TPP Task 5 Economic and Financial Analysis

Page 1

November, 2007

European Agency for Reconstruction Contract nr 05KOS01/04/005 Studies to support the development of new generation capacities and related transmission – Kosovo UNMIK CONSORTIUM OF PÖYRY, CESI, TERNA AND DECON Task 5 ECONOMIC AND FINANCIAL ANALYSIS


Studies to support the development of new generation capacities and related transmission Task 5, Economic and financial analysis

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CONTENTS 1

INTRODUCTION..............................................................................................................3

1.1 Scope....................................................................................................................................3 1.2 Operating Enviroment.......................................................................................................3 1.3 Modelling Assumptions......................................................................................................4 1.3.1 Factors Affecting Financial Viability...............................................................................4 1.3.2 Potential EVA Sources.....................................................................................................5 1.3.3 CO2 Issues......................................................................................................................10 2

FINANCIAL MODEL .....................................................................................................12

2.1 2.2 2.3 2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.3.6 2.3.7 2.4 2.4.1 2.4.2 2.4.3 2.4.4 2.4.5

Technical Configuration Options ...................................................................................12 Site options ........................................................................................................................12 Initial Data – Basecost Excel Workbook........................................................................12 Site Cost Sheet ...............................................................................................................13 Network connection sheet ..............................................................................................15 Plant cost sheet ...............................................................................................................17 Construction schedule sheet ...........................................................................................19 Disbursement schedule sheet .........................................................................................24 Personnel sheet ...............................................................................................................25 Operation and maintenance (O&M) sheet .....................................................................26 Financial model – Excel workbook.................................................................................31 Opening sheet .................................................................................................................32 Input sheet ......................................................................................................................32 Results sheet...................................................................................................................37 Report sheet....................................................................................................................46 All other sheets...............................................................................................................47

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Studies to support the development of new generation capacities and related transmission Task 5, Economic and financial analysis

1

INTRODUCTION

1.1

Scope

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The financial model includes an estimate of itemised investment cost including process and project contingencies for the entire project implementation including, design, engineering, project management, plant and equipment cost, transportation and installation cost, supporting infrastructure cost, preparation of site, access to the site, power evacuation, spare parts, start-up fuel and required tools, commissioning and acceptance test, training of staff, insurance, etc. The investment cost estimate includes an estimate of the ratio between local and foreign supplies including project implementation cost, land acquisition cost, resettlement cost, local taxes and import duties, project development cost, engineering fee, fee for legal and financial advisors, fee for approvals, and interest during construction. A detailed sources and uses of funds during the construction period is included on a quarterly basis. The analysis includes calculation of net present value (NPV), internal rate of return (IRR), and other measures useful to decision-makers in Kosovo. Operating cost includes lignite and fuel oil cost, other operating and maintenance cost, insurance premiums; and major overhauls cost. The frequency of rehabilitation over the plant life is forecast and the NPV of the operating cost and of the generated electricity are derived for the recommended three technical options. The economic analysis integrates the above and shows the range of results for the recommended three options and assumptions (sensitivity analysis). (Gas and renewable sources and electricity import are not technically or economically viable options for comparison for the near future due to severe capacity constraints.) A comprehensive financial model has been developed, answering all relevant questions concerning the financial viability of the project, the revenues, operating cost, cash flows, disbursement schedule of possible loans, capital requirements and liquidity. The model includes a default financing plan and it is flexible for decisionmakers in Kosovo to understand the sensitivities to variables. The model has been delivered to the Contracting Authority. The scope of the Economic and Financial analysis was changed by client request during the project. Because of external considerations, the focus of Task 5 was focused on producing a flexible financial analysis model of the Kosovo C power plant to be used by selected stakeholders for evaluation and option comparison purposes. 1.2

Operating Enviroment The strategic and operational environment of the Kosovo C thermal power plant in the Kosovo electricity market is complex and with multiple interdependencies. In Figure 1 we have shown a simplified principial view of the market.

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Physical Delivery Payments Contracts

WORLD BANK Finance

KOSOVO ADMINISTRATION

Finance

€ for power

OTHER FINANCERS FOREIGN INVESTOR

RP & IR

Investment ROI

€ for power

Investment Ownership

Finance

TRADERS

ROI RP & IR

Ownership Finance

LOCAL CO (IPP)

FOREIGN GENERATION

Price contract

€ for power

MINING OPERATION

Lignite

POWER PLANT

Price contract

Price contract

POWER PLANT 2

€ for power

TSO EXPORT CLIENTS

POWER PLANT 3

Lignite

KEK Ash disposal

€ for ash

ASH DISPOSAL

Ash disposal

Price contract

Kosovo B

KOSOVO DISTRIBUTION

KEK

(KEK + OTHER?)

Price contract

SMALL & MEDIUM CONSUMERS

Kosovo A

€ for ash

LARGE KOSOVO CLIENTS

€ for power

Figure 1: Principial Model of the IPP in the Kosovo Electricity Market

1.3

Modelling Assumptions

1.3.1

Factors Affecting Financial Viability The financial and operational viability of the Kosovo C thermal power plant is primarily dependent on the following factors: 1. The fuel cost, i.e. the price paid for the lignite supply 2. The regional electricity price 3. Project (construction and site) costs 4. Fees or levies paid (Economic Value Added for Kosovo) 5. Operational costs 6. Cost of financing 7. Other fees and costs

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Of these factors, the electricity price is variable and thus carries most of the associated risk. In assessing the financial viability of the power plant this risk normally requires a considerable risk premium for the investor. 1.3.2

Potential EVA Sources This section discusses the assumptions for potential income sources from the Kosovo C project for the Kosovo administration. As no conclusive decisions or comments were provided by key stakeholders, the financial model for reasons of clarity and flexibility only allows for calculation with a few of the options below. Lignite fee (EUR / tonne lignite) In this case the lignite mine would either be owned by the Kosovo administration or there would be separate legislation allowing for a license fee, tax or levy on natural resources. The Kosovo C company would pay a lignite consumption-based fee. Price development would be ensured with an index mechanism following the general development of Kosovo economy, indexed for selected price indicators and inflation rate. There is a possibility to require a minimum assumed annual consumption (tons of lignite) – with payment due also if there is no real physical lignite consumption. This would be a strong incentive for continuous production with high efficiency and ensure a minimum level of annual revenues for Kosovo. It would not constitute an obligation to generate electricity If the fee would also cover ash disposal the investor would not be burdened with additional payments. It would be essential for competition reasons that the same fee would apply to all lignite users (i.e. also KEK). Key benefits of introducing a lignite volume-based fee would be that it is: •

Easy to measure and unambiguous

It provides a guaranteed cash flow level for the Kosovo administration

There is a strong incentive for generation due to the minimum fee level.

Another strong incentive is for efficiency as higher efficiency rate would mean lower lignite cost per MWh electricity

Price indexing ensures relevance of prices in the long term

Drawbacks would include:

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If new legislation is passed, the influence would not be restricted to Kosovo C creating short-term adverse effects on e.g. KEK financial performance

A minimum threshold may increase investment risk with low market prices (ex. seasonal low prices), which increases the required investment risk premium

High electricity market prices would give no extra yield to the Kosovo Administration

A volume-based fee is insensitive to lignite quality (heating value

Energy fee (EUR / GJ energy content of lignite) This is similar to the lignite fee, but the power company is charged for annual usage of lignite and its energy content, and is contractually bound to pay an energy fee based on energy content of the lignite resource, and where the measurement of the energy content is done by an agreed third party, i.e. the energy content can be verified by periodical samples, which are examined by independent laboratory Additional benefits compared to lignite fee: •

The Kosovo C pays for the actual energy content, not the physical mass of the resource

Additional drawbacks: •

The energy content is variable – meaning a variable cost with increased risk for and variable EVA income for the Kosovo Administration

There is a slightly higher cost (calorimetric measurement + weighing)

Laboratory independence needs to be certain

Operational output might not correlate with energy content input during first years (learning curve – later efficiency increases

Energy fee (EUR / MWh electricity) The electrical energy output measured by the TSO as delivered to network is the fee basis, with terms that oblige the power company to generate a certain annual (or monthly) minimum level in output - not tied to strict daily values. Additional incentives / requirements for better efficiency and reliability can be built into the fee structure, but the same fee should be levied for all generators (also KEK). The incentives should be set to different levels: The higher the efficiency, the lower the fee for additional electricity produced, or no fee for heat generation (district heating) to improve incentives

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A mutually acceptable structure in case of operational delays or technical failures must be created, with Force Majeure clauses for major issues. Benefits: •

Easy to measure –through TSO

Additional incentives to drive up performance can be utilized

Could be used in conjunction with other fees

Drawbacks •

Complex, multi-layered fee structure necessary

Variable cash flow as electricity generation fluctuates

Dependent on grid stability

Heat production (for DH) needs a separate structure

No inherent incentive for fuel efficiency

Energy tax-type levy normally paid by consumers, not generators

Concession fee (one-off fee) The concession for the lignite mine and/or power plant is sold separately to the investor, who is obliged to build and start an IPP by concession agreement within an agreed timeframe. The concession is auctioned to the highest bidder. The better and more secure the long-term investment situation is, the higher the auctioned price will be. Settlement (payment) of the concession fee can be annualized or a one-off payment. Clauses for mine utilization need to be applied. Benefits: •

A one-off cash payment, which is not tied to the output or the operational quality of the IPP

Up-front cash for the Kosovo administration

Simplest possible commercial bidding structure for transaction

Drawbacks: •

No control after the transaction by the administration other than national laws (or contract)

KEK lignite supply price - a fixed volume and price for KEK (Kosovo B) lignite supply from the mine is needed

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If the concession is only for the power plant, another structure is needed for the lignite mine

Complicated contract structure, unclear incentives. Without utilization clauses in concession– risk for no generation or late start

Uncertain status of Kosovo can lower fee – higher investor risk, and up-front payment means high discount rate (lower fee) due to high risk

Long-term management of received capital within Kosovo administration – budgeting risk (+other issues)

Energy off-take (electricity and district heating) Kosovo C delivers energy to the Kosovo Administration, and is contractually bound to supply (generate or buy) a fixed amount of energy per annum/other agreed period, and the Administration organizes the use of that energy (requires resources). The economic effect (EVA) depends on volatile market prices, unless subsidized delivery is intended. The Kosovo Administration would be entitled to fixed (or variable) amount of output MWh electricity and (later) district heating Benefits: •

The economic effect follows the market price development – natural hedge for power company

The Kosovo administration has control over fixed energy volume – improved supply situation

Drawbacks: •

Hard to define correct volume level to be delivered

Economic effect follows the market price development and volatility

Kosovo administration has control over fixed energy volume – but does it have sufficient expertise and resources?

