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Financial Assignment
ENGG4900 Assignment 5
ENGG4900 Assignment 5
Financial Modelling Exercise
Context
You are the feasibility study team for End Power Pty Ltd who provides custom designed electricity generation systems for off-grid and fringe-of-grid communities. You are developing a proposal for Yakandangaroo in western Queensland.
Yakandangaroo has a population of 1,500. The main industry is grazing. The town consumes approximately 10 GW h per annum and has a peak load of 3.25 MW which occurs between 4:30 and 8 PM.
You have been asked to develop two proposals – one based on conventional diesel fired generation and one based on Solar PV (assume fixed panel) backed with a Tesla Battery Energy Storage system (up to 5 hours’ storage at peak load). Assume the solar PV has a capacity factor of 25%.
Project parameters:
Commencement Date: As soon as possible.
Investment costs1 for the power generation plant (excluding contingency) may be assumed as:
₋ Diesel Generation $800 per kW installed
₋ Solar PV $1,800 per kW installed
₋ Tesla Battery $400 per kWh installed (Special offer – 50% discount)
Operating and maintenance costs1
₋ Diesel Generation Fixed $75 per kW installed
Variable $0.01 per kWh sent out
Diesel Costs 18 c per kWh sent out (Fixed, Nominal)
₋ Solar PV Fixed $30 per kW installed
Variable $ Nil
The reference date for these estimates is December 2015.
The technologies may be assumed to be AACE2 Reference Class 2.
The technology maturity is different for each of these technologies and so the Process Contingency will also be different.
₋ Diesel Generation is fully commercial with many competing vendors.
₋ Fixed panel solar PV (utility sale) has some limited experience at full scale.
₋ Tesla Energy Storage system has mainly small pilot demonstrations.
All plant assets are depreciable for tax purposes on a straight line basis over a 12-year period.
₋ Sufficient land is already available and allocated for the diesel option
₋ An additional 25 ha of land will be required for the solar PV option at an
estimated cost of $15,000 per hectare including fence and improvements.
The investment decision will be made at the December board meeting this year for an
anticipated commencement of construction in January 2017.
Capital expenditure schedule is projected to be:
₋ Land (if required) must be purchased up front;
₋ Diesel Case 12 months’ EPC.
₋ Solar PV + Battery 24 months’ EPC. (35% year 1, 65% year 2)
Start-up
₋ Diesel option is expected to ramp to average 60% in year 1, 85% in year 2 and
100% in year 3 and beyond.
₋ Solar-Tesla option is expected to ramp to average 50% in year 1, 75% in year 2
90% in year 3 and 100% in year 4 and beyond.
Assumptions:
Economic Life of the Project is 20 years from the commencement of operations.
Residual value of any plant is offset by exactly offset by rehabilitation costs of the
site.
Depreciation of plant over 12 years (straight line basis)
Tax Rate is 30%. The company cannot group its losses with any related entity so tax
losses must be carried forward. Assume tax payable is paid in the year that it arises.
The rate payers will pay 30 c / kWh for their electricity use (fixed for the life of the
plant).
The CO2 emissions intensity is 0.6 tonnes per MWh generated Diesel Plant and nil
for the solar-battery system.
CPI is 2.5%
The WACC is 7% nominal after tax.
O&M costs escalate at CPI (excl. diesel which is fixed in real terms).
Capital costs are not expected to escalate.
Assume all operating cashflows occur at year end.
TASK:
Develop a Spreadsheet Model to calculate:
The nominal after tax cashflow for each year of the project’s life.
The real after tax cashflow for each year of the project’s life.
The NPV, IRR and Payback period for each project option.
Write a 1-page recommendation letter to the CEO of Yankandangaroo outlining
Which project you are recommending and why?
The implications of a CO2 levy of $30 per tonne (2016 dollar equivalent), which if the green party is elected will be applied on all power generation from 2020. The CO2 will escalate at CPI.
An estimate of the CO2 levy that would be necessary to change your recommendation to the Solar + Tesla system.
At this CO2 price what would the electricity price need to be to meet achieve the WACC?
Submission
Submit as two consolidated turn-it-in assignments – 1 Page Recommendation Report + Excel Spreadsheet with the financial model(s) – on behalf of your team.
Ensure that the individual roles for all team members are summarised in a table on the cover page of your submission.
Assessment Criteria
Tutorial Participation Week 9 2%
Assignment Report 18%
Total 20%
Presentations – Groups M, N, O & P in each of T01, T02, T03 & T04 will present in week 12 tutorial sessions (17/18 October). This assessment task is to be completed in you ENGG4900 teams.
1 http://www.co2crc.com.au/wp-content/uploads/2016/04/LCOE_Report_final_web.pdf
22 COST ESTIMATE CLASSIFICATION SYSTEM – AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION FOR THE PROCESS INDUSTRIES TCM Framework: 7.3 – Cost Estimating and Budgeting Rev. March 1, 2016
代写ENGG4900 Financial Assignment
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代写ENGG4900 Financial Assignment
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