renewable energy finance

renewable energy finance

Project description
Feasibility Study

You are required to prepare a Feasibility Study of the following proposed project:-

The Proposed Wind turbine Project

A local farmer is considering building a wind turbine on his land. He has asked you as a specialist in Renewable Energy Finance to carry out a Feasibility Study in order to raise finance for his proposed installation.

He is thinking of installing a Powerwind 500kW turbine. The accompanying manufacturers information provides some preliminary information. His consulting engineer estimates a generation of 1,752,000kWh pa (at 40% efficiency) and costs as follows:-

SUPPLY AND INSTALL
Grid upgrade cost140,000
Site preparation210,000
Supply of turbine850,000

Finance costs: construction finance72,000
Finance arrangement fee30,000
DD & broker fees75,000

OPERATING COSTS
Management costs35,000
Maintenance17,000
Operating costs10,000
Insurance20,655

The farmer informs you that he has already committed 100,000 comprising fees on consulting engineers, planning consent, anemometer and sweat equity to the project development thus far and wishes to extract maximum financial benefit from the installation. Operational start date for the project is targeted for January 2015.

Total cost of capital is 9%.
RPI is assumed to be 2.0% over the life of the project.
Corporation Tax rates are basic rate 25% and small rate 20%.

Tasks to be undertaken for your Feasibility Study:

1.Assuming 100% export specify (i) the export price (ii) FiT rate [5 marks]

2.Draw up a manual* cashflow spreadsheet showing all income and
expenses over the first 10 years of the project
(see Special Requirements below)
[15 marks]

3.Produce an Excel spreadsheet over 20 years
(see Special Requirements below)

[40 marks]

This should show:-

the Project and Equity NPV [10 marks]

the Project and Equity IRR [20 marks]

the Project and Equity Payback term and date (month, year)
[5 marks]

the DSCR [5 marks]

Total marks [100]

Special Requirements

Question 2
* All calculations for the first 10 years must be carried out by calculator and not by spreadsheet programme and your calculations must be shown fully.

The 10 year figures must be submitted written on a separate spreadsheet.

Question 3
Your Excel must show 20 years cashflow. (assume the FiT income only lasts 20 years).

Additional Information from the Manufacturer required to undertake the Feasibility Study

(See also the manufacturers Data Sheet provided separately to accompany the coursework)

POWERWIND 500

The PowerWind 500 is a solid and reliable high-tech wind turbine, especially designed for community wind applications in the United Kingdom.

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