Hydropower exploitation of Dushar – Zerec stream
Business Plan
FOR THE CONSTRUCTION AND OPERATION BY
CONCESSION OF THE HYDROPOWER PLANTS
ON THE DUSHAR-ZEREC STREAM
Page 1
Hydropower exploitation of Dushar – Zerec stream
Business Plan
Content:
1. Estimate of theHPPs’ Budgets
2. Main data.
3. Funding Sources:
- Percentage of funding by bank loan and own capital
- Loan amortization schedule.
4. Financial Plan
5. Profit and Loss Statement
- Chart Presentation
- Statement for 35 years
6. Cash Flow Statement:
- Chart Presentation
- Statement for 35 years
7. Project’s rentability:
- Net Present Value - NPV
- IRR (Internal Rate of return)
- Payback Period
- Benefit/Cost Ratio
- Levelised Discount Cost - LDC
8. Sensitivity Analysis
- Sensitivity Analysis to the discount rate
- Sensitivity Analysis to the water treated and traded
- Sensitivity Analysis to the initial investment
9. Conclusions
Page 2
Hydropower exploitation of Dushar – Zerec stream
Business Plan
1. ESTIMATE OF THE HPPs’ BUDGETS
The following table represents a summary estimation of the investment cost of HPP 1.
No.
Description
1 Water Intake
2 Decanter L = 40 m
3 Deviation Channel L = 1500 m
4 Pressure Basin
5 Turbine Penstock L = 172.5 M
6 Powerhouse
7 Connection to the Grid 10 kV
8 Ricontruction of existing roads and construction of new ones
9 Environment
SUM
Mobilisation Works 1%
SUM
Contingency Fund 5%
SUM
VAT 20%
TOTAL of CIVIL WORKS
Surveillance and Test Costs 1.3%
TOTAL
TECHNOLOGIC MACHINERIES AND EQUIPMENT
DESIGN OF THE IMPLEMENTATION WORKS
TOTAL INVESTMENT FOR HPP 1
Value (EUR)
47,243
14,598
81,795
19,682
37,836
26,281
1,429
857
3,629
233,349
2,333
235,683
11,784
247,467
49,493
296,960
3,860
300,821
144,120
4,286
449,226
246,038
120,100
73,513
1,429
Civil Works
Equipment
Connection
to Grid
8,146
Engineering
VAT
Page 3
Hydropower exploitation of Dushar – Zerec stream
Business Plan
The following table represents a summary estimation of the investment cost of HPP 2.
No.
Description
1 Water Intake
2 Intake of water from Qinami stream
3 Decantor L = 40 m
4 Pressure Deviation L = 1900 ml
5 Pressure Basin
6 Turbine Penstock L = 760 M
7 Powerhouse
8 Connection to the Grid 35 kV
9 Ricontruction of existing roads and construction of new ones
SUM
Mobilisation Works 1%
SUM
Contingency Fund 5%
SUM
VAT 20%
TOTAL of CIVIL WORKS
Surveillance and Test Costs 1.3%
TOTAL
TECHNOLOGIC MACHINERIES AND EQUIPMENT
DESIGN OF THE IMPLEMENTATION WORKS
TOTAL INVESTMENT FOR HPP 2
Value (EUR)
42,538
37,014
14,598
120,461
18,985
97,296
29,415
125,714
1,286
487,308
4,873
492,181
24,609
516,790
103,358
620,148
8,062
628,210
342,000
8,571
978,781
391,076
285,000
160,358
125,714
16,633
Civil Works
Equipment
Connection
to Grid
Engineering
VAT
Page 4
Hydropower exploitation of Dushar – Zerec stream
Business Plan
The following table shows a summery of bill of quantities for the construction of the two
hydropower plants as well as the respective chart:
Description
No.
1
2
3
4
5
6
7
8
9
10
11
12
Water Intake
Decanter L = 40 m
Deviation Channel L = 1500 m
Intake of water from Qinami stream
Decantor L = 40 m
Pressure Deviation L = 1900 ml
Pressure Basin
Turbine Penstock L = 760 M + L = 760 M
Powerhouse
Connection to the Grid 10 kV + 35 kV
Environment
Ricontruction of existing roads and construction of new ones
SUM
Mobilisation Works 1%
SUM
Contingency Fund 5%
SUM
VAT 20%
TOTAL of CIVIL WORKS
Surveillance and Test Costs 1.3%
TOTAL
TECHNOLOGIC MACHINERIES AND EQUIPMENT
VAT 20%
TOTALI MACHINERIES AND EQUIPMENT
DESIGN OF THE IMPLEMENTATION WORKS
TOTAL INVESTMENT
HPP 1
47,243
14,598
81,795
19,682
37,836
26,281
1,429
3,629
857
233,349
2,333
235,683
11,784
247,467
49,493
296,960
3,860
300,821
120,100
24,020
144,120
4,286
449,226
Value (EUR)
HPP 2
42,538
37,014
14,598
120,461
18,985
97,296
29,415
125,714
1,286
487,308
4,873
492,181
24,609
516,790
103,358
620,148
8,062
628,210
285,000
57,000
342,000
8,571
978,781
HPP 1 + HPP 2
89,781
14,598
81,795
37,014
14,598
120,461
38,667
135,133
55,696
127,143
3,629
2,143
720,657
7,207
727,864
36,393
764,257
152,851
917,108
11,922
929,031
405,100
81,020
486,120
12,857
1,428,008
637,114
405,100
233,871
127,143
24,780
Civil Works
Equipment
Connection
to Grid
Engineering
VAT
Page 5
Hydropower exploitation of Dushar – Zerec stream
2. MAIN DATA
- Capacity:
 HPP 1
 HPP 2
- Annual electricity production:
 HPP 1
 HPP 2
- Concessionarie Fee
- Selling Price:
- Price Increase
- Inflation
- Discount rate
- Concession term
- Construction Period
- Initial Invesstment
 HPP 1
 HPP 2
- Bank Loan:
- Loan Interest:
- Loan Payment:
- Own Capital:
- Bank Loan:
- Annual Operative Expenses:
DESCRIPTION
INVESTMENT (EUR)
HPP 1
HPP 2
TOTAL
Business Plan
1’865 kW
550 kW
1’315 kW
10’000’000 kWh
3’000’000 kWh
7’000’000 kWh
2.5%
0.067 EUR/kWh
1% per year
3%
12%
35 years
16 months
1’428’008 EUR
449’226 EUR
978’781 EUR
70% of initial investment
10%
10 years
428’40252 EUR
999’60548 EUR
