Financial Appraisal for Wind Power Plant

1. PROJECT FINANCIAL APPRAISAL
WIND POWER PLANT
Final Assignment
Financial Management - FNCE675
Instructor: Dr. NGUYEN TAN BINH
Students: LE NGOC LONG
HO ANH CUONG
HUYNH HUU QUOC

2. Project Description
1. Project Rationale 5. Financing
2. Project Information 6. Project Lifetime & Cash Flows
3. Design & Scope 7. Cost Components
4. Business Model 8. Incentive Scheme
1
1 Project
Description 2 Financial
Analysis 3 Risk
Analysis 4 Conclusion
Agenda

3. GDP Growth Rate p.a
Generation increase p.a
Vietnam Power Development & Energy Security Strategy
2011 -2030
Toward Competitive Power Generation Market
Priority Wind, Solar, and Bioenergy
7%
14%
Renewable energy contribution in 2020
6.5%
11% Renewable energy contribution in 2030
Source: Revised National Power Development Plan VII (by MoIT-2016)
PROJECT RATIONALE

4. Wind Resource Potential
8,000MWVietnam
2,000MW South Central Coast
Incentive Scheme
Approved WPDP Map
PROJECT RATIONALE
Wind Energy in Vietnam

5. PROJECT INFORMATION
Project name Hoa Thang 1.2
Location Binh Thuan
Num. of turbines 15
Installed Capacity30 MW
Start of Operation 2020
Years in Operation 20 years
Binh Thuan Provincial
WPD Plan until 2020

6. DESIGN & SCOPE
Design Onshore
Utility-scale
Grid-connected
WTG VESTAS (Denmark)
Hub Height 80m
Rotor Diamer 90m
Scope Land use 1,170ha
Wind turbines
Powerline
Substation

7. BUSINESS MODEL
Capacity
Factor
Turbine
Capacity
Num. of
Turbines
Hours
Per Year
Feed-in
Tariff
Revenue
30% 15
2,000
kW
8,760
0.104
USD/kWh
Annual Energy Production
78,840,000
8,200,000
USD
Uncertainty AEP
Net output P50 p.a. 78,840,000
Net output P75 p.a.70,863,481
Net output P90 p.a.63,684,389

8. FINANCING
By KfW – German Development Bank
Maturity 12 years
Interest 2%
Grace period 1 year
Redemption Annuity
70%
Total Investment 57.0 Mil. USD
(1.9 Mil. USD/MW)
30%
Equity

9. PROJECT LIFETIME & CASH FLOWS
CAPEX OPEX
REVENUE
DECOMMISIONING
FINANCING
REPAYMENT

10. COST COMPONENTS
CAPEX
Ave. 2MUSD/MW
Wind Turbine 63%
Construction 17%
Grid Connection 11%
Other 9%
OPEX
Ave. 35KUSD/MW/year
O&M 10%-15%
Technical Management 2.5%~3.5%
Commercial Management 1.5%~2.5%
Insurance cost 0.5%~1.0%
Land leases 2.0%~12.0%
Decommisioning 2.0%
Cost of Capital
Equity 7%~17%
Debt 2.5%~7.5%

11. INCENTIVE SCHEME
Preferential Funding
Import Tax Exemption
Corporate Income Tax (CIT) Highest Level Incentive
First 4 years: 0%
Next 9 years: 10%
Year 14 -20: 20%
Land Rental Exemption/Reduction
Feed-in Tariff (FiT) Fixed in USD
Buy all electricity generated

12. FINANCIAL ANALYSIS
1. Overview
2. Project Inputs
3. Project Appraisal Criteria
2

13. OVERVIEW OF FINANCIAL PROJECT APPRAISAL
Revenues
Opex
P&L
Decommisioning
Cash inflows
Cash outflows
Income tax
Equity
Debt
Net cashflow
WACC
NPV
IRR
Input Calculation Appraisal Criteria

