Renewable Energy Project finance Model

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Permalink Reply by Emre Ozmen on March 14, 2010 at 5:25am

Hi Haiyui,

i just tried downloading the file myself and it worked. you need to have macros enabled as well.

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Permalink Reply by Salauddin Shaik on March 15, 2010 at 4:52am

there's some problem in downloading this file, better option is to click on OPEN in download Window instead of SAVE, this works...I have downloaded and I am going through it...

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Permalink Reply by Emre Ozmen on March 17, 2010 at 2:10am

So has anyone been able to review this model? check for accuracy or mistakes in between? i dont think there should be many mistakes but its always good getting the opinion from other professionals

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Permalink Reply by Werner Reisacher on March 17, 2010 at 1:44pm

From a technical point of view - a very nice model. Following are some practical questions I would ask you if I were to be an investor.
-Why are we running the total project at 35% of the available capacity over the entire 20 years period.
-Considering the expected market fluctations in the energy markets in the future, what are our expectations for the market prices of energy in decades to come. Keeping the price even accross the 20 years looks vulnarable to me, one way or the other. (up or down)
- As an investor, I would like the company to either pay back the capital or to invest the cash in other ventures. Surplus cash is nice but totally unproductive.
Good work, I like the presentation,
Werner Reisacher

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Permalink Reply by Sachidanand (Sacha) Singh on March 18, 2010 at 1:19pm

Werner,

- Wind speeds are far from uniform. One needs to install turbine of much higher capacity to make use of the peak wind speed which may be available for 10/15 weeks a year or for 2/3 hours a day. It means higher capital expenditure but much higher output than what could have been obtained from a system which could run at say 70% load.

- In India, power producers enter into long term power sale agreements with utilities for most of their produce and keep a small part for merchant trade. Keeping the real selling price constant may be considered acceptable.

- But Emre has provided for cash sweep.


Emre,

I am going through the model. It is an excellent model.

I think I have spotted scope for improvements at a few places:
Inflation in Sheet Summary remains to be linked to operational estimates
The formula in row 14 in Sheet Debt needs to tweaked to accept changes in repayment term, at present it is fixed at 10 years

Will get back in a day or so.

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Permalink Reply by Bill M Wright on March 18, 2010 at 3:12pm

Emre, I've not checked for errors or assumption tweaks. I just wanted to say, This is first class work, both in terms of Excel Workbook Layout and Presentation. Werner makes a good point about pricing but shouldn't / couldn't that just be a part of scenario analysis? Forecasting 20 years into the future is easy math but assuming no price increases is a safer bet. Still if you're in an area were demand is rising as far as the eye can see...then price increases are normal. Yet, the largest unknown for Solar and Wind is the alternative availability of Oil or Coal or Nuke power cost. If oil had stayed below $48 Barrel I doubt anyone in the USA would be interested in Wind Farm Projects. But with China and India booming my guess is oil stays above $70 unless we hit another world recession.

Regarding price....One could also gather industry pricing changes from countries / areas which you believe based upon demographics and demand growth are most similiar to your situation.

Again, it's a first class financial model layout & presentation.

Bill

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Permalink Reply by Emre Ozmen on March 19, 2010 at 2:54am

Thank you Bill, Sacha, and Werner for your compliments and inputs on the model, i appreciate your time for reviewing it.

So maybe i should start by answering Werners questions:

1- the project is run at 35% capacity factor, which i could also call its efficiency. let me give an example based on the model. the model is for a 110 MW WEF ( wind energy Farm)

if we just assume that this farm will produce at 100%;

110*1000(kwh)*8760(hrs/year)= 963,600,000 kwh/year (this is not possible kwh output for this wind farm
This isnt correct exactly because of what sacha said, wind is variable and not always available
Correct: 110*1000*8760*(.3 to .4) = 337,260,000 this is much more feasible.

2- The price i set ( .10 cents/kwh) is accurate with the price we receive for the first phase of this model which was 135 MW, generally with renewables, you are able to make Power purchase agreements through the energy ministries etc, however you may also choose to sell the energy independantly, our firm currently chose not to take the PPA because we are able to sell energy on avg at about .18TL per kwh which is around .12 US cents. so assuming a steady price for electricity sales with renewables is normal.
in fact perhaps not necessarily in wind, but in solar, i dont think many investors would be open to building solar farms without a PPA.
The actual price received year by year for a project like this would never receive less than 10 cents i believe, so it I think its safe to assume that price fluctuation would only or has a 90% chance of going up and 10% chance of going down.


Sacha thank you for your input and help reviewing the model, İ had completely forgotten to link inflation in :) and thanks for noticing the formula adjustment needed in the debt sheet.

and Mr. Wright, thank you:) and in terms of price, where i am ( Turkey) energy demand is high and prices for renewables except solar are very attractive. İ will upload an adjust version today with inflation and debt term more integrated.

thanks everyone !

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Permalink Reply by Andres Rojas on March 19, 2010 at 12:23pm

The balance sheet in year 0, asset do not equal liabilities & owners equity. I think debt is overstated, or maybe there is something i am not looking at correctly.

Anyways, it is a very useful model. Thanks for sharing it with us!

Andres

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Permalink Reply by George on March 31, 2010 at 3:57pm

Emre,

I glossed over the model for errors and didn't find any that were material in my opinion. Also, I'm no project finance maven or alternative energy expert.

I would like to say that I like the models simplicity and relative readability.

I was thrown off by the color coding. It appears to attempt to follow "industry standards", however, certain cells colored blue (representing an input in the USA) are actually formulas. Some worksheet links are not labeled green. The above are minor flaws, but noticeable and may be worth updating.

Also, the balance sheet tab is not easily digestible. I'm sure sophisticated investors and analysts will have no problem following it, but it would be more prudent to have summarized versions of the detail so less sophisticated readers don't get lost in all the numbers.

Lastly, the VBA could be more efficient -- it's highly redundant. Using constructs such as select case could have yielded a much more efficient runtime. Also, the screen blip at runtime is a minor annoyance too.

The above aside the model is solid work. Thanks for sharing!

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Permalink Reply by Emre Ozmen on April 1, 2010 at 7:38am

Thank you very much for your constructive criticism and overall satisfaction of the model George!:) i really do appreciate it, and will update the mentioned areas as soon as i get a chance!:)

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Permalink Reply by Ali Demirci on April 2, 2010 at 2:58pm

Emre,

Thanks for sharing your work, it is a very good model, it also has a very nice and professional looking presentation. My comments (in addition to Sacha's) are:

1-When I open the file it gives me a circular reference error in P&L tab at cells d45 d46 and d47.

2-On the sensitivity worksheet, you can link the baseline inputs to the summary worksheet. (namely, a9 a18 a29)

That's all from me, thanks again for the excellent work.

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Permalink Reply by Emre Ozmen on April 12, 2010 at 3:44am

Hi All,

its been a while since i promised an updated version but here it is. Some of the fixes include:

1- inflation is integrated into operating measures
2-Debt repayment formula has been fitted to change with term adjustment
3-Balance sheet in year 0 Assets= liabilities
4-Circular reference in P&L (will not show circular reference when iterations are on)

File is uploaded!

Thanks!!!!

Attachments:

• Rotor2rec.xlsm, 179 KB

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