Severely limits investment upside - increases investment price risk

Sales pricing is essential(Government-subsidized delivery price reduces economic benefit for Kosovo)

Energy Taxation Energy taxes can be set to affect any part of the energy value chain: mining, lignite price, sold electricity price, ash disposal etc. Taxation can be also based on volume, environmental impact, etc.

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This requires a well-defined legal set-up fixed for the long term to be attractive for the investor Energy taxes are currently used in many countries. Taxes must normally be applied equally to all market participants. The long-term effect on investment value is fixed by contract / additions in law. This could also be a pinpoint law/tax (for one IPP) but assumption is same law and tax for all Shareholding The Kosovo Administration invests capital or receives a share in the IPP and as a shareholder has direct insight and control (level depends on the shareholding stake) The income to the Administration comes from annual dividends which are determined by financial results Assumption: Administration is minority shareholder, but has some control e.g. through the board. Clear decision-making structures, governance structures and articles of association are required for balanced management. Key benefits: •

Government participation in the power plant lowers some risks of the investors

Stake can also include other industry sector stakeholders

Kosovo Administration received part of investment upside

Drawbacks: •

The double role of the Administration can hinder other investments to energy sector (possible conflicts of interests, and significantly reduces the investor’s upside

The annual income stream is volatile and unpredictable with a full risk bearing in e.g. default situation, and the Kosovo Administration gets partial investment risk

Availability of capital for the investment

Political decisions affect financial viability – increased political risk

Equity loan The Administration issues an equity loan to the power company, which will be repaid with appropriate interest over the time. An equity loan does not give control, but is the second in line for liquidation (after loans) in possible default. National legislation can contain restrictions or special rules for equity loans

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Terms should be agreed for both securing steady income stream to Administration and securing reasonable financial strength to IPP Capital is acquired from international sources Investor risk rating probably better than Kosovo Administration Benefits: •

Possible tax shield on interest

Terms can be negotiated in flexible way

May improve the financial feasibility if necessary for raising debt capital

Keeps the power plant separated from Administration – no double role

Drawbacks: •

The price of capital can be high, if it is syndicated from international sources (normally more expensive than commercial debt)

Interest and re-payments can be restricted to positive financial result of the company – difficult to control

Limited or no economic upside for Kosovo Administration or investor

Rent Rental fees work similar to license or concession fees with the difference primarily in which legislation the agreement falls under (real estate). Obligations The power company is obliged to deliver electricity (and / or heat) at agreed price, with a price cap and volume obligation targeted either for the Administration or to a certain customer group. The risk of technical or operational failure must be taken into account in contract terms Could be combined with other fees etc. and decreases EVA cash flow volatility. Costbearing obligations means including e.g. site cleanup costs or decommissioning costs or ash disposal costs to be paid for by the investor. Other obligations may include domestic or local employment requirements, counter trades, etc. 1.3.3

CO2 Issues Task 3 comprises a detailed analysis of the issues related to greenhouse gas emissions illustrating the characteristics of the main flexibility mechanisms that exist at the

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moment in order to lower the CO2 emission volumes, and an analysis in which way such mechanisms could be implemented in the Kosovo context and the effects on the Kosovo C power plant. The first conclusion of the analysis was that the development about this topic strongly depends on if Kosovo will ratify the Kyoto protocol, moving Kosovo from a passive position to an active one. If Kosovo will ratify Kyoto in fact, besides not having any emission cap to respect, it would take the position of “beneficiary� country of a Clean Development Mechanism Project, held by an Annex I Country. On the other hand, if Kosovo decided to ratify Kyoto, an emission cap would probably be fixed for Kosovo. In this case the level of this emissions cap would contribute in the determination whether an investment (ex. Kosovo C) is economically interesting. With the Kyoto ratification and the cap level assignment, becoming Annex I, Kosovo would not have the possibility to benefice anymore of CDM Projects but, on the other hand, would have the chance to take part in Joint Implementation Projects, both as proposal and as guest. These kinds of Project, if compared with CDMs, can be easier to be developed, especially if both the Countries satisfy the eligible criteria. If the Kosovo C thermal power plant project is compared with a baseline in which the demand is satisfied by an internal generation capacity increase, then the USC technology may be a strong alternative from the CO2 emissions point of view. Scenario analysis in Task 3 states that the project will save an overall quantity of 11.9 Mt CO2 calculated over the 7 years credit period. If the baseline was defined starting from a situation similar to the actual one, in which the peak load is covered with the help of imports, then any generation project, even the one characterised by the highest efficiency, would be probably penalised. It is, based on the facts at hand, not feasible to estimate the full economic and financial impact of a hypothetical situation, as no status regarding the Kyoto protocol has been declared. The default assumption for the economic and financial model is that it is CO2 neutral, i.e. there is no associated CO2 cost. The calculation model does, however, allow for a different set of assumptions where a CO2 cost can be used for calculation. The medium and high electricity price scenarios from Task 1 that are used in the model include a moderate to high CO2 price as price components. This fact does not mean that the Kosovo C plant needs to buy emission rights, but rather that the electricity sales price reflects the CO2 costs in the whole region.

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2

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FINANCIAL MODEL This report covers the characteristics of the financial model of the Kosovo C power plant developed by Pöyry Energy. Input values for the model (such as plant costs, disbursement schedule etc.) will be described in detail below, the idea being to give an explanation to why specific values are used. This section also provides a walk-through of the functional characteristics of the model, and describes on a high level how results are obtained and how they should be interpreted.

2.1

Technical Configuration Options The model evaluates three different cases, which are described below. The modelling is done separately for each of the three technical options, with three separate calculation models. 1. 500 PF (pulverised firing) In this case the power plant is made up of four 500 MW units, utilising pulverised firing technology. 2. 500 CFB (circulating fluidised bed) In this case the power plant is made up of four 500 MW units, utilising circular fluidised bed technology. 3. 750 PF (pulverised firing) In this case the power plant is made up of one 500 MW unit and two 750 MW units, all utilising pulverised firing technology. These technical configurations are described in detail in the documentation for Task 3. Detailed specifications for the above units can be found in three separate Excel files named in this manner: Basecost[model][date] (e.g. basecost500PF050709). This Excel file will hereafter be referred to as the Basecost file.

2.2

Site options As described in detail in Task 4, the new thermal power plant can be situated at the sites Kosovo A, Kosovo B, or Bivolak. The financial model offers the ability to select between the three site options for financial evaluation.

2.3

Initial Data – Basecost Excel Workbook This section shows the initial data in the abovementioned Excel files, and descriptions for selected values. The content of the Excel files is detailed worksheet by worksheet with one collective description for all three technical options due to the relatively small differences between them.

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2.3.1

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Site Cost Sheet This worksheet presents the estimated overall site-related costs for site selection. These costs do not appear directly in the actual model for the power plant. For example, the cost of the 400 kV line connection will be taken care of by the transmission line operator KOSTT. The same applies to the cost of belt conveyors from the mine and conveyor/pipe to the ash dump as that cost is assumed to be taken care of by the mine operator and the ash dump operator respectively. In this respect the model is limited to within the power plant boundary.

2.3.1.1

Site-specific Investment Cost Initial costs are presented in table below.

Initial costs for the evaluated sites

Item Initial costs

Kosovo A

site Kosovo B

Bivolak

Land cost

3 000 000

3 000 000

1 500 000

400 000

800 000

4 000 000 1 000 000

Access road Access road bridge

0

0

Cleaning from toxic substances

2 000 000

0

0

Dismantling existing structures

2 000 000

0

0

Levelling

1 000 000

2 000 000

10 000 000

Removal of contaminated soil/ash

12 500 000

37 500 000

0

Backfill of removed soil

25 000 000

0

0

Potable w ater supply

50 000

50 000

500 000

Construction pow er

100 000

100 000

500 000

Drainage

100 000

100 000

0

Industrial w ater supply

250 000

250 000

250 000

Beltconveyor from mine

12 000 000

15 000 000

21 000 000

Belt/pipeconveyor to ash dump

6 000 000

10 000 000

16 000 000

400/110 kV pow er connections

19 950 000

24 825 000

29 575 000

10 000 000

10 000 000

10 000 000

2 800 000 97 150 000

2 100 000 105 725 000

1 400 000 95 725 000

Foundations pow erplant lignite yard Grand total initial cost

Table 1: Site-specific investment costs

The cost estimates above have been made by the key experts based on site visits. The site costs are estimated to be the same for all technical options and Kosovo B figures have been used in the default case. The site cost worksheet is editable and new figures can be inserted for comparison of the sites to support decision-making. The cost items of the site options are determined as follows:

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Land cost is the estimated price to be paid KEK for approximately 75 hectares of industrial land in Kosovo A or B case. In Bivolak there are several private owners for the same area of agricultural land. Access road requirements for Kosovo A and B case are relatively limited as a separate paved access road needs to be built from the existing roads next to the property. For the Bivolak site a new access road has to be constructed from the main road Pristina – Mitrovica plus a bridge crossing the Sitnica River. Cleaning from toxic substances is a cost in Kosovo A as there are phenols etc. that have to be removed before any further activities can commence on this particular site. Task 4 details the environmental issues and related clean-up costs for the sites. Dismantling of the existing structures is also necessary for the Kosovo A site as the proposed site currently is occupied by the abandoned gasification-fertilizer plant as well as facilities for preparation (drying) of lignite for sale. There are also tanks for storing of phenols. The dismantling cost is uncertain as there is no information available on whether asbestos is found there. On the other hand the current high price of scrap steel/stainless steel can lower the net cost considerably. Levelling cost is for preparing the site for construction. The Kosovo A and B sites are fairly flat to start with, and thus this cost is just marginal. In Bivolak there are more rolling hills and the cost for levelling the area is estimated at 10 million. The sheet indicates the material volumes and specific costs used in the estimates. Removal of contaminated soil/ash in case of Kosovo A it is assumed that some 5 million cubic meters of contaminated (phenolic) soil is removed to the ash dump. For the Kosovo B site the existing ash pile of 15-16 million tons needs to be removed to the ash dump. Backfilling is required for the Kosovo A site. The cost per cubic meter is higher as the clean material has to be brought in and compacted for further construction. Potable water supply is the estimated connection cost of the site (for construction camp purposes) to the public water supply system. Construction power supply is the estimated cost of connecting the construction site to the 20 kV power supply. Drainage is the estimated cost of organising drainage of the site for the construction period. Industrial water supply is the estimated cost of connecting the plant to the IberLepenc channel system. Belt conveyor from the mine is the estimated cost of a new belt conveyor system from the SW Sibovc mine to each alternative site. Belt conveyor / pipe for ash transport is the cost of connecting the site to the ash dump at the Mirash mine. European Agency for Reconstruction PÜyry-Cesi-Terna-Decon


