geothermal power plant projects in central america - Orkustofnun
geothermal power plant projects in central america - Orkustofnun geothermal power plant projects in central america - Orkustofnun
6.2 Model structureThe financial feasibility assessment model is based on several different modules done on separateworksheets, each representing different functions of the model. These worksheets are interconnectedin a workbook. Figure 38 shows the main components of the model and their relationship.In order to perform the financial feasibility analysis, the model created projected financial reports suchas an income statement, balance sheet and a cash flow statement. Crundwell (2008) indicated thatthese three financial statements represent three views of the company: the balance sheet represents theassets and liabilities of the company, that is, the value of the company; the income statementrepresents the revenue, costs and profit of the company, that is, the productive effort of the company;and the cash flow statement represents the net flow of cash into and out of the company, that is, thecash position of the company.6.2.1 Input and assumptionsAn Input and Assumptions Sheet is used as the particular place to assemble all the technical andfinancial data that describe the project, and is needed for the assessment.Figure 38: Main components of the financial model and their relationships;Figure modified from Jensson (2006)6.2.2 Investment and financingAn Investment and Financing Sheet is used for calculating the financing requirements of theinvestment project. The calculation of this module determines the depreciation of assets (estimation ofincome tax purpose), financing, loan repayment, loan interest and loan management fees. The assumed43
eakdown of the total investment cost is exploration & confirmation, drilling and power plant.However, the total capital is higher due to the addition of the working capital estimation.6.2.3 Operating statementAn Operating Statement or Income Statement Sheet is used for calculating the revenue and expensesover a specific period. The income statement includes several sections. One of particular importance isEBITDA (Earnings before Interests, Taxes, Depreciation and Amortization) or operating surplus,which summarizes earnings before taxes and financing costs. EBITDA is calculated by subtractingproduction costs from revenue. EBIT (Earnings before Interest and Taxes) can then be calculated byextracting depreciation and amortization from the EBITDA. Profit before tax is calculated byextracting the interest on the loan from EBIT. Income tax is a percentage of the taxable profit, in thisanalysis loss transfer is not considered, therefore, profit before tax is considered as the taxable profit.Appropriation of profit (dividends) is calculated as a percentage of the profit after tax. The last item onthe statement is net profit/loss, calculated by extracting the dividends from the profit after tax.6.2.4 Balance sheetIn this model, the balance sheet is used as a corroborative instrument as many logical errors wouldresult in a difference between total assets and total debt and capital.6.2.5 Cash flowThe Cash Flow Sheet for calculation requires information from investment & financing, an operatingstatement and a balance sheet. Cash flow before tax is calculated by subtracting debtor and creditorchanges (changes in working capital) from EBITDA. Cash flow after taxes is calculated by subtractingthe taxes that are paid a year later from Cash flow before tax. Cash flow after taxes together with thetotal invested capital (equity and the loan) is a measure of the profitability of the project regardless ofhow it will be financed.Net cash flow or free cash flow (FCF) is calculated by subtracting the financing cost (interest and loanmanagement fees) and the repayment of loans from the cash flow after tax. Net cash flow is used tomeasure the profitability of the equity. The last item on the statement is cash movements, which arecalculated by adding the difference between financing (drawdown of equity and loans) and capitalexpenditure (i.e. the Working Capital) to the net cash flow, and then subtracting the paid dividend. TheFCF calculation in this model can be summarized asFCF = EBITDA − ∆ Working Capital − Taxes − Financial Cost − Repayments (51)Hillier et al. (2010) pointed out that the name (FCF) refers to the cash that the firm is free to distributeto creditors and shareholders because is it not needed for working capital or investment.6.2.6 ProfitabilityThe profitability sheet calculates the NPV and the IRR. The profitability measures for evaluating theproject and equity are calculated from these two relevant cash flow series:• Capital Cash Flow (CCF)• Free Cash Flow to Equity (FCFE)Capital Cash Flow (CFF)Capital Cash Flow is defined by Pinto et al. (2010) as the cash flow (available for the company´ssuppliers) of the capital after all operating expenses (including tax) have been paid and necessaryinvestments in working capital and fixed capital have been made. The CCF calculation in this modelcan be summarized as44
- Page 3 and 4: This MSc thesis has also been publi
- Page 5 and 6: ACKNOWLEDGEMENTSMy gratitude to the
- Page 7 and 8: TABLE OF CONTENTSPage1. INTRODUCTIO
- Page 9 and 10: PageAPPENDIX A: FINANCIAL MODEL ...
