Financial overview of the investment program

2012

2012

2

Financial Overview of of the Investment Program on the 6 ha Greenhouse in the Vicinity of Noragavit District of Yerevan

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Երևանի ջերմատնային գոտուofծրագրի ներդրումների կատարման աջակցման մեխանիզմները Financial Overview the Investment Program on the 6 ha Greenhouse in the

Vicinity of Noragavit District of Yerevan

Investments Capital Invest ments

International nternational experience shows that the most optimal size of a state-of-the-art state greenhouse is 3-66 ha. Taking this into consideration, calculations are made for a 6 ha greenhouse. In the meantime, the construction and operation of the greenhouse is possible to carry out on a phased basis starting from 1 ha.

In case of applying standard technology solutions, the capital investments for constructing a 6 ha greenhouse in the vicinity of Noragavit district istrict of Yerevan will constitute 9,88 mln. USD (VAT VAT excluded). The amount of investments is calculated on the assumption of the prices submitted by a number ber of greenhouse producers and distributors.

In order to fund the aforementioned investments and to replenish current assets, the total amount of investments will constitute approx. 10,64 mln USD, the 80 % of which is possible to fund through loans (Table ( 1).

Table 1. Investment costs for a 6 ha greenhouse without assimilation lighting

USD

Specific weight in the total investments

Area (6,5 ha)

743 333,3

7,0%

Right to use outer infrastructures*

337 500,0

3,2%

Greenhouse

8 796 666,38

82,7%

Total capital investments

9 877 499,71

92,9%

760 000

7,1%

10 637 499,71

100,0%

Investments

Replenishment of current assets** assets Total investments

*Includes the right to use the infrastructures of the centralized system providing thermal, electric energy and gas supply, as well as water discharge. **On top of that, it also includes loan service fees for the first two years of operation.

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Երևանի ջերմատնային գոտուofծրագրի ներդրումների կատարման աջակցման մեխանիզմները Financial Overview the Investment Program on the 6 ha Greenhouse in the

Vicinity of Noragavit District of Yerevan

The greenhouses to be constructed in the vicinity of Noragavit district of Yerevan will take advantage of the infrastructures of the centralized system providing thermal, electric energy and gas supply, as well as water discharge. In the result, in comparison with constructing greenhouses in another area, area investments in the infrastructures will be reduced approximately 2,8 fold.

Production Cost According to the calculations, the production cost of tomatoes grown in the vicinity of Noragavit district of Yerevan is 15% lower than that of tomatoes grown in a greenhouse constructed elsewhere. This, in the first place, is accounted for by the considerable reduction in heating costs due to the use of the heat resources of the TPP (some 40--50%). Another factor condusive to production cost reduction is the reduction in the depreciation costs and loan interest costs, caused by the reduced investment investme in the infrastructure.

As 80% of the investment in the calculations done is planned to be made through loans, the interest costs of the long-term term loan constitute an essential part in the structure of the production cost. After the complete repayment of the loan the total production cost of tomatoes which makes 0.81 USD will decrease by some 30% to make 0.57 USD. Structure of Production Cost If using an independent heating system

If using the resources of the Yerevan TPP Interest amount, 29%

Variable costs (for heating without gas) 34%

Variable costs (for heating without gas) 29%

Interest amount, 29%

Depreciation

12 %

Depreciation

13 % Maintnance 4%

Other constant costs 10%

Gas for heating 11%

Maintnance

4%

Other constant costs 8%

Gas for heating 18%

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Երևանի ջերմատնային գոտուofծրագրի ներդրումների կատարման աջակցման մեխանիզմները Financial Overview the Investment Program on the 6 ha Greenhouse in the

Vicinity of Noragavit District of Yerevan

Financial Results

The calculations were made by the scenario of funding through 80% long-term long loans and 20% equity. In this case the average profitability will comprise 39,60% before the full repayment of the loan, and 54% after the repayment of the loan, loa , starting from the sixth year of operation. The payback period will constitute 5 years, and the discounted payback period will be 6,5-7 years.

Table 2. Financial Data LongLong-term credit (US dollar) dollar) Total interest amount (USD) USD) Credit repayment period (year) year) Grace period (year) year) LongLong-term credit interest rate (%) Profitability by revenue for the first 6 years* years* th Profitability by revenue since the 7 year Payback period (year) year) Discounted payback period (year) year)

7 895 259,9 2 139 921,87 5 1 10% 39,60% 5 54% 5 6,5 ,5-7

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Երևանի ջերմատնային գոտուofծրագրի ներդրումների կատարման աջակցման մեխանիզմները Financial Overview the Investment Program on the 6 ha Greenhouse in the

Vicinity of Noragavit District of Yerevan

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