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400/110 kV power line connection is the cost to enlarge the existing 400 kV switchyard and construct the 400 kV overhead lines from the plant step transformers to the switchyard. A 110 kV connection is built for start-ups and emergency service. The cost is based on Task 2.3 figures. The transmission operator KOSTT will bear the cost for this part of the project, and thus the cost is excluded from the financial model. Foundations are the actual cost of constructing building foundations for the plant. The basic assumption is that the foundation concept is almost the same for all the investigated sites as there is a lignite seam beneath. It should be noted that the differences between the sites are relatively small when the overall initial costs. There are considerable unknown factors and risks involved like the dismantling cost of existing Kosovo A site facilities and the ash pile removal cost at the Kosovo B site. 2.3.1.2

Site-specific Operating Cost An estimate of the annual site-specific operating costs of the proposed power plant at different sites has been made and the results are presented in the table below:

Operating costs for the evaluated sites Operating costs

Kosovo A

Kosovo B

Bivolak

Lignite transport from mine

3 200 000

4 000 000

5 600 000

Water pumping

685 714

342 857

342 857

Ash disposal

420 000

700 000

1 120 000

560 000 4 865 714

576 000 5 618 857

616 000 7 678 857

Limestone transport Total operation

Table 2: Site-specific operating costs The above operating costs are a function of transport distance from mine to power plant

The operating costs specified in Table 2: Site-specific operating costs are all dependent on the physical distance between the lignite mine and the power plant site. The Kosovo A site is closest to the new SW mine, while the Bivolak site is furthest away. The estimated costs are typical lignite transportation costs for this type of mine, over the relevant distances. 2.3.2

Network connection sheet Network connection costs are estimated as follows.

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Network connection costs for the evaluated sites Electrical connection cost - € Item

Kosovo A

Kosovo B

Bivolak

400/220 kV sw itchyard

16 200 000

18 800 000

18 000 000

1 750 000

1 000 000

3 500 000

0

0

0

500 000

0

0

375 000

375 000

0

1 000 000

3 500 000

2 // 220 kV line to Pristhina 4

0

1 750 000

0

2 // 220 kV line to Krushevci Total for 400 kV

0 18 450 000

0 22 925 000

1 500 000 26 875 000

Start-up connection 110 kV Grand total ouside plant

1 500 000 19 950 000

1 900 000 24 825 000

2 700 000 29 575 000

2 // 400 kV line to Kosovo B 400 kV line to Albania 400 kV line to Shkupi 400 kV line to Podgorica 2 // 220 kV line to Kosovo B

Table 3: Site-specific network connection costs Network connection costs for the three power plant alternatives are considered the same

The above table shows Terna’s estimation of the cost to connect a power plant of this magnitude to the grid at the different sites. The estimation is based on the network evaluation; see Task 2 for further details.

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2.3.3

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Plant cost sheet The plant cost sheet contains the specific plant costs of the three different power plant alternatives, and hence differs for each of the three alternatives. In the three following tables the plant costs are presented for the three different technical options. The plant costs presented in the three following tables is based on the results from Task 3, and represents the consultant’s best estimate of the costs of a power plant of the specified type, with a typical distribution of cost. Costs for the first unit (in a power plant complex with multiple units) are usually higher than for additional units at the same site, due to the fact that some work does not need to be carried out twice (e.g. the access road only needs to be built once etc.). In the analysis, the cost “savings” for the following three (two in the 750 PF case) units represent typical cost savings based on data from equipment manufacturers and experience from other similar power plant projects. Costs are showed in two columns, the first column shows the expected costs for the first built unit, and the second column shows expected costs for the following three (or two in the 750 PF case) units. Both engineering and start-up costs are assumed to be lower for the following units than for the first unit. These figures do not include any interest during construction and are calculated with a mid-2007 cost level.

Specific plant costs – 500 PF Plant costs - M€ Alternative Kosovo B site

M€

500 MW PF First unit Local %

500 M€

M€

MW PF Follow ing units Local % M€

Boiler plant

220,0

5

11,0

205,0

5

FGD plant

25,0

5

1,3

24,0

5

10,3 1,2

Turbine plant

85,0

3

2,6

82,0

3

2,5

Black start

17,0

2

0,3

1,0

0

0,0

Lignite yard

18,0

10

1,8

13,0

10

1,3

Cooling tow ers

21,0

25

5,3

20,0

25

5,0

Piping

22,0

5

1,1

21,0

5

1,1

Electrical systems

45,0

3

1,4

40,0

3

1,2

Instruments & DCS

31,0

3

0,9

28,0

3

0,8

Water treatment

5,0

10

0,5

4,0

10

0,4

Auxiliary boiler plant

6,0

10

0,6

1,0

10

0,1

Tank farm

2,0

15

0,3

0,5

15

0,1

Ash disposal

5,0

15

0,8

4,0

15

0,6

Civil w orks

38,0

50

19,0

50,0

50

25,0

Temporary facilities

7,0

40

2,8

2,0

40

0,8

Maintenance shop

5,0

15

0,8

0,5

15

0,1

Off ices

2,0

15

0,3

0,5

15

0,1

Pre-operating costs

2,0

20

0,4

2,0

20

0,4

Taxes and duties

11,0

100

11,0

10,0

100

10,0

Site external connections

6,8

10

0,7

2,9

10

0,3

0,0 573,8 28,0 12,0 63,0

5

0,0 62,7 4,2 1,8 0,0

0,0 511,4 23,0 2,0 55,7

5

0,0 61,1 3,5 0,3 0,0

68,7

592,2

Electrical connections Subtotal plant CM & engineering Development costs Contingency

10 %

Grand total excl. financing costs Uni t cost

676,8 1354

15 15 10,1 € / kW

Table 4: Technical option plant cost – 500 PF European Agency for Reconstruction Pöyry-Cesi-Terna-Decon

1184

15 15 11,0 € / kW

64,9


Studies to support the development of new generation capacities and related transmission Task 5, Economic and financial analysis

Page 18 (48) November, 2007

The right hand columns for both the first and following units show how much of each component’s cost will be spent on local materials, labour, and services. The cost of Electrical connections is borne by KOSTT.

The cost per unit is, for the first 500 MW unit, estimated at 1354 € / kW, and for the next three 500 MW units at 1184 € / kW. Specific plant costs – 500 CFB Plant costs - M€ 500 MW CFB First unit M€ Local %

Alternative Kosovo B site

500 M€

MW CFB Follow ing units M€ Local % M€

Boiler plant

215,0

5

10,8

205,0

5

FGD plant

0,0

5

0,0

0,0

5

10,3 0,0

Turbine plant

85,0

3

2,6

82,0

3

2,5

Black start

17,0

2

0,3

1,0

0

0,0

Lignite yard

18,0

10

1,8

13,0

10

1,3

Cooling tow ers

21,0

25

5,3

20,0

25

5,0

Piping

22,0

5

1,1

21,0

5

1,1

Electrical systems

44,0

3

1,3

39,0

3

1,2

Instruments & DCS

30,0

3

0,9

27,0

3

0,8

Water treatment

5,0

10

0,5

4,0

10

0,4

Auxiliary boiler plant

6,0

10

0,6

1,0

10

0,1

Tank farm

2,0

15

0,3

0,5

15

0,1

Ash disposal

5,0

15

0,8

4,0

15

0,6

Civil w orks

38,0

50

19,0

50,0

50

25,0

Temporary f acilities

7,0

40

2,8

2,0

40

0,8

Maintenance shop

4,5

15

0,7

0,5

15

0,1

Offices

2,0

15

0,3

0,5

15

0,1

Pre-operating costs

2,0

20

0,4

2,0

20

0,4

Taxes and duties

11,0

100

11,0

10,0

100

10,0

6,8

10

0,7

2,9

0,0 541,3 28,0 12,0 59,7

5

0,0 61,0 4,2 1,8 0,0

0,0 485,4 23,0 2,0 53,1

5

0,0 59,6 3,5 0,3 0,0

67,0

563,6

Site external connections Electrical connections Subtotal plant CM & engineering Development costs Contingency

10 %

Grand total excl. financing costs Unit cost

641,1 1282

15 15 10,5 € / kW

1127

0,0

15 15 11,2

63,3

€ / kW

Table 5: Technical option plant cost – 500 CFB

The right hand columns for both the first and following units show how much of each component’s cost will be spent on local materials, labour, and services. The cost of Electrical connections is borne by KOSTT.

The cost per unit is, for the first 500 MW unit, estimated at 1282 € / kW, and for the next three 500 MW units at 1127 € / kW.

European Agency for Reconstruction Pöyry-Cesi-Terna-Decon


Studies to support the development of new generation capacities and related transmission Task 5, Economic and financial analysis

Page 19 (48) November, 2007

Specific plant costs – 750 PF Plant costs - M€ 500 MW MW PF First unit M€ Local %

Alternative Kosovo B site

M€

750 MW MW PF Follow ing units M€ Local % M€

Boiler plant

220,0

5

11,0

310,0

5

FGD plant

25,0

5

1,3

35,0

5

15,5 1,8

Turbine plant

85,0

3

2,6

120,0

3

3,6

Black start

17,0

2

0,3

1,0

0

0,0

Lignite yard

18,0

10

1,8

22,0

10

2,2

Cooling tow ers

21,0

25

5,3

30,0

25

7,5

Piping

22,0

5

1,1

28,0

5

1,4

Electrical systems

45,0

3

1,4

58,0

3

1,7

Instruments & DCS

31,0

3

0,9

41,0

3

1,2

Water treatment

5,0

10

0,5

6,0

10

0,6

Auxiliary boiler plant

6,0

10

0,6

1,5

10

0,2

Tank farm

2,0

15

0,3

0,5

15

0,1

Ash disposal

5,0

15

0,8

7,0

15

1,1

Civil w orks

38,0

50

19,0

55,0

50

27,5

Temporary f acilities

7,0

40

2,8

2,0

40

0,8

Maintenance shop

4,5

15

0,7

0,5

15

0,1

Offices

2,0

15

0,3

0,5

15

0,1

Pre-operating costs

2,0

20

0,4

3,0

20

0,6

Taxes and duties

11,0

100

11,0

14,0

100

14,0

8,3

10

0,8

3,6

0,0 574,8 28,0 12,0 63,1

5

0,0 62,7 4,2 1,8 0,0

0,0 738,6 28,0 3,0 79,5

5

0,0 79,8 4,2 0,5 0,0

68,7

849,1

Site external connections Electrical connections Subtotal plant CM & engineering Development costs Contingency

10 %

Grand total excl. financing costs Unit cost

677,9 1356

15 15 10,1 € / kW

1132

0,0

15 15 10,0

84,5

€ / kW

Table 6: Technical option plant cost – 750 PF The right hand columns for both the first and following units show how much of each component’s cost will be spent on local materials, labour, and services. The cost of Electrical connections is borne by KOSTT.