5% of initial investment
PRODUCTION
CAPACITY (kW)
(kWh)
449,226
978,781
1,428,008
550
1,315
1,865
3,000,000
7,000,000
10,000,000
Specific
Capital Cost
(EUR/kW)
816.78
744.32
765.69
Specific
Production
Cost
(EUR/kWh)
0.15
0.14
0.14
Construction Schedule:
HYDROPOWER PLANT
I
II
III
2 MONTH PERIOD
IV
V
VI
VI
VII
VIII
HYDROPOWER PLANT 1
HYDROPOWER PLANT 2
Electricity selling price and revenues calculation:
The electricity selling price based upon the decision no.27, dated datë 19.01.2007 is
determined by Energy Regulatory Entity by the following formula:
Selling price (Euro/kWh) = Average price of electricity import realized the previous year
(Euro/kWh) X Coeficient 1.04
Based on ERE decision this price is 9.37 EUR/kWh with an exchange rate of 140
ALL/EUR it results 6693 EUR/MWh. In order to calculate the revenues the selling price
for the first year is assumed 6693 EUR/MWh with an annual increase for the following
years of 2% less then the supposed inflation rate of 3%. So the price increase is
Page 6
Hydropower exploitation of Dushar – Zerec stream
Business Plan
assumed 1% per year. Also in order to calculate the revenues it is taken into
consideration the concessionaire fee of 2.5% of the annual electricity generated.
3. FUNDING SOURCES
The funding sources of the project are bank loan and own capital. The following table
summerizes the funding sources by value and percentage:
Description
Value
1’428’008
Total value to be funded - EUR
From which:
Investment value funded by own capital - EUR
428’40252
Investment value funded by bank loan - EUR
999’60548
In %
Total value to be funded
100%
Investment value funded by own capital
30%
Investment value funded by bank loan
70%
Loan amortization schedule:
The conditions of the bank loan of a total value of 999’60548 EUR are shown in the
following table:
Bank Loan - EUR
999,605.48
Annual Interest - %
10.00%
Payment Schedule
10
Annual Payment
Grace Period
No.
Month
111,067.28
12
Balance at the beginning
PM
999,605.48
Payment
P
Interest
Balance at the End
I
PM - P
8,330.05
999,605.48
1
Janary
2
February
999,605.48
8,330.05
999,605.48
3
March
999,605.48
8,330.05
999,605.48
4
April
999,605.48
8,330.05
999,605.48
5
May
999,605.48
8,330.05
999,605.48
6
June
999,605.48
8,330.05
999,605.48
7
July
999,605.48
8,330.05
999,605.48
8
August
999,605.48
8,330.05
999,605.48
9
September
999,605.48
8,330.05
999,605.48
10 October
999,605.48
8,330.05
999,605.48
11 November
999,605.48
8,330.05
999,605.48
12 December
999,605.48
8,330.05
999,605.48
YEAR I
0.00
99,960.55
Page 7
Hydropower exploitation of Dushar – Zerec stream
No.
Month
Business Plan
Balance at the beginning
PM
999,605.48
Payment
P
9,255.61
Interest
Balance at the End
I
PM - P
8,330.05
990,349.88
1
Janary
2
February
990,349.88
9,255.61
8,252.92
981,094.27
3
March
981,094.27
9,255.61
8,175.79
971,838.66
4
April
971,838.66
9,255.61
8,098.66
962,583.06
5
May
962,583.06
9,255.61
8,021.53
953,327.45
6
June
953,327.45
9,255.61
7,944.40
944,071.84
7
July
944,071.84
9,255.61
7,867.27
934,816.24
8
August
934,816.24
9,255.61
7,790.14
925,560.63
9
September
925,560.63
9,255.61
7,713.01
916,305.02
10 October
916,305.02
9,255.61
7,635.88
907,049.42
11 November
907,049.42
9,255.61
7,558.75
897,793.81
12 December
897,793.81
9,255.61
7,481.62
888,538.21
111,067.28
94,869.96
1
YEAR II
Janary
888,538.21
9,255.61
7,404.49
879,282.60
2
February
879,282.60
9,255.61
7,327.35
870,026.99
3
March
870,026.99
9,255.61
7,250.22
860,771.39
4
April
860,771.39
9,255.61
7,173.09
851,515.78
5
May
851,515.78
9,255.61
7,095.96
842,260.17
6
June
842,260.17
9,255.61
7,018.83
833,004.57
7
July
833,004.57
9,255.61
6,941.70
823,748.96
8
August
823,748.96
9,255.61
6,864.57
814,493.36
9
September
814,493.36
9,255.61
6,787.44
805,237.75
10 October
805,237.75
9,255.61
6,710.31
795,982.14
11 November
795,982.14
9,255.61
6,633.18
786,726.54
12 December
786,726.54
9,255.61
6,556.05
777,470.93
111,067.28
83,763.24
YEAR III
1
Janary
777,470.93
9,255.61
6,478.92
768,215.32
2
February
768,215.32
9,255.61
6,401.79
758,959.72
3
March
758,959.72
9,255.61
6,324.66
749,704.11
4
April
749,704.11
9,255.61
6,247.53
740,448.50
5
May
740,448.50
9,255.61
6,170.40
731,192.90
6
June
731,192.90
9,255.61
6,093.27
721,937.29
7
July
721,937.29
9,255.61
6,016.14
712,681.69
8
August
712,681.69
9,255.61
5,939.01
703,426.08
9
September
703,426.08
9,255.61
5,861.88
694,170.47
10 October
694,170.47
9,255.61
5,784.75
684,914.87
11 November
684,914.87
9,255.61
5,707.62
675,659.26
12 December
675,659.26
9,255.61
5,630.49
666,403.65
111,067.28
72,656.51
1
YEAR IV
Janary
666,403.65
9,255.61
5,553.36
657,148.05
2
February
657,148.05
9,255.61
5,476.23
647,892.44
3
March
647,892.44
9,255.61
5,399.10
638,636.84
4
April
638,636.84
9,255.61
5,321.97
629,381.23
5
May
629,381.23
9,255.61
5,244.84
620,125.62
6
June
620,125.62
9,255.61
5,167.71
610,870.02
Page 8
Hydropower exploitation of Dushar – Zerec stream
No.
