This document outlines the framework for developing a financial model for a build-own-operate-transfer (BOOT) waste-to-energy project. It discusses establishing project assumptions around costs, financing, operations, and revenues. Key factors covered include total project costs, debt financing, equity returns, tax rates, tipping fees, energy sales, and operation and maintenance expenses. Sensitivity analysis is also recommended to evaluate how changes in costs, revenues, and other variables might impact the project's profitability and risk.

1. FINANCIAL MODELING FOR BOO/BOT
WASTE-TO-ENERGY PROJECT
Jen Wu
Business Development and Project Finance Professional
Jen Wu’s Proprietary Information

2. FINANCIAL MODELING FRAMEWORK

3. Project Assumptions Structure
1. Project Cost
2. Total Operation and Maintenance Expenses
3. Operation Data such as power gen, power sold, waste
tonnage
4. Tipping Fee、Tariff、 Steam Price
5. Financing
6. Equity Participants
7. Tax and Depreciation
8. Risk and Return – Discount Rate
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4. Project Evaluation
• Using the followings to connect and integrate all
project assumptions
• Income Statement
• Cash Flow Statement
• Evaluation Criteria – IRR、NPV、Discount Rate
• Sensitivity Analysis
• Scenario Analysis
• Monte Carlo Simulation
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5. Cost of Equity、Cost of Debt、WACC
Sources: Contemporary Engineering Economics, C. S Park
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6. Equity IRR、NPV
• Equity IRR
• Unleveraged equity IRR
• Leveraged equity IRR
• NPV @ discount rate
• Discount rate、hurdle rate、minimum acceptable rate of
return(MARR)
• Cost of Equity - if the exact debt-financing such as interest rate、loan
term、debt/equity ratio and repayment schedules is KNOWN
• WACC - if the exact debt-financing such as interest rate、loan term
except given debt/equity ratio and repayment schedules is UNKNOWN
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7. Evaluation Criteria
• Equity IRR MARR à GO
• NPV @ discount rate 0 à GO
• DSCR
• Payback period
• The most important thing – NET CASH FLOW 0 from year 1
of operation to the end of concession period
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8. REVENUE、TAKE-OR-PAY、TAKE-AND-PAY、PUT-OR-PAY

9. Fundamental Equation for Infrastructure Investment
• DS + OM + ER = PR
• PR: Project Revenue
• DS(Debt Service)
• OM(Total Operation and Maintenance Expenses)
• ER(Equity Return)
• PR DS + OM + ER
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10. BOO/BOT Waste – to – Energy (WTE) Project
• DS + OM + R = TF + ER
• DS = Debt Service
• OM = Total Operation and Maintenance Expenses
• R = Equity Return
• TF = Tipping Fee
• ER = Energy Revenues
• Major project revenue – TF, Put or Pay
• Minor project revenue – ER, Take-and-Pay
• Put or Pay is more important than Take and Pay for BOO/BOT WTE
project
• Put or Pay – to guarantee debt service repayment and equity return
• If power generated can not be sold, tipping fee will be increased.
• In China
• Major project revenue – ER
• Minor project revenue – TF
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11. Tariff for Independent Power Producer/Cogen Project
Tariff
Capacity
Payment
Debt Service Equity Return
Fixed Total
OM
Expenses
Energy
Payment
Variable OM
Expenses
Fuel Cost
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12. Independent Power Producer/Cogen Project
• Capacity Payment
• DS + R + FOM
• Take or Pay
• Energy Payment
• VOM + Fuel Cost
• Take and Pay
• If there is no take-or-pay mechanism, it is a merchant power
project.
• Higher IRR
• Higher DSCR
• Higher Equity, i.e. Lower Debt/Equity Ratio
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13. BUILDING FINANCIAL MODEL FOR BOO/BOT WASTE-TO-ENERGY PROJECT