The cost per unit is, for the first 500 MW unit, estimated at 1358 € / kW, and for the next two 500 MW units at 1132 € / kW. 2.3.4

Construction schedule sheet The construction schedule can be viewed in the Construction schedule sheet of the Basecost files. With investor selection being made in the 3rd quarter of 2008, commissioning of the last unit is expected in late 2017, with take over of the last unit in the first quarter of 2018 (estimate based on equipment manufacturer information from July 2007). The time schedules for the different power plant alternatives are presented in three separate charts.

European Agency for Reconstruction Pöyry-Cesi-Terna-Decon


Studies to support the development of new generation capacities and related transmission Task 5, Economic and financial analysis

2.3.4.1

Page 20 (48) November, 2007

Fundamentals behind the proposed schedule The proposed schedule assumes that the site for the power plant is selected in 2008, and that the power plant investor is selected half way into 2008. It is assumed that the investor has made basic feasibility studies at this stage, but still some EIA (environmental impact assessment) processes might be ongoing at this stage. The ultimate decision to go ahead with the power plant investment, the financial close or notice to proceed, is made when the plant contract is signed half way through 2009. Immediately after the plant contract is signed, engineering of the first unit is started. Plant erection of the first unit is expected two and a half years later, at the beginning of 2012. Plant erection plays a central role in the scheduling of the following (three or two) units, due to the fact that the needed construction crane (150 meters lifting height is required for the tower type boiler) and construction crews are one of the main cost components, and thus their use needs to be optimised. The schedule for building the following units are thus made in such a way that the construction crane and construction crews smoothly can move from one unit to the next without undue decommissioning, resulting in the fact that at a certain point in time (in 2013) all four units are under construction/development. The construction crane and construction teams are expected to be commissioned for roughly five and a half years altogether, from start of 2012 until the middle of 2017.

2.3.4.2

Using the project schedule The project schedule can be used to alter the project disbursement schedule, the development of personnel costs and the development of power generation. If the project schedule is changed, the disbursement schedule, personnel employed, and quarterly generation need to be changed accordingly.

2.3.4.3

Disbursements Disbursements can be altered under “disbursement %” (typed in red font). This row indicates how big a percentage of the total money is spent quarterly on prepatory works, 1st unit, 2nd unit, 3rd unit, and 4th unit. Below “disbursement %” is a control calculation of the cumulative disbursement.

2.3.4.4

Personnel In the personnel row it can be specified how much of annual personnel costs are incurred during the different stages of construction. (For instance during year 2010, annual personnel costs are 70% of a “standard year”, looking at the first unit). Personnel costs reach 100% before completion of the power plant to facilitate for training of staff. Furthermore, key personnel are anticipated to take part in commissioning tests.

European Agency for Reconstruction Pöyry-Cesi-Terna-Decon


Ye ar X

2008

1 3

10 14

XXX

XXXXXXX

2 4

1 2 20

1 4

10 24

8 12

15 49

1 1

2 14 60

2010

10 59

1 2

6 20

10 69

1 3

2 22

10 79

1 4

8 30

10 89

8 12

2011

10 1 99 100

8 40

2 14

2 42

1 1

6 20

8 50

1 2

2 22

2 52 80

1 3

8 30

2012

2 62

8 70

2 72 90

2013

8 80

2 82

8 12

1 1

2 42

2 14

1 2

8 50 30

6 20

1 3

2 22

1 4

8 12

2 62

2 72

8 80

2 82

1

8 90 90

2015

5

2 92

20

3 95

XXXXXXX

4 1 99 100 100 70 80 90 100 100 65

XXX

2014

20

3 95

XXXXXXX

2 92 100

8 70 80

8 40 30

2 42

8 50

6 20

2 22

8 30

2 32

2 62

8 70

2 42

8 50

2 52

2

1

8 80 100

8 60 80

2016

2 82

2 62

8 90

8 70

3

2

2017

2 82

8 90

4

3

2018

70

5

4

100 80 100 95

4 1 99 100 100 80 100 100 88

1

100 80 100 100 95

2

100 80 100 100 95

100 80 100 100 100 95

XXXXXXX

2 3 92 95 100 20 6,3

5

XXX

4 1 99 100 100 70 80 100 100 100 88

1

100 80 100 100 100 95

100 80 100 100 100 95

XXXXXXX

2 8 72 80 100

XXXXXXXXXXXXXXXXXXXXXXXXXX

2 3 92 95 100 5 20 6,3

XXX

100 80 100 100 100 95

100 80 100 100 100 95

XXX 4 1 99 100 100 70 80 100 44

2 72

XXXXXXXXXXXXXXXXXXXXXXXXXX

8 60 80

8 40 30

XXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXX

2 52

XXXXXXXXXXXXXXXXXX

2 32

2 14

XXXXXXXXXXXXXXXXXX

8 30

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

8 60

XXXXXXXXXXXXXXXXXXXXXXXXX

8 90

XXXXXXXXXXXXXXXXXXXXXXXXXX

8 60

8 40

XXXXXXXXXXXXXXX

2 32

1 4

XXXXXXXXXXXXXXXXXX

2 52

XXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXX

2 32 70

XXX XXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXX

XX

10 34

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXX

2009

XXXXXXXXXX

X

1 1

2 2

XXXXXX

Investor selection

Age

Disbursement 3r d uni t % Cumul ati ve % Personnel empl oyed % Quar terl y genera ti on % Tota l genera tion %

Take Over 3rd unit

Commissioning

Erection plant

Fabrication

Civil w orks 3rd unit

Engineering

Age

Disbursement 2nd unit % Cumul ati ve % Personnel empl oyed % Quar terl y genera ti on % Tota l genera tion %

Take Over 2nd unit

Commissioning

Erection plant

Fabrication

Civil w orks 2nd unit

Engineering

Age

Disbursement 1st uni t % Cumul ati ve % Personnel empl oyed % Quar terl y genera ti on % Tota l genera tion %

Take Over 1st unit

Commissioning

Erection plant

Fabrication

Civil w orks 1st unit

Engineering

Age

Plant contract signed

Disbursement prepar atory work s Cumul ati ve %

Clean-up Kosovo B ash pile

Clean-up Kosovo f ertilizer

Contract clean-up

Permitting clean-up

Engineering clean-up

Dismantle Kosovo A f ertilizer

Site selection

500 PF – project schedule

Ist unit

2nd unit

3rd unit

4th unit Engineering Civil w orks 4th unit Fabrication Erection plant Commissioning Take Over 4th unit

Disbursement 4th unit % Cumul ati ve % Personnel empl oyed % Quar terl y genera ti on % Tota l genera tion %

Table 7: Project schedule – 500 PF


Ye ar X

2008

Civil w orks 4th unit

Engineering

Age

Disbursement 3r d uni t % Cumul ati ve % Personnel empl oyed % Quar terl y genera ti on % Tota l genera tion %

Take Over 3rd unit

Commissioning

Erection plant

Fabrication

Civil w orks 3rd unit

Engineering

Age

Disbursement 2nd unit % Cumul ati ve % Personnel empl oyed % Quar terl y genera ti on % Tota l genera tion %

Take Over 2nd unit

Commissioning

Erection plant

Fabrication

Civil w orks 2nd unit

Engineering

Age

Disbursement 1st uni t % Cumul ati ve % Personnel empl oyed % Quar terl y genera ti on % Tota l genera tion %

Take Over 1st unit

Commissioning

Erection plant

Fabrication

Civil w orks 1st unit

Engineering

Age

Plant contract signed

Disbursement prepar atory work s Cumul ati ve %

Clean-up Kosovo B ash pile

Clean-up Kosovo f ertilizer

Contract clean-up

Permitting clean-up

Engineering clean-up

Dismantle Kosovo A f ertilizer

Investor selection

Site selection

1 1

2 2

1 2 20

2 4

1 4

10 24

8 12

15 49

1 1

2 14 60

2010

10 59

1 2

6 20

10 69

1 3

2 22

10 79

1 4

8 30

10 89

8 12

2011

10 1 99 100

8 40

2 14

2 42

1 1

6 20

8 50

1 2

2 22

2 52 80

1 3

8 30

2012

2 62

8 70

2 72 90

2013

8 80

2 82

8 12

1 1

2 42

2 14

1 2

8 50 30

6 20

1 3

2 22

1 4

8 12

2 62

2 72

8 80

2 82

1

8 90 90

2015

5

2 92

20

3 95

XXXXXXX

4 1 99 100 100 70 80 90 100 100 65

XXX

2014

20

3 95

XXXXXXX

2 92 100

8 70 80

8 40 30

2 42

8 50

6 20

2 22

8 30

2 32

2 62

8 70

2 42

8 50

2 52

2

1

8 80 100

8 60 80

2016

2 82

2 62

8 90

8 70

3

2

2017

2 82

8 90

4

3

2018

70

5

4

100 80 100 95

4 1 99 100 100 80 100 100 88

1

100 80 100 100 95

2

100 80 100 100 95

100 80 100 100 100 95

XXXXXXX

2 3 92 95 100 20 6,3

5

XXX

4 1 99 100 100 70 80 100 100 100 88

1

100 80 100 100 100 95

100 80 100 100 100 95

XXXXXXX

2 8 72 80 100

XXXXXXXXXXXXXXXXXXXXXXXXXX

2 3 92 95 100 5 20 6,3

XXX

100 80 100 100 100 95

100 80 100 100 100 95

XXX 4 1 99 100 100 70 80 100 44

2 72

XXXXXXXXXXXXXXXXXXXXXXXXXX

8 60 80

8 40 30

XXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXX

2 52

XXXXXXXXXXXXXXXXXX

2 32

2 14

XXXXXXXXXXXXXXXXXX

8 30

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

8 60

XXXXXXXXXXXXXXXXXXXXXXXXX

8 90

XXXXXXXXXXXXXXXXXXXXXXXXXX

8 60

8 40

XXXXXXXXXXXXXXX

2 32

1 4

XXXXXXXXXXXXXXXXXX

2 52

XXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXX

2 32 70

XXX XXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXX

XX

10 34

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXX

2009

1 3

10 14

XXX

XXXXXXX

XXXXXX

XXXXXXXXXX

X

500 CFB – project schedule

Ist unit

2nd unit

3rd unit

4th unit

Fabrication Erection plant Commissioning Take Over 4th unit Disbursement 4th unit % Cumul ati ve % Personnel empl oyed % Quar terl y genera ti on % Tota l genera tion %