Month
Business Plan
Balance at the beginning
PM
610,870.02
Payment
P
9,255.61
Interest
Balance at the End
I
PM - P
5,090.58
601,614.41
7
July
8
August
601,614.41
9,255.61
5,013.45
592,358.80
9
September
592,358.80
9,255.61
4,936.32
583,103.20
10 October
583,103.20
9,255.61
4,859.19
573,847.59
11 November
573,847.59
9,255.61
4,782.06
564,591.98
12 December
564,591.98
9,255.61
4,704.93
555,336.38
111,067.28
61,549.78
YEAR V
1
Janary
555,336.38
9,255.61
4,627.80
546,080.77
2
February
546,080.77
9,255.61
4,550.67
536,825.17
3
March
536,825.17
9,255.61
4,473.54
527,569.56
4
April
527,569.56
9,255.61
4,396.41
518,313.95
5
May
518,313.95
9,255.61
4,319.28
509,058.35
6
June
509,058.35
9,255.61
4,242.15
499,802.74
7
July
499,802.74
9,255.61
4,165.02
490,547.13
8
August
490,547.13
9,255.61
4,087.89
481,291.53
9
September
481,291.53
9,255.61
4,010.76
472,035.92
10 October
472,035.92
9,255.61
3,933.63
462,780.32
11 November
462,780.32
9,255.61
3,856.50
453,524.71
12 December
453,524.71
9,255.61
3,779.37
444,269.10
111,067.28
50,443.05
YEAR VI
1
Janary
444,269.10
9,255.61
3,702.24
435,013.50
2
February
435,013.50
9,255.61
3,625.11
425,757.89
3
March
425,757.89
9,255.61
3,547.98
416,502.28
4
April
416,502.28
9,255.61
3,470.85
407,246.68
5
May
407,246.68
9,255.61
3,393.72
397,991.07
6
June
397,991.07
9,255.61
3,316.59
388,735.46
7
July
388,735.46
9,255.61
3,239.46
379,479.86
8
August
379,479.86
9,255.61
3,162.33
370,224.25
9
September
370,224.25
9,255.61
3,085.20
360,968.65
10 October
360,968.65
9,255.61
3,008.07
351,713.04
11 November
351,713.04
9,255.61
2,930.94
342,457.43
12 December
342,457.43
9,255.61
2,853.81
333,201.83
111,067.28
39,336.33
YEAR VII
1
Janary
333,201.83
9,255.61
2,776.68
323,946.22
2
February
323,946.22
9,255.61
2,699.55
314,690.61
3
March
314,690.61
9,255.61
2,622.42
305,435.01
4
April
305,435.01
9,255.61
2,545.29
296,179.40
5
May
296,179.40
9,255.61
2,468.16
286,923.80
6
June
286,923.80
9,255.61
2,391.03
277,668.19
7
July
277,668.19
9,255.61
2,313.90
268,412.58
8
August
268,412.58
9,255.61
2,236.77
259,156.98
9
September
259,156.98
9,255.61
2,159.64
249,901.37
10 October
249,901.37
9,255.61
2,082.51
240,645.76
11 November
240,645.76
9,255.61
2,005.38
231,390.16
12 December
231,390.16
9,255.61
1,928.25
222,134.55
111,067.28
28,229.60
YEAR VIII
Page 9
Hydropower exploitation of Dushar – Zerec stream
No.
Month
Business Plan
Balance at the beginning
PM
222,134.55
Payment
P
9,255.61
Interest
Balance at the End
I
PM - P
1,851.12
212,878.95
1
Janary
2
February
212,878.95
9,255.61
1,773.99
203,623.34
3
March
203,623.34
9,255.61
1,696.86
194,367.73
4
April
194,367.73
9,255.61
1,619.73
185,112.13
5
May
185,112.13
9,255.61
1,542.60
175,856.52
6
June
175,856.52
9,255.61
1,465.47
166,600.91
7
July
166,600.91
9,255.61
1,388.34
157,345.31
8
August
157,345.31
9,255.61
1,311.21
148,089.70
9
September
148,089.70
9,255.61
1,234.08
138,834.09
10 October
138,834.09
9,255.61
1,156.95
129,578.49
11 November
129,578.49
9,255.61
1,079.82
120,322.88
12 December
120,322.88
9,255.61
1,002.69
111,067.28
111,067.28
17,122.87
YEAR IX
1
Janary
111,067.28
9,255.61
925.56
101,811.67
2
February
101,811.67
9,255.61
848.43
92,556.06
3
March
92,556.06
9,255.61
771.30
83,300.46
4
April
83,300.46
9,255.61
694.17
74,044.85
5
May
74,044.85
9,255.61
617.04
64,789.24
6
June
64,789.24
9,255.61
539.91
55,533.64
7
July
55,533.64
9,255.61
462.78
46,278.03
8
August
46,278.03
9,255.61
385.65
37,022.43
9
September
37,022.43
9,255.61
308.52
27,766.82
10 October
27,766.82
9,255.61
231.39
18,511.21
11 November
18,511.21
9,255.61
154.26
9,255.61
12 December
9,255.61
9,255.61
77.13
111,067.28
6,016.14
YEAR X
(0.00)
4. FINANCIAL PLAN
In order to compile the profit and loss statement, cash flow statement and to evaluate
the investment, the following is taken into consideration:
1.