14. PROJECT INPUTS (1)

15. PROJECT INPUTS (2)

16. PROJECT APPRAISAL CRITERIA
TIP EIP
NPV, nominal 951,413 367,772
IRR, nominal 12.4% 24.0%
NPV, real 951,413 367,772
IRR, real 8.3% 20.0%
TIP: Total Investment Point
EIP: Equity Investment Point

17. RISK ANALYSIS
1. Objectives & Procedure
2. Step 1:Identify Risk Sources & Selection
3. Step 2: Sensitivity Analysis
4. Step 3: Scenario Analysis
5. Step 4: Monte Carlo Simulation
3

18. OBJECTIVES & PROCEDURE
Objectives:
• Increase the probability and impact of positive events
• Decrease the probability and impact of negative events
Procedure:
• Step 1 : Identity the risks
• Step 2 : Sensitivity analysis
• Step 3 : Scenarios analysis
• Step 4 : Monte Carlo Simulation

19. Step 1: Identify Risk Sources

20. Step 2: Sensitivity Analysis
Capacity
factor
NPV (TIP) %∆ Capacity
factor
%∆ NPV
(TIP)
Sensitivity
951,413
28% 778,11 -7% -18% 2.73
29% 864,766 -3% -9% 2.73
30% 951,413 0% 0% -
31% 1,038,061 3% 9% 2.73
32% 1,124,709 7% 18% 2.73
Interest
Rate
NPV (TIP) %∆ Interest
rate
%∆ NPV(TIP) Sensitivity
951,413
2% 951,413 0% 0% 0
4% 707,726 100% -26% 0.26
6% 501,106 200% -47% 0.24
8% 323,960 300% -66% 0.22
10% 172,257 400% -82% 0.20
Capex NPV (TIP) %∆ Capex %∆ NPV
(TIP)
Sensitivity
951,413
51,300,000 1,076,017 -10.0% 13.10% 1.3
54,150,000 1,013,715 -5.0% 6.55% 1.3
57,000,000 951,413 0.0% 0.00% 0.0
59,850,000 889,111 5.0% -6.55% 1.3
62,700,000 826,810 10.0% -13.10% 1.3
Opex NPV (TIP) %∆ Opex %∆ NPV
(TIP)
Sensitivity
951,413
945,000 953,775 -10.00% 0.25% 0.02
997,500 952,594 -5.00% 0.12% 0.02
1,050,000 951,413 0.00% 0.00% 0.00
1,102,500 950,233 5.00% -0.12% 0.02
1,155,000 949,052 10.00% -0.25% 0.02
HIGHEST
SENSITIVITY

21. Step 3: Scenario Analysis
Scenario Summary
Current Values: GOOD_CASE EXPECTED BAD_CASE
Changing Cells:
Capex (USD) 57,000,000 51,300,000 57,000,000 62,700,000
Opex (USD) 1,050,000 945,000 1,050,000 1,155,000
Capacity Factor (%) 30.0% 35.0% 30.0% 25.0%
Result Cells:
NPV TIP (M. VND) 951,413 1,511,618 951,413 378,800
NPV > 0
in all scenarios

22. Step 4: Monte Carlo Simulation - Result
P50 P75 P90

23. Risk Evaluation Summary
1/ Risk Source Sensitivity
• Capacity factor is the most sensitive variable
2/ Scenario
• Profit on all scenarios
3/ Probability
• 90% profit greater than 447,000 mil VND
• 75% profit greater than 690,850 mil VND
• 50% profit greater than 949,700 mil VND

24. CONCLUSION
4

25. Profitability Assesment
NPV (TIP) = 951,413 > 0
NPV (EIP) = 367,772 > 0
IRR (TIP) = 12.4% > WACC (5.8%)
IRR (EIP) = 24% > Required Rate of Return (12%)
DSCR > 1

26. Risks Assesment
NPV > 0
In the worst case of 03 typical risks combination
90% NPV exceed 447,000 (>0)
By simulation with most critical input Capacity factor

27. Thank you!