Table 8: Project schedule – 500 CFB


Year X

2008

2 4

1 2 20

XXX

10 14

1 3

1 4

10 24

8 12

15 49

2 14 60

2010

10 59

1 1

6 20

10 69

1 2

2 22

10 79

1 3

8 30

10 89

1 4

2011

2 42

6 11

8 50

2 13

2 52 80

2012

2 62

8 70

2 72 90

2013

8 80

2 82

8 90

8 29

1 3

2 31

8 39

1 5

2 41

6 11

8 49

2 13

2 92 100 10

8 59 30

2014

50

3 95

2 61

8 29

2 31

2 71

8 39

8 79 80

2 41

2015

2 81

8 49

XXXXXXXXXXXXXXXXXXXXXX

2 21

8 89

2 51

8 59

1

3 94 100 30

2 61 30

2016

XXX

2 71

8 79

2

1

2 81 80

2017

8 89

0

2 91

30

3 94

XXXXXXX

3

2

2018

4

3

1

5 1 99 100 100 100 100 100 100 80 90 100 80 100

XXX

5 1 99 100 100 100 100 100 100 100 100 100 100 100 100 100 100 90 100 100 100 80 100 100 100 80 100 100 80

8 69

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

2 91

XXXXXXX

4 1 99 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 90 100 100 100 100 80 100 100 100 80 100 100 100 80 100 100 100 80 100

8 69

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

2 51

6 19

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXX

1 4

XXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXX

8 60

1 2

2 21

XXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

6 19

1 1

XXX

10 1 99 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

8 40

1 5

XXXXXXXXXXXXXXXXX

2 32 70

XXX XXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXX

XX

10 34

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXX

2009

XXXXXXXXXX

X

Dismantle Kosovo A fertilizer

1 1

XXXXXXX

XXXXXX

Permitting clean-up Contract clean-up Clean-up Kosovo f ertilizer Clean-up Kosovo B ash pile Disbursement preparatory works Cumul ative %

Plant contract signed Age Engineering Civil w orks 1st unit Fabrication Erection plant Commissioning Take Over 1st unit Disbursement 1st unit % Cumul ative % Personnel empl oyed % Quarterl y generation % Total generation % Age Engineering Civil w orks 2nd unit Fabrication Erection plant

Take Over 2nd unit

Commissioning

Disbursement 2nd unit % Cumul ative % Personnel empl oyed % Quarterl y generation % Total generation % Age

2 2

Engineering clean-up

Investor selection

Site selection

750 PF – project schedule

Ist unit

2nd unit

3rd unit Engineering Civil w orks 3rd unit Fabrication Erection plant Commissioning Take Over 3rd unit Disbursement 3rd uni t % Cumul ative % Personnel empl oyed % Quarterl y generation % Total generation %

Table 9: Project schedule – 750 PF


Studies to support the development of new generation capacities and related transmission Task 5, Economic and financial analysis

Page 24 (48) September 13, 2007

A disbursement schedule can also be found in the Construction schedules sheet, showing in percent the distribution of disbursements over time. The following section describes project disbursements in more detail. 2.3.5

Disbursement schedule sheet The disbursement schedule shows how money is spent over time for the different power plant alternatives. Disbursement schedules for the three different power plant alternatives are shown below. The excel-file automatically generates these sheets from the data on the Construction schedule sheets.

Disbursement schedule – 500 PF Quarterly disbursements general & plant - k€ Item

Total k€

Preparatory w orks 1st unit 2nd unit 3rd unit 4th unit Grand total

2008 40 300 695 939 594 893 594 893 594 893 2 520 918

2009 0 0 0 0 0 0

0 0 0 0 0 0

806 6 959 0 0 0 7 765

2010

806 6 959 0 0 0 7 765

4 030 6 959 0 0 0 10 989

4 030 6 959 0 0 0 10 989

4 030 55 675 0 0 0 59 705

6 045 13 919 5 949 0 0 25 913

4 030 41 756 5 949 0 0 51 735

4 030 13 919 5 949 0 0 23 898

4 030 55 675 5 949 0 0 65 654

4 030 13 919 47 591 0 0 65 540

Yearly disbursem ents general & plant - k€ Item

Year

Preparatory w orks 1st unit 2nd unit 3rd unit 4th unit Grand total Cumulative

2 008

2 009

2 010

2 011

2 012

2 013

2 014

2 015

2 016

2 017

2 018

2 019

1 612 13 919 0 0 0 15 531 15 531

18 135 83 513 5 949 0 0 107 597 123 127

16 120 125 269 65 438 0 0 206 827 329 955

4 433 139 188 107 081 17 847 0 268 548 598 503

0 139 188 118 979 101 132 17 847 377 145 975 648

0 139 188 118 979 118 979 101 132 478 277 1 453 925

0 55 675 118 979 118 979 118 979 412 611 1 866 535

0 0 59 489 118 979 118 979 297 446 2 163 982

0 0 0 89 234 118 979 208 212 2 372 194

0 0 0 29 745 89 234 118 979 2 491 173

0 0 0 0 29 745 29 745 2 520 918

0 0 0 0 0 0 2 520 918

Table 10: Disbursement schedule – 500 PF For a full view of quarterly disbursements, consult the Basecost Excel workbook. The disbursement schedule showed here is linked with how disbursements are specified under project schedule. Disbursements are carried out as they typically are for a power plant investment of this type.

Disbursement schedule – 500 CFB Disbursem ents general & plant Quarterly disbursements general & plant - k€ Item

Total k€

Preparatory w orks 1st unit 2nd unit 3rd unit 4th unit Grand total

2008 40 300 660 189 566 293 566 293 566 293 2 399 368

2009 0 0 0 0 0 0

0 0 0 0 0 0

806 6 602 0 0 0 7 408

2010

806 6 602 0 0 0 7 408

4 030 6 602 0 0 0 10 632

4 030 6 602 0 0 0 10 632

4 030 52 815 0 0 0 56 845

6 045 13 204 5 663 0 0 24 912

4 030 39 611 5 663 0 0 49 304

4 030 13 204 5 663 0 0 22 897

4 030 52 815 5 663 0 0 62 508

4 030 13 204 45 303 0 0 62 537

Yearly disbursem ents general & plant - k€ Item Preparatory w orks 1st unit 2nd unit 3rd unit 4th unit Grand total Cumulative

Year

2 008

2 009

2 010

2 011

2 012

2 013

2 014

2 015

2 016

2 017

2 018

2 019

1 612 13 204 0 0 0 14 816 14 816

18 135 79 223 5 663 0 0 103 021 117 836

16 120 118 834 62 292 0 0 197 246 315 083

4 433 132 038 101 933 16 989 0 255 392 570 475

0 132 038 113 259 96 270 16 989 358 555 929 030

0 132 038 113 259 113 259 96 270 454 825 1 383 855

0 52 815 113 259 113 259 113 259 392 591 1 776 445

0 0 56 629 113 259 113 259 283 146 2 059 592

0 0 0 84 944 113 259 198 202 2 257 794

0 0 0 28 315 84 944 113 259 2 371 053

0 0 0 0 28 315 28 315 2 399 368

0 0 0 0 0 0 2 399 368

Table 11: Disbursement schedule – 500 CFB European Agency for Reconstruction Pöyry-Cesi-Terna-Decon


Studies to support the development of new generation capacities and related transmission Task 5, Economic and financial analysis

Page 25 (48) September 13, 2007

For a full view of quarterly disbursements, consult the Basecost Excel workbook. The disbursement schedule showed here is linked with how disbursements are specified under project schedule. Disbursements are carried out as they typically are for a power plant investment of this type.

Disbursement schedule 750 PF Disbursem ents general & plant Quarterly disbursements general & plant - k€ Item

Total k€

Preparatory w orks 1st unit 2nd unit 3rd unit Grand total

2008

2009

40 300 697 039 853 189 853 189 2 443 718

0 0 0 0 0

0 0 0 0 0

806 6 970 0 0 7 776

2010

806 6 970 0 0 7 776

4 030 6 970 0 0 11 000

4 030 6 970 0 0 11 000

4 030 55 763 0 0 59 793

6 045 13 941 0 0 19 986

4 030 41 822 8 532 0 54 384

4 030 13 941 8 532 0 26 503

4 030 55 763 8 532 0 68 325

4 030 13 941 8 532 0 26 503

Yearly disbursem ents general & plant - k€ Item

Year

Preparatory w orks 1st unit 2nd unit 3rd unit Grand total Cumulative

2 008

2 009

2 010

2 011

2 012

2 013

2 014

2 015

2 016

2 017

2 018

2 019

1 612 13 941 0 0 15 553 15 553

18 135 83 645 0 0 101 780 117 332

16 120 125 467 34 128 0 175 715 293 047

4 433 139 408 127 978 8 532 280 351 573 398

0 139 408 170 638 34 128 344 173 917 571

0 139 408 170 638 136 510 446 556 1 364 127

0 55 763 170 638 170 638 397 039 1 761 166

0 0 127 978 170 638 298 616 2 059 782

0 0 51 191 170 638 221 829 2 281 612

0 0 0 153 574 153 574 2 435 186

0 0 0 8 532 8 532 2 443 718

0 0 0 0 0 2 443 718

Table 12: Disbursement schedule – 750 PF For a full view of quarterly disbursements, consult the Basecost Excel workbook. The disbursement schedule showed here is linked with how disbursements are specified under project schedule. Disbursements are carried out as they typically are for a power plant investment of this type.

2.3.6

Personnel sheet Personnel costs per unit are estimated to be the same in all three power plant alternatives. The costs presented in the following table are split up between personnel needed for the first unit, and personnel needed per unit for the following two or three units. The table comprises both the number of personnel employed, and overall annual cost for that type of personnel.

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Estimation of required personnel Personnel cost estim ate First unit

Follow ing units

First k€/a Total 400 250 250 250 250 250 200 49

Next k€/a Total 0 0 0 250 0 0 0 7

number 1 1 1 1 1 1 1 7

type expat. local expat. expat. expat. expat. expat. local

number 0 0 0 1 0 0 0 1

type expat. local expat. local expat. expat. local

k€/a pay 400 250 250 250 250 250 200 7

Operation div. Operations planner & efficiency control Shift engineers Operators

2 5 30

local local local

1 1 30

local local local

10 15 6

20 75 180

10 15 180

Technical departm ent-m aintenance Engineers Boilers Turbines Chemist (w ater & fuel) Electrical I&C Scheduling

2 2 2 2 2 2

exp./local exp./local exp./local exp./local exp./local exp./local

1 1 0 1 1 1

exp./local exp./local exp./local exp./local exp./local exp./local

100 100 100 100 100 80

200 200 200 200 200 160

100 100 0 100 100 80

Supervisors Mechanical Electrical I&C Misc.