2.
3.
4.
Construction period of the hydropower plants is 16 months;
Concession term 1s 35 years including the construction period;
annual average electricity generation – 10,000,000 kWh;
the investment will be realized as follows:
a. during the first year of construction will be invested 169,734,107 EUR; and
b. during the second year of construction will be invested 30,186,989 EUR.
5. Electricity selling price willbe 9.37 EUR/kWh for the first year and for the following
years there is forecasted a price increase of 1% per year;
6. Annual operative expenses (staff cost, maintenance expenses, administrative
expenses) in order to have a normal operation of the HPPs is assumed 5% of the
initial investment for the first years, followed by a yearly increase of 3% for the
following years (inflation rate);
7. Interest expenses are based on the loan amortization schedule;
Page 10
Hydropower exploitation of Dushar – Zerec stream
Business Plan
8. Depreciation is assumed linear for the utilization period of the assets (buildings,
machineries and equipment, grid lines etc.);
9. Tax on profit is assumed 15%;
10. In the 25th year of operation there is forecasted a reinvestment. This reinvestment is
60% of the investment in the equipment and is indexed with the inflation rate of 3%;
11. The discount rate in order to evaluate the feasibility of the project is assumed 12%.
5. LOSS AND PROFIT STATEMENT
The profit and loss statement is compiled based on the above-mentioned assumptions.
The following table represents the sales, operative expenses and profit for the whole
concession term. Also there is given the chart presentation of the operative expenses
(which include personnel expenses, maintenace expenses, electricity expenses,
intrests, etc.) for the operation period as well as the chart presentation of total operative
expenses and net profit.
Annual Operative Expenses by item
350,000
300,000
250,000
200,000
150,000
100,000
50,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
Operative Expenses
Interest
Depreciation
Profit Tax
350,000
700,000
300,000
600,000
250,000
500,000
200,000
400,000
150,000
300,000
100,000
200,000
50,000
100,000
-
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
Shpenzime Operative
Net Profit
Page 11
Hydropower exploitation of Dushar – Zerec stream
Business Plan
LOSS AND PROFIT STATEMENT
Electricity Sales
Year
1
kWh
Price
(EUR/kWh)
Sales (EUR)
Operative
Expenses
EBITDA
Interest
EBTDA
Depreciation
EBT
Profit Tax
Net Profit
2
3
4=2*2
5
6=4-5
7
8=6-7
9
10 = 8 - 9
11 = 15% * 10
12 = 10 - 11
1
4,875,000
0.067
326,277
47,600
278,677
99,961
178,716
22,669
156,047
23,407
132,640
2
9,750,000
0.068
659,079
71,400
587,679
94,870
492,809
34,004
458,805
68,821
389,984
3
9,750,000
0.068
665,670
73,542
592,127
83,763
508,364
34,004
474,360
71,154
403,206
4
9,750,000
0.069
672,327
75,749
596,578
72,657
523,921
34,004
489,918
73,488
416,430
5
9,750,000
0.070
679,050
78,021
601,029
61,550
539,479
34,004
505,475
75,821
429,654
6
9,750,000
0.070
685,840
80,362
605,479
50,443
555,036
34,004
521,032
78,155
442,877
7
9,750,000
0.071
692,699
82,773
609,926
39,336
570,590
34,004
536,586
80,488
456,098
8
9,750,000
0.072
699,626
85,256
614,370
28,230
586,140
34,004
552,136
82,820
469,316
9
9,750,000
0.072
706,622
87,813
618,809
17,123
601,686
34,004
567,682
85,152
482,530
10
9,750,000
0.073
713,688
90,448
623,240
6,016
617,224
34,004
583,220
87,483
495,737
11
9,750,000
0.074
720,825
93,161
627,664
-
627,664
34,004
593,660
89,049
504,611
12
9,750,000
0.075
728,033
95,956
632,077
-
632,077
34,004
598,073
89,711
508,362
13
9,750,000
0.075
735,314
98,835
636,479
-
636,479
34,004
602,475
90,371
512,104
14
9,750,000
0.076
742,667
101,800
640,867
-
640,867
34,004
606,863
91,029
515,834
15
9,750,000
0.077
750,094
104,854
645,240
-
645,240
34,004
611,236
91,685
519,550
16
9,750,000
0.078
757,594
107,999
649,595
-
649,595
34,004
615,591
92,339
523,252
17
9,750,000
0.078
765,170
111,239
653,931
-
653,931
34,004
619,927
92,989
526,938
Page 12
Hydropower exploitation of Dushar – Zerec stream
Business Plan
LOSS AND PROFIT STATEMENT
Electricity Sales
Year
1
kWh
Price
(EUR/kWh)
Sales (EUR)
Operative
Expenses
EBITDA
Interest
EBTDA
Depreciation
EBT
Profit Tax
Net Profit
2
3
4=2*2
5
6=4-5
7
8=6-7
9
10 = 8 - 9
11 = 15% * 10
12 = 10 - 11
18
9,750,000
0.079
772,822
114,577
658,245
-
658,245
34,004
624,242
93,636
530,605
19
9,750,000
0.080
780,550
118,014
662,536
-
662,536
34,004
628,532
94,280
534,253
20
9,750,000
0.081
788,356
121,554
666,801
-
666,801
34,004
632,798
94,920
537,878
21
9,750,000
0.082
796,239
125,201
671,038
-
671,038
34,004
637,034
95,555
541,479
22
9,750,000
0.082
804,202
128,957
675,245
-
675,245
34,004
641,241
96,186
545,055
23
9,750,000
0.083
812,244
132,826
679,418
-
679,418
34,004
645,414
96,812
548,602
24
9,750,000
0.084
820,366
136,811
683,556
-
683,556
34,004
649,552
97,433
552,119
25
9,750,000
0.085
828,570
140,915
687,655
-
687,655
49,426
638,230
95,734
542,495
26
9,750,000
0.086
836,856
145,142
691,713
-
691,713
49,426
