$513 $513 $513

$513

$513

$513 $513 $513

$513

$513 $513 $513

$0

$0

$220 $363 $417 $403 $386

$367

$345

$320 $291 $258

$220

$176 $125

$67

$0

$0

($220) ($363) $96 $110 $127

$146

$168

$193 $222 $255

$293

$337 $388 $446

$0

$1,465 $2,417 $2,780 $2,684 $2,574 $2,447 $2,301 $2,133 $1,941 $1,719 $1,464 $1,171 $834 $446

$0

$0

Effective tax Equity CF 38% DSCR

$0 ($628) 0.00

$0 $135 0.00

$49 $635 0.00

$36 $146 1.35

$44 $149 1.38

$52 $151 1.40

$61 $153 1.42

$70 $154 1.44

$81

$93 $106

$121

$137 $156 $176

$0

$154 $153 $150

$146

$140 $132 $122

$0

1.46 1.48 1.50

1.52

1.54 1.56

1.58

0.00

* PV at year 15 for revenues from year 16-25

*** WACC = Equity share * ROE + Debt Share * Loan rate * (1- tax rate)

Questions answered by "Simple project viability evaluation model"

? How does the financial viability of an off-grid or ongrid SPP project vary under diffent assumptions of tariffs, subsidies, and carbon revenues, exchange rates, etc.?

? Internal Rate of Return (IRR)? ? Project IRR ? Equity IRR

? Net Present Value (NPV) ? Project NPV ? Equity NPV

? Does cash flow meet debt service requirements?

Model inputs

Input basic project data (yellow cells)

? Plant Capacity: generation capacity of power plant in kW ? Capacity factor: ratio of actual output to potential annual

output if it operated at nameplate capacity fulltime. ? # Connections: is applicable to systems that sell electricity

to retail customers and receive REA grants of $500 per hookup ? Investment costs: costs to build project (generator, grid connection, grid extension, etc.) ? Operating costs: costs to keep project going (salaries, mainteannce, fuel)

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