9 4 4 2

local local exp./local local

5 2 2 2

local local exp./local local

10 10 20 10

90 40 80 20

50 20 40 20

Shift m aintenance Mechanical Electrical I&C

5 5 5

local local local

2 1 1

local local local

7 7 7

35 35 35

14 7 7

10 5 5 3 10 130

local local local local local

5 2 3 1 5 70

local local local

7 7 7 7 7

70 35 35 21 70 3900

35 14 21

Plant director Deputy plant manager Operations director Sales director Finance director Personnel director Safety and environmental manager Secretaries, clerks

Day Mechanical Electrical I&C Laboratory Misc. drivers Grand total

local

35 1205

Table 13: Personnel requirement estimate exp = expatriate

The personnel costs stated above represent the consultant’s best estimation of personnel needs for the power plant, based on information available at the time. Personnel needs may vary significantly because of regional, political, personnel cost, employment regulation, automation level etc. variations. 2.3.7

Operation and maintenance (O&M) sheet Operation and maintenance costs are presented individually for each of the three power plant alternatives in the following tables.

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The user of the financial model can alter the unit prices as necessary. Operation and maintenance costs - 500 PF Operation and m aintenance costs Fuel, m aintenance and fixed costs

Lignite Heavy fuel oil Light oil Limestone Raw w ater Chemicals Aluminium sulphate HCl Caustic Cooling tow er chemicals Consumables Gypsum sales Ash disposal cost Total operation Variable maintenance

Consumption kg/MWh 1038 0,3 0,05 2,5 2700

Unit price €/t, m3 8,00 400 1200 20 0,1

€/MWh

0,11 0,3 0,05 0,07 0,01 5 159

200 290 300 4000 5000 0 3,00

0,022 0,087 0,015 0,28 0,05 0,00 0,48

1

2,1

9,73 2,10

8,30 0,12 0,06 0,05 0,27

Grand total operation

11,83

Annual fixed costs € Maintenance Inspections permitting Outside services excl. maintenance Insurance

1st unit 1 700 000 300 000 2 000 000 3 000 000

Grand total

7 000 000

Initial lignite stockpile

10 days

follow ing units 1 500 000 200 000 500 000 2 750 000 4 950 000

124 546 tons

Table 14: Operation and maintenance cost – 500 PF

The lignite stockpile can hold up to 14 days consumption. The initial stockpile is to make the inventory between the mine and the plant during start-up of a unit.

The costs shown in red colour represent the consultant’s best estimate of costs at the time of making the report. These costs should be updated as better information becomes available, as the cost level develops over time. The most important unit cost figure to be entered into the model is the lignite cost per ton. It has been assumed that the lignite has an average heat value of 8,2 MJ/kg LHV. Another cost figure is the ash disposal cost that has to be confirmed and entered. The unit price for raw water has been preliminarily stated by Iber-Lepenc.

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Operation and maintenance cost 500 CFB Operation and m aintenance costs Fuel, m aintenance and fixed costs

Lignite Heavy fuel oil Light oil Limestone Raw w ater Chemicals Aluminium sulphate HCl Caustic Cooling tow er chemicals Consumables Gypsum sales Ash disposal cost Total operation Variable maintenance

Consumption kg/MWh 1042 0,3 0,05 0 2700

Unit price €/t, m3 8,00 400 1200 20 0,1

€/MWh

0,11 0,3 0,05 0,07 0,01 0 159

200 290 300 4000 5000 0 3,00

0,022 0,087 0,015 0,28 0,05 0,00 0,48

1

1,9

9,71 1,90

8,33 0,12 0,06 0,00 0,27

Grand total operation

11,61

Annual fixed costs € Maintenance Inspections permitting Outside services excl. maintenance Insurance

1st unit 1 600 000 300 000 2 000 000 3 000 000

Grand total

6 900 000

Initial lignite stockpile

10 days

follow ing units 1 400 000 200 000 500 000 2 750 000 4 850 000

124 989 tons

Table 15: Operation and maintenance cost – 500 CFB The lignite stockpile can hold up to 14 days consumption. The initial stockpile is to make the inventory between the mine and the plant during start-up of a unit.

The lignite cost is based on the Vattenfall mining study. It should be noted that the cost and availability of mining equipment has changed significantly since the study was made, potentially increasing the lignite cost by 10-50%. The lignite heating value and the cost of water are the same as in the previous case.

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Operation and maintenance cost – 750 PF Operation and m aintenance costs Fuel, m aintenance and fixed costs Consumption kg/MWh Lignite Heavy fuel oil Light oil Limestone Raw w ater Chemicals Aluminium sulphate HCl Caustic Cooling tow er chemicals Consumables Gypsum sales Ash disposal cost

500 M W

750 M W

1038 0,3 0,05 2 2700

1021

0,11 0,3 0,05 0,07 0,01 3 159

Total operation Variable maintenance

156

€/MWh

Unit price €/t, m3

500 M W

750 M W

8,00 400 1200 20 0,1

8,30 0,12 0,06 0,04 0,27

8,17

200 290 300 4000 5000 0 3,00

0,022 0,087 0,015 0,28 0,05 0,00 0,48

0,47

2,1

9,72 2,10

9,58 2,10

11,82

11,68

1

Grand total operation

Annual fixed costs € Maintenance Inspections permitting Outside services excl. maintenance Insurance

1st unit 1 600 000 300 000 2 000 000 3 000 000

Grand total

6 900 000

Initial lignite stockpile

10 days

follow ing units 2 000 000 250 000 750 000 4 500 000 7 500 000

186 819 tons

Table 16: Operation and maintenance cost – 750 PF The lignite stockpile can hold up to 14 days consumption. The initial stockpile is to make the inventory between the mine and the plant during start-up of a unit.

The assumptions for annual operating figures that are used to estimate the annual operating costs are presented in the three following tables, separately for each power plant alternative.

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Annual operating figures – 500 PF Kosovo C, 2000 MW annual operating figures 500 MW PF net capacity units 0,85 load factor Item Generation Lignite demand Limestone consumption Water consumption Heavy fuel oil Light oil Aluminium sulphate Hydrochloric acid Caustic Cooling tow er chemicals

unit GWh/a tons/a tons/a cu.m/a tons/a cu.m/a tons/a tons/a tons/a tons/a

One block 3 723 3 864 037 9 308 10 052 100 1 117 186 410 1 117 186 261

Whole plant 14 892 15 456 149 37 230 40 208 400 4 468 745 1 638 4 468 745 1 042

Gypsum sales Ash disposal

tons/a tons/a

18 615 591 198

74 460 2 364 791

CO2 emission SO2 emission

tons/a tons/a

3 168 511 2 890

12 674 043 11 561

NOx emission Particulates

tons/a tons/a

2 890 434

11 561 1 734

Table 17: Annual operating figures – 500 PF

Annual Operating figures – 500 CFB Kosovo C, 2000 MW annual operating figures 500 MW CFB net capacity units 0,85 load factor Item Generation Lignite demand Limestone consumption Water consumption Heavy fuel oil Light oil Aluminium sulphate Hydrochloric acid Caustic Cooling tow er chemicals

unit GWh/a tons/a tons/a cu.m/a tons/a cu.m/a tons/a tons/a tons/a tons/a

One block 3 723 3 877 788 0 10 052 100 1 117 186 410 1 117 186 261

Whole plant 14 892 15 511 154 0 40 208 400 4 468 745 1 638 4 468 745 1 042

Gypsum sales Ash disposal

tons/a tons/a

0 593 302

0 2 373 206

CO2 emission SO2 emission

tons/a tons/a

3 179 786 2 901

12 719 146 11 602

NOx emission Particulates

tons/a tons/a

2 901 435

11 602 1 740

Table 18: Annual operating figures – 500 CFB

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Annual operating figures – 750 PF Kosovo C, 2000 MW annual operating figures 750 MW PF net capacity units 0,85 load factor Item Generation Lignite demand

unit GWh/a tons/a

500 MW 3 742 3 883 358

750 MW Whole plant 5 585 14 911 5 796 056 15 475 470

Limestone consumption Water consumption Heavy fuel oil Light oil Aluminium sulphate Hydrochloric acid Caustic Cooling tow er chemicals

tons/a cu.m/a tons/a cu.m/a tons/a tons/a tons/a tons/a

Gypsum sales Ash disposal

tons/a tons/a

11 225 594154

16 754 886797

44 732 2367747

CO2 emission SO2 emission

tons/a tons/a

3 184 353 2 905

4 752 766 4 335

12 689 885 11 576

NOx emission Particulates

tons/a tons/a

2 905 436

4 335 650,31749

11 576 1 736

7 483 11 169 10 102 361 15 078 150 1 122 1 675 187 279 412 614 1 122 1 675 187 279 262 391

29 821 40 258 661 4 473 746 1 640 4 473 746 1 044

Table 19: Annual operating figures – 750 PF

2.4

Financial model – Excel workbook This section refers to the Excel “Poyry_Kosovo_C_Financial_Model_[version]_[date]”.

file

named

This Excel file reads the technical data from the Basecost Excel files, and performs financial modelling over the life cycle of the power plant. The financial model considers all three power plant scenarios (500 PF, 500 CFB and 750 PF) simultaneously. For easy comparison of the results based on key parameters, these parameters can be entered as reference or alternative values. The model calculates the three technical options, each with reference and alternative parameters; consequently, 6 separate scenarios are presented. The reference parameters represent the consultants view on this specific input value, according to best available information at the time of making the financial model. The reference parameters can and should thus be updated as more/new information becomes available. For sensitivity analysis key parameters have been made easy to edit through the alternative input values. This functionality is explained further in the walk-through section for the input sheet of the financial model below. European Agenecy for Recosntruction Pöyry-Cesi-Terna-Decon


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The different elements of the financial model are presented sheet-by-sheet in the following sections. 2.4.1

Opening sheet The opening sheet shows a brief presentation of the financial model and stating some rules of it use

2.4.2

Input sheet The input sheet is the only place in the model where it is intended that the user enters any values. Input values are entered in two versions: a reference value and a variation to this reference value (for sensitivity analysis). Cells are colour-coded in order to show the user where input values can be entered, and where calculations are made automatically, the different colour codes are presented below. Data should only be entered in cells marked as “input” cells. INPUT

CALCULATION

The data entry procedure is shown in detail in the following section. Each category of input data is shown or hidden by using the “+” or “-“ buttons at the left edge of the Excel sheet.