642,288
96,343
545,945
27
9,750,000
0.087
845,224
149,497
695,728
-
695,728
49,426
646,302
96,945
549,357
28
9,750,000
0.088
853,676
153,981
699,695
-
699,695
49,426
650,269
97,540
552,729
29
9,750,000
0.088
862,213
158,601
703,612
-
703,612
49,426
654,187
98,128
556,059
30
9,750,000
0.089
870,835
163,359
707,476
-
707,476
49,426
658,051
98,708
559,343
31
9,750,000
0.090
879,544
168,260
711,284
-
711,284
49,426
661,858
99,279
562,580
32
9,750,000
0.091
888,339
173,307
715,032
-
715,032
49,426
665,606
99,841
565,765
33
9,750,000
0.092
897,222
178,507
718,716
-
718,716
49,426
669,290
100,394
568,897
34
9,750,000
0.093
906,195
183,862
722,333
-
722,333
26,756
695,576
104,336
591,240
Page 13
Hydropower exploitation of Dushar – Zerec stream
Business Plan
6. CASH FLOWS STATEMENT
Cash flow of the project which is funded 70% by bank loan and 30% by own capital of
concessionaire is shown in the following table:
EUR
Years
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Cash Flow at the
beginning
(1,212,386)
(1,272,699)
(959,778)
(633,635)
(294,269)
58,322
424,135
803,170
1,195,423
1,600,889
2,019,563
2,558,177
3,100,544
3,646,651
4,196,489
4,750,043
5,307,299
5,868,241
6,432,850
7,001,107
7,572,988
8,148,472
8,727,530
9,310,136
9,896,259
9,979,266
10,574,636
11,173,418
11,775,573
12,381,057
12,989,826
13,601,831
14,217,022
14,835,344
Cash Inflow
326,277
659,079
665,670
672,327
679,050
685,840
692,699
699,626
706,622
713,688
720,825
728,033
735,314
742,667
750,094
757,594
765,170
772,822
780,550
788,356
796,239
804,202
812,244
820,366
828,570
836,856
845,224
853,676
862,213
870,835
879,544
888,339
897,222
906,195
Cash Outflow
1,212,386
386,589
346,158
339,527
332,960
326,459
320,027
313,664
307,373
301,156
295,014
182,210
185,667
189,206
192,829
196,539
200,338
204,229
208,213
212,294
216,474
220,756
225,143
229,638
234,243
745,563
241,485
246,442
251,522
256,729
262,067
267,538
273,148
278,900
288,198
Net Cash
(1,212,386)
(60,312)
312,921
326,143
339,367
352,590
365,814
379,035
392,253
405,466
418,674
538,615
542,366
546,108
549,837
553,554
557,256
560,942
564,609
568,256
571,882
575,483
579,059
582,606
586,123
83,007
595,370
598,782
602,155
605,484
608,769
612,005
615,191
618,322
617,996
Cumulative Cash
(1,212,386)
(1,272,699)
(959,778)
(633,635)
(294,269)
58,322
424,135
803,170
1,195,423
1,600,889
2,019,563
2,558,177
3,100,544
3,646,651
4,196,489
4,750,043
5,307,299
5,868,241
6,432,850
7,001,107
7,572,988
8,148,472
8,727,530
9,310,136
9,896,259
9,979,266
10,574,636
11,173,418
11,775,573
12,381,057
12,989,826
13,601,831
14,217,022
14,835,344
15,453,340
Page 14
Hydropower exploitation of Dushar – Zerec stream
Business Plan
Cash flow in chart for is as follows:
16,500,000
15,000,000
13,500,000
12,000,000
10,500,000
9,000,000
7,500,000
6,000,000
4,500,000
3,000,000
1,500,000
(1,500,000)
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
Net Ca sh
Cumulative Cash
7. PROJECT’S FEASIBILITY
Some of the main criteria to evaluate and to determine the profitability and the
feasibility of the project are:
1.
2.
3.
4.
5.
Payback period method;
Vnet Present Value -NPV;
Internal Rate of Return - IRR;
Levelised Discount Cost - LDC;
Benefit/Cost Ratio.
1. Payback Period method
The method of payback period is the easiest method (criteria) to calculate and it
expresses the time required to repay the initial investment with the future cash
flows.
The pauback period of the investment is about 5 years which is lower than 35
years of the concession term. This is the case when the cash flow is not
discounted.
Page 15
Hydropower exploitation of Dushar – Zerec stream
Business Plan
16,500,000
15,000,000
13,500,000
12,000,000
10,500,000
9,000,000
7,500,000
6,000,000
4,500,000
3,000,000
1,500,000
0
-1,500,000
0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
The main disadvantage of the payback period method is that it does not consider
the time value of money and the cash flows after the payback period. The
following chart represents the payback period for the discounted cash flows. The
discounted payback period is 7 years.
2,000,000
1,500,000
1,000,000
500,000
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
-500,000
-1,000,000
-1,500,000
2. Net Present Value - NPV of the Project
The Net Present Value – NPV of the project represents the difference between
the discounted cash flows and the initial investment. It is calculated with the
following formula:
35
 CFt 
NPV   
 I0
t 
t 1  (1  i ) 
Page 16
Hydropower exploitation of Dushar – Zerec stream
CFt
I0
t
i
-
Business Plan
cash flow at time t
Initial Investment
number of years under consideration
discount rate
The Net Present Value analyzis the profitability of a project and if the NPV is
greater than 0 the project should be accepted because the discounted cash flows
cover the initial investment and add value to the investment. It is one of the most
reliable measures of the project’s profitability. For the base case disocunt rate of
12%, the Net Present Value of the project is 1,808,995 EUR.