14. 1. Technical Issues
2. Commercial Issues
Assumptions and Parameters
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15. • Put-or-Pay tonnage ？
• Take-and-Pay for power sales ?
• MSW ONLY or Both MSW and ISW ?
• Air Emission Standards – Hcl、SOx、NOx、PM2.5、Heavy
Metals etc
• Fly Ash Treatment
• TCLP or other leaching protocol
• Heavy metals Leaching Standards
• Bottom ash treatment
• Recycling ?
• Landfill
Technical Issues
– Plant Size、Total Investment Cost、OM Cost etc
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16. Technical Issues
– Plant Size、Total Investment Cost、OM Cost etc
I. Waste Supply
A. Waste Composition
1. Lower heating value (LHV)
2. Ultimate analysis
3. Proximate analysis
II. Fly Ash and Bottom Ash and Bypass Disposal
A. Regulatory Standards
B. Management Options and Costs
1. Landfilling options
2. Reuse options, e.g. concrete, highway, landfill capping
3. Hauling requirements and cost
4. Location of management facilities
C. Bypass disposal and cost
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17. Technical Issues
– Plant Size、Total Investment Cost、OM Cost etc
III. Energy customers
A. Identification of Potential Energy Customers
B. Availability of long – term electric or steam sales
C. Take-or-Pay或Take-and-Pay
D. Capacity Payment and Energy Payment
E. Interconnection Requirements
IV. Technical performance
A. Put-or-Pay tonnage
B. Processing reliability and availability
C. Throughput capability, both daily and annual tonnage
D. Power generation and sold, kwh/tonne
E. Regulatory compliance / environmental performance including Air
Quality Standards
F. PM2.5
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18. I. Financing Costs
A. Component of debt, Debt/Equity ratio
B. Size and tenure of debts
C. Interest rate and arrangement fees
D. Repayment schedule
E. Equity commitment
F. Currency exchange
II. Tax and depreciation
A. Tax rate
B. Tax holiday
C. depreciation schedule
D. Inflation rate
E. Insurance
F. Import duties / value added taxes
Commercial Issues
– Plant Size、Total Investment Cost、OM Cost etc
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19. Commercial Issues
– Plant Size、Total Investment Cost、OM Cost etc
III. Total project cost
A. EPC Contract
B. Development cost
C. Interest During Construction, IDC
D. Land Cost
E. Interest Earnings
F. Debt Issuence Expense
G. Debt Reserve
H. Startup Revenue
I. Startup Cost including training and Salary
J. Work Capital
K. Construction Management Fee
IV. Schedule
A. Financial closing date
B. Construction Schedule
C. Draw down schedule
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20. Commercial Issues
– Plant Size、Total Investment Cost、OM Cost etc
V. Operation and maintenance
A. Operation and maintenance fixed cost
B. Operation and maintenance variable cost
C. Major maintenance reserve
D. Insurance
E. Regulatory compliance
F. Fly and bottom ash disposal
VI. Energy Sales
A. electricity, steam
B. Capacity payment
C. Energy payment
D. Steam sales
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21. Commercial Issues
– Plant Size、Total Investment Cost、OM Cost etc
VII. Sensitivity Analysis
A. Total project cost
B. EPC cost
C. OM costs
D. Interest rates
E. electricity, steam
F. Inflation
G. Currency exchange
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22. Sensitivity Analysis
• Capital cost
• Operating costs
• Energy production / sales
• Shortfall / interruption
• Inflation
• Interest rates
• Currency exchange
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23. For more detailed Information, please refer to the followings:
• Project Development and Evaluation for BOO/BOT Waste-to-Energy Project –
Feasibility Study
https://www.facebook.com/jenwu.projectfinance/posts/765291863574053
• Project Development and Evaluation for BOO/BOT Waste-to-Energy Project –
Total Project Cost
https://www.facebook.com/jenwu.projectfinance/posts/765291863574053
• Project Development and Evaluation for BOO/BOT Waste-to-Energy Project –
Building Financial Model for BOO/BOT Waste-to-Energy Project, Part 1
https://www.facebook.com/jenwu.projectfinance/posts/773323626104210
• Project Development and Evaluation for BOO/BOT Waste-to-Energy Project –
Building Financial Model for BOO/BOT Waste-to-Energy Project, Part 2
https://www.facebook.com/jenwu.projectfinance/posts/773794192723820
• Project Development and Evaluation for BOO/BOT Waste-to-Energy Project –
Building Financial Model for BOO/BOT Waste-to-Energy Project, Part 3
https://www.facebook.com/jenwu.projectfinance/posts/775662429203663
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