Input values - financing Parameter

Reference case

Variation

10,40 %

WACC

Value in alternative case

0,00 %

10,4 %

60,0 %

Leverage Equity cost Interest rate

20,00 % 5,00 %

Loan repaym ent period

5,0 years

0 years

5,0 years

Asset depreciation

25 years

0 years

25 years

Table 20: Financing input values The financial model compares the reference case with the alternative case

WACC - The model calculates the WACC (weighted average cost of capital) automatically, hence only leverage, equity cost and general interest rate have to be entered. The equity cost is the internal cost of capital, specified as a discounting percentage rate. If an alternative value for the WACC is required in the alternative case, enter under variation the percentage rate that will be added/subtracted (in absolute terms) to/from the reference WACC rate.

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Loan repayment period - The financial model starts amortising loans one full year after the final unit has been commissioned. The duration of the loan repayment can be specified here. Under variation you can add/subtract years to/from the reference case value. Asset depreciation – The model uses linear depreciation of assets. In this field you specify the length of time within which the power plant investment is to be depreciated. Under variation you can add/subtract years to/from the reference case value.

Input values – economic environment Parameter

Reference case

Variation

Value in alternative case

Tax rate

20,0 %

0,0 %

20,0 %

Inflation

0,0 %

0,0 %

0,0 %

0,0 €/t,CO2

CO2 cost

0,0 €/t,CO2

0,0 €/t,CO2

Table 21: Input values for economic environment The financial model compares the reference case with the alternative case

Tax rate – The tax rate specifies the corporate tax rate that the power plant owner has to pay on the profits gained from the operation of the power plant. These taxes may or may not be paid where the power plant is located, i.e. choose the tax rate for the region showing the profit. Under variation you can add/subtract a percentage (in absolute terms) to/from the reference case value for comparison of two tax rates. Inflation – This is the general inflation rate. When used, this inflation rate is applied to all costs (including investments) and also to all income. Adding a percentage point of inflation is essentially equal to subtracting a percentage point from the WACC. Under variation you can add/subtract a percentage (in absolute terms) to/from the reference case value for comparison or sensitivity analysis. CO2 cost – Specify here a cost in Euros per tonne of CO2 released that is expected for the power plant. Under variation you can add/subtract a cost to/from the reference case value for comparison or sensitivity analysis.

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Input values – license costs Parameter

Reference case

Variation 0,0 €/ton

Lignite fee

Value in alternative case 0,0 €/ton

0,0 €/ton

Mine rent

0 1000€/a

0 1000€/a

0,0 1000€/a

Ash disposal

0 1000€

0 1000€

0,0 1000€

Table 22: License cost input values The financial model compares the reference case with the alternative case

Lignite fee – The lignite fee is a fee collected by the government (local authority) for each ton of lignite supplied. The fee is specified in euros per tonne. The fee is considered to be a direct income to the government Under variation you can add/subtract a unit price difference to/from the reference case value. Mine rent – Mine rent is a rent for the lignite mine collected by the government. The rent is specified in thousands of Euros per year. The rent is considered a direct income to the government. Under variation you can add/subtract an amount to/from the reference case value. Ash disposal – Ash disposal is a fee collected by the government for the right to dispose of ash from the power plant. The ash disposal fee is specified in thousands of Euros. The ash disposal fee is considered a direct income to the government. Under variation you can add/subtract a price to/from the reference case value.

Input values – power market Parameter

Reference case

Electricity price scenario

Variation

Value in alternative case

central choose: low, central, high

Electricity price

0,0 %

0,0 %

2008

2009

2010

2011

2012

2013

High

45,38

63,94

75,77

76,06

84,59

92,15

Central

30,71

33,66

38,69

41,33

41,41

44,48

Low

27,06

25,50

25,70

27,71

28,56

30,51

In reference case

30,71

33,66

38,69

41,33

41,41

44,48

In alternative case

30,71

33,66

38,69

41,33

41,41

44,48

Table 23: Input values for the power market The financial model compares the reference case with the alternative case

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Electricity price scenario – In this dropdown menu you can choose which electricity price scenario is to be used; the low, the central or the high scenario. The scenarios are based on Pöyry’s Ilex Energy Reports for electricity price development in the Balkans. The central case is the base case, which case is used is up to the user of the model. To view electricity prices beyond 2013, please see consult the excel model directly. The price scenario data is not intended for editing, but it is possible to use a different set of price data if necessary. This needs to be input in correct place in the data sheets (ex. data500PF sheet) Electricity price – Here the option is given to add (or subtract) a percentage to (or from) the chosen electricity price scenario. Under variation an additional change in addition to the reference case can be made. The results of the changes can be viewed a couple of rows down, under the static low, central and high scenarios.

Input values – operating costs and investment Parameter

Reference case

Variation

Value in alternative case

Lignite cost

0,00 %

0,00 %

0,0 %

Other consum ables

0,00 %

0,00 %

0,0 %

Var. m aintenance

0,00 %

0,00 %

0,0 %

Fixed cost, excl. P.

0,00 %

0,00 %

0,0 %

Personnel

0,00 %

0,00 %

0,0 %

Investm ent

0,00 %

0,00 %

0,0 %

Table 24: Input values for operating cost and investment The financial model compares the reference case with the alternative case

Lignite cost – The lignite cost enables the user to adjust the cost of lignite up or down by a chosen percentage value. Under variation you can add/subtract a percentage to/from the reference case value. Other consumables – Other consumables represents costs for chemicals, etc. The cost of other consumables can be adjusted up or down by a chosen percentage value. Under variation you can add/subtract a percentage to/from the reference case value. Variable maintenance cost – Variable maintenance costs can be adjusted up or down by a chosen percentage value. Under variation you can add/subtract a percentage to/from the reference case value. Fixed costs (excluding personnel) – Fixed costs, excluding personnel costs, can here be adjusted up or down by a chosen percentage value. Under variation you can add/subtract a percentage to/from the reference case value.

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Personnel – The costs of personnel can be adjusted up or down by a chosen percentage value. Under variation you can add/subtract a percentage to/from the reference case value. Investment – The over all power plant investment can be adjusted up or down by a chosen percentage value. Under variation you can add/subtract a percentage to/from the reference case value.

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Results sheet This section comprises the results from the financial modelling and analysis. As in the input data sheet, the results are categorised, and shown/hidden using the +/- buttons at the left edge of the Excel sheet. Key results will be presented in graphs; representing calculations based on the best available input data at the time of making the financial model. The results showed in the graphs are initially the same for reference and alternative scenarios (no variation in the default setting), hence only three lines are seen in the graphs by default. Results that are not showed in graphs can still be viewed in detail in the financial model itself. Quarterly free cash flow – Quarterly free cash flow is presented in numbers and plotted in graphs for all six analysed cases. The quarterly free cash flow represents the free cash flow of the power plant investment, and is calculated as follows: operating margin - investment and taxes (financing costs are not included). When the project has a negative operating profit, negative taxes are subtracted from the operating margin, thus increasing the free cash flow. The quarterly free cash flow is initially negative during the disbursement period but cash flow becomes positive as production starts. Cumulative free cash flow – The cumulative free cash flow is presented in numbers and plotted in graphs for all six analysed cases. The cumulative free cash flow shows the quarterly free cash flow in cumulative form.

Cumulative free cash flow: for all six cases

Cumulative Cash Flow: All scenarios compared M€ 20 000

15 000 500 PF 500 CFB 10 000

750 PF 500 PF alt. 500 CFB alt.

5 000

750 PF alt.

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 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

0

-5 000

Years

Figure 2: Cumulative free cash flow Alternative cases show the same value as the reference cases for all power plant options

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Net present value (NPV) – NPV is presented in numbers and plotted in graphs for all six analysed cases. The NPV showed here is the NPV of the free cash flow of the power plant investment (i.e. the NPV of the quarterly free cash flow). NPV represents the future free cash flows discounted by the WACC (weighted average cost of capital). Net present value (NPV): for all six cases

NPV - All scenarios

M€ 800 700 600 500

reference

400

alternative

300 200 100 0

500 PF

500 CFB

750 PF

Figure 3: Net Present Value (NPV)

Using the input data presented earlier in this document (the consultant’s best estimates), the highest NPV is received for the power plant alternative 500 CFB, at roughly 740 million euros.

Internal rate of return (IRR) – The IRR is presented in numbers and plotted in graphs for all six analysed cases. The IRR showed here is the IRR of the power plant investment. Note that the reference and alternative case results are identical due to identical input parameters in the example.

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Internal rate of return (IRR): for all six cases

IRR - All scenarios 16 % 14 % 12 % 10 %

reference

8%

alternative

6% 4% 2% 0%

500 PF

500 CFB

750 PF

Figure 4: Internal rate of return (IRR) Using the input data presented earlier in this document (the consultant’s best estimates), the highest IRR is received for the power plant alternative 500 CFB, at roughly 14,6 %.