3. Internal Rate of Return – IRR of the Project
The Intrernal rate of return – IRR is the discount rate for which the sum of the
discounted cash flows equals the initial investment, I 0. In other words, IRR is the
discount rate for which NPV = 0.
The internal Rate of Return is an indicator of the efficiency of the project.
GenerEURy the investment is considered profitable if the IRR is higher than the
interest rate that can be earned by the same amount of money invested in an
alternative investment (for example another project, securities – treasury bills,
bonds; money held in a deposit, etc.). The project is considerd acceptable if the
internal rate of return is greater than the established minimum acceptable rate of
return.
For the project IRR = 24.06% > 12% (discount rate or minimum acceptable rate
of return).
4. Levelised Discount Cost - LDC
Another wellknown method especiEURy in the electricity generation sector is the
method of long-term marginal unit cost of electricity generation or Levelised
Discount Cost - LDC. This cost is calculated using the following formula:
35
Ci

i
0 (1  ri )
LDC  i35
Ei

i
i 0 (1  ri )
Ci – represents the sum of the investment cost, operative costs and depreciation
costs.
Ei - generated electricity;
ri - discount rate.
For the base case disocunt rate of 12%, LDC = 0.0474 EURcent/kWh
Page 17
Hydropower exploitation of Dushar – Zerec stream
Business Plan
5. Benefit/Cost Ratio
This measure is calculated as a ratio of the present value of cash inflows to the
present valu of cash outflows including the inistial investment. This ratio should
be greater than 1 in order for the project to be acceptable.
For the discount rate 12% the benefit/cost ratio is B/C = 1. 495 > 1.
8. SENSITIVITY ANALYSIS
The main parameters to be change for the i nvestment are: discount rate, electricity
generated, sale price, initial investment, interest rate. In order to have a more
reliable feasibility (profitability) analysis it is necessary to perform the sensitivity
analysis. The sensitivity analysis will be performed for the financial criteria NPV,
IRR, LDC dhe B/C against the above-mentioned parameters.
Sensitivity Analysis against the discount rate
0
78,423
160,550
251,467
352,512
465,279
591,686
734,044
895,165
1,078,480
1,808,995
1,529,549
1,288,204
1,078,480
895,165
734,044
591,686
465,279
352,512
251,467
160,550
78,423
0
1,288,204
NPV
1,529,549
Discount
Rate
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
19.00%
20.00%
21.00%
22.00%
23.00%
24.06%
1,808,995
NPV (EUR)
12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 24.1%
Page 18
Hydropower exploitation of Dushar – Zerec stream
Business Plan
LDC (Eurcent/kWh)
0.068
0.067
0.065
0.063
0.061
0.059
0.058
0.056
0.054
0.053
0.051
0.047
0.049
0.051
0.053
0.054
0.056
0.058
0.059
0.061
0.063
0.065
0.067
0.068
0.049
LDC
0.047
Discount
Rate
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
19.00%
20.00%
21.00%
22.00%
23.00%
24.06%
12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 24.1%
15.0%
17.0%
18.0%
19.0%
20.0%
1.092
1.126
1.162
1.201
1.242
1.286
16.0%
21.0%
1.000
14.0%
1.030
13.0%
1.060
12.0%
1.333
1.495
1.437
1.383
1.333
1.286
1.242
1.201
1.162
1.126
1.092
1.060
1.030
1.000
1.383
B/C
1.437
Discount
Rate
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
19.00%
20.00%
21.00%
22.00%
23.00%
24.06%
1.495
B/C Ratio
22.0%
23.0%
24.1%
Sensitivity analysis against electricity generated
One of the main parameters expected to change in the case of hydropower plants
projects is annual electricity generation. The following tables show the change of
financial criteria when the variation of electricity generation is in the range of ± 30%.
Page 19
95% 100% 105% 110% 115% 120% 125% 130%
70%
75%
80%
85%
33.35%
31.80%
30.25%
28.70%
27.15%
25.60%
24.06%
22.51%
20.97%
19.43%
90%
0.039
0.040
0.041
0.043
0.044
0.046
0.047
0.049
0.060
0.063
1.821
1.769
Sensitivity analysis of IRR
1.717
1.663
1.608
1.552
1.495
1.436
1.376
1.315
1.252
1.188
17.89%
70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 125% 130%
Sensitivity analysis of NPV
1.122
16.35%
3,202,440
2,970,199
2,737,958
2,505,717
2,273,476
2,041,236
1,808,995
1,576,754
14.80%
90%
0.051
85%
1,344,513
1,112,272
880,031
80%
0.054
75%
Business Plan
0.057
70%
647,791
415,550
Hydropower exploitation of Dushar – Zerec stream
95% 100% 105% 110% 115% 120% 125% 130%
70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 125% 130%
Sensitivity analysis of B/C
Sensitivity analysis of LDC
Sensitivity analysis against initial investment
In order to obtain a complete sensitivity analysis of the financial measures against the
initial investment, the variation of the initial investment is in the range (70-130)%.
Page 20
20.72%
21.26%
22.36%
21.80%
22.92%
23.48%
24.06%
25.22%
24.64%
25.81%
0.053
0.052
0.051
0.050
0.049
0.048
0.047
0.046
1.334
1.358
1.384
0.042
Sensitivity analysis of IRR
1.410
1.437
1.465
1.495
1.526
1.558
1.591
1.626
1.662
26.41%
70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 125% 130%
Sensitivity analysis of NPV
1.700
27.01%
27.62%
1,367,716
1,441,262
1,514,809
1,588,355
1,661,902
1,735,448
1,808,995
1,882,541
95% 100% 105% 110% 115% 120% 125% 130%
0.046
90%
0.045
85%
1,956,088
2,029,634
2,103,181
80%
0.044
75%
Business Plan
0.043
70%
2,176,727
2,250,273
Hydropower exploitation of Dushar – Zerec stream
70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 125% 130%
70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 125% 130%
Sensitivity analysis of B/C
Sensitivity analysis of LDC
Also the sensitivity analysis is performed for NPV, IRR and B/C against the variation of
the initial investment and the quantity of electricity generated when the dsicount rate is
12%, for the variation of sale price and production and initial investment as well as the
variation of the interest rate and debt ratio. The following tables show NPV, IRR, LDC
and B/C against the simultaneous change of the initial investment and the quantity of
electricity generated, sale price and the quantity of water treated and traded, initial
investment and the quantity of electricity generated as well as against the change of
interest rate and debt ratio.