- Page 12 and 13: 1. INTRODUCTIONRecent research on r
- Page 14 and 15: 2. CENTRAL AMERICAN DATA2.1 Power p
- Page 16 and 17: 2.2.3 HondurasThe Honduran electric
- Page 18 and 19: NET INJECTION BY SOURCE (2010)INSTA
- Page 20 and 21: income taxes for a period of 10 yea
- Page 22 and 23: annual temperature ranges from 17 t
- Page 24 and 25: egional reconnaissance in 1981ident
- Page 26 and 27: 4. GEOTHERMAL ELECTRICAL POWER ASSE
- Page 28 and 29: The net contribution of that power
- Page 30 and 31: Introducing , = , and , = ,
- Page 32 and 33: 9ProductionWellBoiler5Turbine~1046P
- Page 34 and 35: TABLE 3: Parameters and boundary co
- Page 36 and 37: eaches the maximum limit, and for h
- Page 38 and 39: 160180140160tc vap[i], th vap[i]120
- Page 40 and 41: average results, and combining them
- Page 42 and 43: The base cost ( ) can be calculate
- Page 44 and 45: calculation for another separator c
- Page 46 and 47: mass flow rate (kg/s) on the plant
- Page 48 and 49: Table 11 shows a summary of costs f
- Page 50 and 51: 5.6.4 Comparison of capital costs b
- Page 52 and 53: 6. FINANCIAL FEASIBILITY ASSESSMENT
- Page 56 and 57: CCF = EBITDA − ∆Working Capital
- Page 58 and 59: Interest on loansFleischmann (2007)
- Page 60 and 61: IRR30%25%IRR CapitalIRR Equity20%Si
- Page 62 and 63: FIGURE 42: Allocation of funds for:
- Page 64 and 65: 340IRR Free Cash Flow to Equity [ %
- Page 66 and 67: flash technology is between 0.3 and
- Page 68 and 69: Energy Price Availability Factor O&
- Page 70 and 71: FIGURE 50: Density and cumulative p
- Page 72 and 73: In Chapter 6, Figure 44 illustrated
- Page 74 and 75: The internal rate of return is offs
- Page 76 and 77: Cengel, Y. and Tuner, R., 2005: Fun
- Page 78 and 79: IEAb, 2011: Technology roadmap: Geo
- Page 80 and 81: Salmon, J., Meurice, J., Wobus, N.,
- Page 82 and 83: APPENDIX A: SUMMARY OF FINANCIAL MO
- Page 84 and 85: APPENDIX C: INVESTMENT AND FINANCIN
- Page 86 and 87: APPENDIX E: BALANCE SHEETBALANCE SH
6.2 Model structureThe f<strong>in</strong>ancial feasibility assessment model is based on several different modules done on separateworksheets, each represent<strong>in</strong>g different functions of the model. These worksheets are <strong>in</strong>terconnected<strong>in</strong> a workbook. Figure 38 shows the ma<strong>in</strong> components of the model and their relationship.In order to perform the f<strong>in</strong>ancial feasibility analysis, the model created projected f<strong>in</strong>ancial reports suchas an <strong>in</strong>come statement, balance sheet and a cash flow statement. Crundwell (2008) <strong>in</strong>dicated thatthese three f<strong>in</strong>ancial statements represent three views of the company: the balance sheet represents theassets and liabilities of the company, that is, the value of the company; the <strong>in</strong>come statementrepresents the revenue, costs and profit of the company, that is, the productive effort of the company;and the cash flow statement represents the net flow of cash <strong>in</strong>to and out of the company, that is, thecash position of the company.6.2.1 Input and assumptionsAn Input and Assumptions Sheet is used as the particular place to assemble all the technical andf<strong>in</strong>ancial data that describe the project, and is needed for the assessment.Figure 38: Ma<strong>in</strong> components of the f<strong>in</strong>ancial model and their relationships;Figure modified from Jensson (2006)6.2.2 Investment and f<strong>in</strong>anc<strong>in</strong>gAn Investment and F<strong>in</strong>anc<strong>in</strong>g Sheet is used for calculat<strong>in</strong>g the f<strong>in</strong>anc<strong>in</strong>g requirements of the<strong>in</strong>vestment project. The calculation of this module determ<strong>in</strong>es the depreciation of assets (estimation of<strong>in</strong>come tax purpose), f<strong>in</strong>anc<strong>in</strong>g, loan repayment, loan <strong>in</strong>terest and loan management fees. The assumed43
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