Economic value added (EVA) for Kosovo – NPV of charged fees – EVA represents the income that the local authorities will receive from the investor/plant owner. This sum includes lignite fees, mine rent and ash disposal fees. The EVA – NPV of charged fees calculates the net present value of future incomes, as discount rate is used the general interest rate (see interest rate under the financing section of the input sheet). If Lignite fee, ash disposal fee, and mine rent are all set to zero, EVA will naturally be zero as well as in the default case. Economic value added (EVA) for Kosovo – NPV of charged fees: for all six cases

[This figure contains no data in the default case, as the default EVA value is ZERO (no assumptions for lignite fee, ash fee, or mine rent)] [Comment]

Economic value added (EVA) for Kosovo – Total value of cash flow - EVA represents the income that the local authorities will incur from the power plant owner. Included in this income are incurred lignite fees, mine rent and ash disposal fees. The EVA – Total value of cash flow states the monetary value of all future incomes undiscounted. Economic value added (EVA) for Kosovo – Quarterly cash flow - EVA represents the income that the local authorities will incur from the power plant owner. Included in this income are incurred lignite fees, mine rent and ash disposal fees. The EVA – Quarterly cash flow shows the quarterly income to the local authorities. European Agenecy for Recosntruction Pöyry-Cesi-Terna-Decon


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Economic value added (EVA) for Kosovo – Cumulative cash flow – EVA represents the income that the local authorities will incur from the power plant owner. Included in this income are incurred lignite fees, mine rent and ash disposal fees. The EVA – Cumulative cash flow shows the cumulative undiscounted value of the quarterly cash flow. Economic value added (EVA) for Kosovo – Cumulative cash flow: for all six cases

[This figure contains no data in the default case, as the default EVA value is ZERO (no assumptions for lignite fee, ash fee, or mine rent)] [Comment]

Tax income for Kosovo – Net present value (NPV) – The NPV of the taxes paid by the power plant owner over the lifespan of the power plant is showed here. Please note that the taxes paid may or may not end up in Kosovo. The assumption in the default case is that they will. Tax income for Kosovo – Net present value (NPV): for all six cases

NPV of tax incomes - All scenarios

M€ 1 400 1 200 1 000 800

reference alternative

600 400 200 0

500 PF

500 CFB

750 PF

Figure 5: NPV of tax incomes [The NPV of tax income ranges between 1122 million EUR for the 500 PF option and 1184 million EUR for the 750 PF option ]

Net present value (NPV) of tax incomes and EVA – The NPV of tax incomes and EVA added together is showed here. In an optimal scenario (where all taxes end up in Kosovo), this would be the income for the local authorities. Please note that the taxes paid may or may not end up in Kosovo. The assumption in the default case is that they will. As the EVA is zero in the default case the NPV only contains tax income. European Agenecy for Recosntruction Pöyry-Cesi-Terna-Decon


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Overall financing costs – The overall financing cost shows how much money is needed in total to finance the power plant investment. The overall financing cost is represented by the minimum value of the overall cumulative free cash flow of the power plant investment. The table below shows the maximum capital expenditure reached before the project cash flow turns positive. Overall financing costs: for all six cases

M€

Overall financing costs - All scenarios

2 500 2 000 1 500

reference alternative

1 000 500 0

500 PF

500 CFB

750 PF

Figure 6: Overall financing cost Overall financing costs presented here represent the lowest point of the cumulative free cash flow. This cash flow covers the investment and operating costs, but excludes financing costs (i.e. loans).

Equity ratio – The equity ratio, presented as a pie chart, shows the ratio of shareholders’ equity versus liabilities. Equity ratio

Equity ratio

40 %

Shareholders' equity Liabilities

60 %

Figure 7: Equity ratio

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[This ratio is the default assumption, which is the same for all technical options]

Levelised operating costs – marginal cost of production – The marginal cost of production is obtained by dividing production volume with overall operating costs (personnel, fuel, etc.) and depreciation, resulting in a €/MWh value. The marginal cost of generation excludes financing costs. Levelised operating costs – marginal cost of production: for all six cases

Levelised operating costs: All scenarios compared €/MWh 90 80 70

500 PF

60

500 CFB

50

750 PF

40

500 PF alt. 500 CFB alt.

30

750 PF alt.

20 10 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 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

0 Years

Figure 8: Levelised operating cost (marginal cost of generation) The marginal cost of production is, in the long term, below 20€/MWh for all three power plant alternatives.

Total cost of production – The total cost of production is the marginal cost of production (see above) plus financing costs. Development of loans – Here is shown the total loan amount at any given time (quarterly). The maximum loan amount and payback time can be seen here. Development of loans: for all six cases

Development of loan principal: All scenarios compared M€ 1 400 1 200 500 PF

1 000

500 CFB 800

750 PF 500 PF alt.

600

500 CFB alt. 750 PF alt.

400 200

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 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

0 Years

Figure 9: Development of loans European Agenecy for Recosntruction Pöyry-Cesi-Terna-Decon


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Page 43 (48) September 13, 2007

The graph shows how loans are taken and repaid in the different cases.

Financing, graphs of equity development – Equity development is followed in six separate graphs, one for each scenario. The ratio between equity and liabilities can be followed over time. Below each graph, a check is made if the financing plan is sound or not. If the message “okay” is displayed, the financing is okay. If the message “default” is displayed, there is not enough money to finance the project. In the case of “default” a date when the default occurs is showed, this date refers to the relevant quarter it is in, not the exact date. For instance, if loans are repaid to rapidly (see input sheet loan repayment) financing will not be adequate, and the model will give the “default” message. Financing:

Okay

If not, then default date:

Financing: Equity development Financing: 500 PF M€ 2 500 000 2 000 000 1 500 000

Liabilities Equity

1 000 000 500 000

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 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

0 Ye ars

Figure 10: Financing – Equity development This figure show loan repayment and the equity development – equity grows according to D/E ratio up to maximum debt amount, then stays constant..

Investment: Quarterly – Shows the quarterly investment made in each of the six scenarios. Investment: Cumulative – Shows the quarterly investment cumulatively made in each of the six scenarios Investment: Cumulative, split by type – Shows the quarterly investment cumulatively made in each of the six scenarios split by area of investment. Considered areas are prepatory works, 1st unit, 2nd unit, 3rd unit, and (in the 500 cases) 4th unit. When investments begin and end for each of the units can easily be observed here. Below three graphs are shown for each of the three power plant alternatives.

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Investment: Cumulative, split by type: 500 PF

Cumulative investment: 500 PF k€ 3 000 000 2 500 000 2 000 000

4th unit 3rd unit

1 500 000

2nd unit 1 000 000

1st unit prepatory works

500 000 0 1

2

3

4

5

6

7

8 9 Years

10

11

12

13

14

15

Figure 11: Cumulative investment by type, 500 PF Of the three power plant alternatives, the 500 PF has the highest investment need at 2 490 million euros.

Investment: Cumulative, split by type: 500 CFB

Cumulative investment: 500 CFB k€ 2 500 000 2 000 000 4th unit

1 500 000

3rd unit 2nd unit

1 000 000

1st unit 500 000

prepatory works

0 1

2

3

4

5

6

7

8

9

10

11

12

13

14

Years

Figure 12: Cumulative investment by type, 500 CFB Of the three power plant alternatives, the 500 CFB has the lowest investment need at 2 370 million euros.

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15


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Investment: Cumulative, split by type: 750 PF

Cumulative investment: 750 PF k€ 3 000 000 2 500 000 2 000 000 3rd unit 1 500 000

2nd unit 1st unit

1 000 000

prepatory works 500 000 0 1

2

3

4

5

6

7

8 9 Years

10

11

12

13

14

15

Figure 13: Cumulative investment by type, 500 PF The 750 PF power plant has an investment need of 2 420 million euros.

Total Capital Expenditure (CAPEX) – CAPEX represents total funds spent on the project, and is thus made up of the total investment and the total financing costs. Total Capital Expenditure: for all six cases

CAPEX - All scenarios

M€ 3 500 3 000 2 500

reference

2 000

alternative

1 500 1 000 500 0

500 PF

500 CFB

750 PF

Figure 14: Total CAPEX Capital expenditure is lowest for the 500 CFB alternative at 2 880 million euros.

Development of production – Development of production shows, graphically, how the different power plant units produce electricity in the 20 first years after the investment decision. Quarterly production continues much like this until decommissioning. European Agenecy for Recosntruction Pöyry-Cesi-Terna-Decon


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Development of production: for reference scenarios

Quarterly production: 500 PF GWh 4 500 4 000 3 500 3 000 2 500

4th unit

2 000

3rd unit

1 500

2nd unit

1 000

1st unit

500 0 1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Quarterly production: 500 CFB GWh 4 500 4 000 3 500 3 000 2 500

4th unit

2 000

3rd unit

1 500

2nd unit

1 000

1st unit

500 0 1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Quarterly of production: 750 PF GWh 4 500 4 000 3 500 3 000 2 500

4th unit

2 000

3rd unit

1 500

2nd unit

1 000

1st unit

500 0 1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Figure 15: Quarterly generation volumes fot the three technical options The above graphs show how the different power plant alternatives respective units come into production during the first 20 years after investment decision has been made

2.4.4

Report sheet The results sheet is intended as a printer-friendly summary of the results. Input parameters used are shown in the top left table. The results are shown annually, instead of quarterly. Consult the results sheet (as described above) for more detailed results.

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All results shown in the report sheet are also shown in the results sheet, except for turnover, which is only shown on the report sheet. 2.4.5

All other sheets The rest of the sheets in the financial model Excel file are for calculation only, and not intended for editing, except if using a different set of market price data.

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INDEX OF FIGURES Figure 1: Principial Model of the IPP in the Kosovo Electricity Market.............................................4 Figure 2: Cumulative free cash flow ..................................................................................................37 Figure 3: Net Present Value (NPV)....................................................................................................38 Figure 4: Internal rate of return (IRR)................................................................................................39 Figure 5: NPV of tax incomes............................................................................................................40 Figure 6: Overall financing cost.........................................................................................................41 Figure 7: Equity ratio .........................................................................................................................41 Figure 8: Levelised operating cost (marginal cost of generation)......................................................42 Figure 9: Development of loans .........................................................................................................42 Figure 10: Financing – Equity development ......................................................................................43 Figure 11: Cumulative investment by type, 500 PF...........................................................................44 Figure 12: Cumulative investment by type, 500 CFB........................................................................44 Figure 13: Cumulative investment by type, 500 PF...........................................................................45 Figure 14: Total CAPEX....................................................................................................................45 Figure 15: Quarterly generation volumes fot the three technical options ..........................................46

INDEX OF TABLES Table 1: Site-specific investment costs ..............................................................................................13 Table 2: Site-specific operating costs.................................................................................................15 Table 3: Site-specific network connection costs ................................................................................16 Table 4: Technical option plant cost – 500 PF...................................................................................17 Table 5: Technical option plant cost – 500 CFB................................................................................18 Table 6: Technical option plant cost – 750 PF...................................................................................19 Table 7: Project schedule – 500 PF....................................................................................................21 Table 8: Project schedule – 500 CFB.................................................................................................22 Table 9: Project schedule – 750 PF....................................................................................................23 Table 10: Disbursement schedule – 500 PF .......................................................................................24 Table 11: Disbursement schedule – 500 CFB....................................................................................24 Table 12: Disbursement schedule – 750 PF .......................................................................................25 Table 13: Personnel requirement estimate .........................................................................................26 Table 14: Operation and maintenance cost – 500 PF.........................................................................27 Table 15: Operation and maintenance cost – 500 CFB......................................................................28 Table 16: Operation and maintenance cost – 750 PF.........................................................................29 Table 17: Annual operating figures – 500 PF ....................................................................................30 Table 18: Annual operating figures – 500 CFB .................................................................................30 Table 19: Annual operating figures – 750 PF ....................................................................................31 Table 20: Financing input values .......................................................................................................32 Table 21: Input values for economic environment.............................................................................33 Table 22: License cost input values ...................................................................................................34 Table 23: Input values for the power market .....................................................................................34 Table 24: Input values for operating cost and investment .................................................................35

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