Page 21
Hydropower exploitation of Dushar – Zerec stream
NPV
Electricity sale price (EUR/kWh)
Electricity generated
(kWh)
Business Plan
1,808,995
0.053542857 0.060235714
80%
90%
0.067
100%
0.073621429 0.080314286
110%
120%
8,000,000
80%
136,861
508,446
880,031
1,251,617
1,623,202
9,000,000
90%
508,446
926,480
1,344,513
1,762,547
2,180,580
10,000,000
100%
880,031
1,344,513
1,808,995
2,273,476
2,737,958
11,000,000
110%
1,251,617
1,762,547
2,273,476
2,784,406
3,295,336
12,000,000
120%
1,623,202
2,180,580
2,737,958
3,295,336
3,852,714
NPV
Electricity sale price (EUR/kWh)
Initital Investment
(EUR)
1,808,995
0.053542857 0.060235714
80%
90%
0.067
100%
0.073621429 0.080314286
110%
120%
1,142,406
80%
1,174,217
1,638,699
2,103,181
2,567,662
3,032,144
1,285,207
90%
1,027,124
1,491,606
1,956,088
2,420,569
2,885,051
1,428,008
100%
880,031
1,344,513
1,808,995
2,273,476
2,737,958
1,570,809
110%
732,939
1,197,420
1,661,902
2,126,383
2,590,865
1,713,609
120%
585,846
1,050,327
1,514,809
1,979,291
2,443,772
70.0%
77.0%
NPV
Debt Ratioo (%)
Interest Rate
56.0%
63.0%
84.0%
(%)
1,808,995
80%
90%
100%
110%
120%
8.00%
80%
2,027,422
1,949,528
1,871,634
1,793,739
1,715,845
9.00%
90%
2,002,367
1,921,340
1,840,314
1,759,288
1,678,262
10.00%
100%
1,977,311
1,893,153
1,808,995
1,724,837
1,640,678
11.00%
110%
1,952,256
1,864,965
1,777,675
1,690,385
1,603,095
12.00%
120%
1,927,200
1,836,778
1,746,356
1,655,934
1,565,512
NPV
Electricity generated (kWh)
Initital Investment
(EUR)
8,000,000
80%
9,000,000
90%
10,000,000
100%
11,000,000
110%
12,000,000
120%
80%
1,174,217
1,638,699
2,103,181
2,567,662
3,032,144
1,808,995
1,142,406
1,285,207
90%
1,027,124
1,491,606
1,956,088
2,420,569
2,885,051
1,428,008
100%
880,031
1,344,513
1,808,995
2,273,476
2,737,958
1,570,809
110%
732,939
1,197,420
1,661,902
2,126,383
2,590,865
1,713,609
120%
585,846
1,050,327
1,514,809
1,979,291
2,443,772
3,500,000
2,800,000
2,100,000
80%
1,400,000
90%
700,000
0
120%
100%
110%
110%
100%
90%
120%
80%
3,500,000-4,000,000
2,800,000-3,500,000
2,100,000-2,800,000
1,400,000-2,100,000
700,000-1,400,000
0-700,000
Page 22
Hydropower exploitation of Dushar – Zerec stream
IRR
Electricity sale price (EUR/kWh)
Electricity generated
(kWh)
24.06%
8,000,000
9,000,000
Business Plan
0.053542857 0.060235714
80%
90%
80%
12.93%
15.42%
0.067
100%
0.073621429 0.080314286
110%
120%
17.89%
20.36%
22.82%
90%
15.42%
18.20%
20.97%
23.75%
26.53%
10,000,000
100%
17.89%
20.97%
24.06%
27.15%
30.25%
11,000,000
110%
20.36%
23.75%
27.15%
30.56%
33.97%
12,000,000
120%
22.82%
26.53%
30.25%
33.97%
37.68%
IRR
Electricity sale price (EUR/kWh)
Initital Investment
(EUR)
24.06%
0.053542857 0.060235714
80%
90%
20.10%
23.26%
0.067
100%
26.41%
0.073621429 0.080314286
110%
120%
29.56%
32.70%
1,142,406
80%
1,285,207
90%
18.98%
22.10%
25.22%
28.34%
31.47%
1,428,008
1,570,809
100%
110%
17.89%
16.83%
20.97%
19.87%
24.06%
22.92%
27.15%
25.97%
30.25%
29.04%
1,713,609
120%
15.80%
18.80%
21.80%
24.82%
27.86%
IRR
Debt Ratioo (%)
Interest Rate
56.0%
63.0%
70.0%
77.0%
84.0%
(%)
24.06%
80%
90%
100%
110%
120%
8.00%
80%
26.20%
25.45%
24.71%
23.99%
23.29%
9.00%
90%
25.92%
25.14%
24.38%
23.64%
22.91%
10.00%
100%
25.64%
24.84%
24.06%
23.29%
22.54%
11.00%
110%
25.37%
24.54%
23.74%
22.95%
22.18%
12.00%
120%
25.10%
24.25%
23.42%
22.61%
21.83%
IRR
Electricity generated (kWh)
Initital Investment
(EUR)
24.06%
8,000,000
80%
9,000,000
90%
10,000,000
100%
11,000,000
110%
12,000,000
120%
1,142,406
80%
20.10%
23.26%
26.41%
29.56%
32.70%
1,285,207
90%
18.98%
22.10%
25.22%
28.34%
31.47%
1,428,008
100%
17.89%
20.97%
24.06%
27.15%
30.25%
1,570,809
110%
16.83%
19.87%
22.92%
25.97%
29.04%
1,713,609
120%
15.80%
18.80%
21.80%
24.82%
27.86%
33.12%
28.59%
24.06%
80%
90%
100%
110%
120%
19.53%
15.00%
120%
110%
100%
90%
80%
28.59%-33.12%
24.06%-28.59%
19.53%-24.06%
15.00%-19.53%
Page 23
Hydropower exploitation of Dushar – Zerec stream
B/C
Electricity generated
(kWh)
1.495
8,000,000
9,000,000
Business Plan
Electricity sale price (EUR/kWh)
7.496
80%
8.433
90%
80%
1.041
1.148
9.370
100%
10.307
110%
11.244
120%
1.252
1.352
1.448
90%
1.148
1.265
1.376
1.483
1.586
10,000,000
100%
1.252
1.376
1.495
1.608
1.717
11,000,000
110%
1.352
1.483
1.608
1.727
1.841
12,000,000
120%
1.448
1.586
1.717
1.841
1.959
B/C
Initital Investment
(EUR)
1.495
1,142,406
Electricity sale price (EUR/kWh)
7.496
80%
8.433
90%
80%
1.367
1.500
9.370
100%
10.307
110%
11.244
120%
1.626
1.746
1.860
1,285,207
90%
1.307
1.435
1.558
1.674
1.786
1,428,008
100%
1.252
1.376
1.495
1.608
1.717
1,570,809
110%
1.201
1.322
1.437
1.547
1.653
1,713,609
120%
1.155
1.272
1.384
1.491
1.594
B/C
Interest Rate
Debt Ratioo (%)
56.0%
63.0%
70.0%
77.0%
84.0%
(%)
1.495
80%
90%
100%
110%
120%
8.00%
80%
1.590
1.555
1.521
1.489
1.458
9.00%
90%
1.578
1.542
1.508
1.475
1.443
10.00%
100%
1.567
1.530
1.495
1.461
1.429
11.00%
110%
1.556
1.518
1.482
1.448
1.415
12.00%
120%
1.545
1.506
1.470
1.435
1.402
B/C
Initital Investment
(EUR)
1.495
Electricity generated (kWh)
8,000,000
80%
9,000,000
90%
10,000,000
100%
11,000,000
110%
12,000,000
120%
1,142,406
80%
1.367
1.500
1.626
1.746
1.860
1,285,207
90%
1.307
1.435
1.558
1.674
1.786
1,428,008
100%
1.252
1.376
1.495
1.608
1.717
1,570,809
110%
1.201
1.322
1.437
1.547
1.653
1,713,609
120%
1.155
1.272
1.384
1.491
1.594
1.900
1.700
80%
1.500
90%
1.300
1.100
120%
100%
110%
110%
100%
90%
120%
80%
1.700-1.900
1.500-1.700
1.300-1.500
1.100-1.300
Page 24
Hydropower exploitation of Dushar – Zerec stream
LDC
Initital Investment
(EUR)
0.047
1,142,406
Business Plan
Electricity sale price (EUR/kWh)
7.496
80%
8.433
90%
80%
0.041
0.043
9.370
100%
10.307
110%
11.244
120%
0.044
0.045
0.046
1,285,207
90%
0.043
0.044
0.046
0.047
0.048
1,428,008
100%
0.045
0.046
0.047
0.048
0.050
1,570,809
110%
0.047
0.048
0.049
0.050
0.051
1,713,609
120%
0.049
0.050
0.051
0.052
0.053
LDC
Electricity generated
(kWh)
0.047
8,000,000
9,000,000
Electricity sale price (EUR/kWh)
7.496
80%
8.433
90%
80%
0.054
0.056
9.370
100%
10.307
110%
11.244
120%
0.057
0.058
0.059
90%
0.049
0.050
0.051
0.053
0.054
10,000,000
100%
0.045
0.046
0.047
0.048
0.050
11,000,000
110%
0.042
0.043
0.044
0.045
0.046
12,000,000
120%
0.039
0.040
0.041
0.042
0.043
LDC
Interest Rate
Debt Ratioo (%)
56.0%
63.0%
70.0%
77.0%
84.0%
(%)
0.047
80%
90%
100%
110%
120%
8.00%
80%
0.045
0.046
0.047
0.048
0.049
9.00%
90%
0.045
0.046
0.047
0.048
0.049
10.00%
100%
0.045
0.046
0.047
0.049
0.050
11.00%
110%
0.046
0.047
0.048
0.049
0.050
12.00%
120%
0.046
0.047
0.048
0.049
0.051
LDC
Initital Investment
(EUR)
0.047
Electricity generated (kWh)
8,000,000
80%
9,000,000
90%
10,000,000
100%
11,000,000
110%
12,000,000
120%
1,142,406
80%
0.052
0.047
0.044
0.041
0.038
1,285,207
90%
0.054
0.049
0.046
0.042
0.040
1,428,008
100%
0.057
0.051
0.047
0.044
0.041
1,570,809
110%
0.059
0.054
0.049
0.046
0.043
1,713,609
120%
0.061
0.056
0.051
0.048
0.044
0.070
0.060
0.050
120%
110%
0.040
0.030
80%
100%
90%
90%
100%
110%
80%
120%
0.060-0.070
0.050-0.060
0.040-0.050
0.030-0.040
Page 25
Hydropower exploitation of Dushar – Zerec stream
Business Plan
9. CONCLUSIONS
Based on the above analysis it results that the project for the construction an operation
by concession of the HPPs’ on the Dushar - Zerec stream is a feasible project because:
1.
Net Present Value (NPV):
NPV = 1,808,995 EUR > 0
2.
Internal Rate of Retur (IRR) :
IRR = 24.06% > 12%
3.
Benefit/Cost Ratio:
B/C = 1.495
4.
Payback period:
PBP = 5 years
5.
Discounted Payback period:
PBPd = 7 years
Levelised Discount Cost - LDC:
LDC = 0.047 Eurocent/kWh
Page 26