SOLAR POWER PROJECT ECONOMICS

Transcription

1 SOLAR POWER PROJECT ECONOMICS Instructor: Peter Cockcroft 9 11 October 2017 Bandung OVERVIEW Given the various fiscal incentives and quality of electricity offtakers today, the economic evaluation of solar power investment is essential. Business decisions involving asset acquisitions, lease-buy assessments, solar technology and hybrid options, equipment purchases, and fiscal negotiations all require detailed economic analysis. The course will cover cash flow analysis, deriving and understanding economic indicators and detailed probability and fiscal analysis. These are vital components of the evaluation of investments in today s international power generation industry, especially with the everchanging capital costs in renewable energy. This 3 day course is a practical project economics course that will provide participants with a complete understanding of the use of the techniques of economic analysis and risk analysis as currently practiced in the international energy industry. Participants will receive a thorough understanding of the context of economic analysis as well as practical instruction and an appreciation of the analytical techniques used. Throughout the course, participants will engage in exercises and analyse case-study examples to reinforce their understanding of the concepts learned. COURSE OBJECTIVES GAIN a thorough understanding of solar power economic evaluations IDENTIFY the main components CONSTRUCT cash flow projections for your international projects DETERMINE key elements and determinants involved in making solar power investment decisions UNDERSTAND and APPLY economic indicators to assess solar power industry projects QUANTIFY and MANAGE uncertainty and risk faced in your business decisions APPLY Monte Carlo Simulation and other statistical methods in risk analysis to exploration and production investments effectively COURSE BENEFITS Energy projects are usually long life but with initially very capital intensive, and solar power projects are no exception. Thus making sure the project economics are robust, accurate and reflects potential uncertainties is a critical part of any successful international solar power project.

2 KEY COURSE LEARNING The participants will learn how to develop their own economic models of different solar projects, whether they are grid-connected or off-grid, rooftop or ground-based. A working Excel-based model will be developed during the workshop, which all participants will be able to use as a template for their own individual projects. SPECIALLY DESIGNED FOR The course is designed for international renewable energy professionals with a need for detailed understanding of the economics of international solar power projects: Solar power investors Planning and Development Analysts/Executives Commercial Analysts/Executive/Managers Business Planners/Analysts/Executives/Managers Investment Executives/Managers Project Executives/Manager Energy Economists General Managers Finance and Account Executive/Managers Delegates will be required to bring a laptop computer with Microsoft Excel DAY 1 1. INTRODUCTION TO SOLAR POWER Aims and scope Contents Solar Energy Yield How do we capture and convert solar energy The solar revolution the drivers Does solar power make economic sense? A review of real-world solar projects 2. THE SOLAR POWER PROJECT VALUE CHAIN Grid-connected vs Off-Grid Rooftop vs Ground-mounted Solar-Diesel Hybrid projects Project Development Conceptual Pre-Feasibility Feasibility Study Contracting (PPA, EPC, O&M, etc.) Construction Commissioning Operating 3. CASH FLOW ANALYSIS Net Cash Flow

3 Discussion of the main components and relative importance of components of cash flow for solar power investments Energy yield, CUF, price, revenue, operating costs, capital costs, different structures (BOO, BOT, etc.). Review of a range of potential risks [EXERCISE]: Delegates exercise in preparing a net cash flow projection. How net cash flow projections are critical in determining financing structure. Distinction between Cash Flow and Profit How cash flow is distinguished from profit. The role of depreciation. When we use cash flow and when we use profit. Cash Flow and Tax How tax is incorporated into cash flow projections. How to inflate the components of cash flows. The conventions and the jargon. [EXERCISE] : Delegates exercise in generating cash flow incorporating inflation. Real and Nominal Cash Flows The distinction between real and nominal cash flows. Fiscal drag and the problems associated with taking short cuts to derive real cash flows. Common misunderstandings in the use of real cash flows. [EXERCISE] : Delegates exercise in preparing real and nominal net cash flows. Depreciation [EXERCISE] : Delegates exercise in preparing depreciation schedules 4. ECONOMIC INDICATORS Introduction The need to measure net cash flow projections with single indicators. The common indicators used The time value of money. Compounding and discounting. Net Present Value (NPV) Valuing projects using NPV. Preliminary discussion of choosing discount rates [EXERCISE] : Delegates exercises in calculating NPV and demonstrating its features. Real and Nominal NPVs [EXERCISE] : Delegates exercises in calculating real and nominal NPVs. Internal Rate of Return (IRR) [EXERCISE] : Delegates exercises in calculating IRR. Problems with IRR [EXERCISE] : Delegates exercises in calculating multiple IRRs and seeing how they arise and how to interpret them. Payback Calculation and use of payback and discounted payback indicators. [EXERCISE] : Delegates exercises in calculating simple and compound payback for tax. Capital Productivity Index (CPI). Calculation and use of CPI. Problems with CPI. [EXERCISE] : Delegates exercises in calculating CPIs

4 5. RISK ANALYSIS A review of risks to be treated in international solar power projects Sensitivity Analysis Analysing the sensitivity of investment decisions to variations in input parameters. Interpreting sensitivity diagrams. The pitfalls in using sensitivity analyses for investment decisions. [EXERCISE] : Delegates exercise in preparing sensitivity analyses and using them for investment decisions. Probability Analysis [EXERCISE] : Delegates exercise in preparing probability analysis. Using Probability in the solar power industry, particularly with energy yield and capacity utilisation [EXERCISE] : Delegates exercises in combining uncertain oil industry variables. Different inputs and conditions for rooftop vs ground-mounted solar projetcs Offgrid vs grid-connected differences [EXERCISE] : Delegates exercises in the economics of of grid-connected versus off-grid projects DAY 2 6. REVENUE Energy Yield Forecasting Power Production [EXERCISE] : Delegates exercises in projects forecasting production from rooftop and ground mounted plants Billable kwh [EXERCISE] : Exercise in revenue forecast for various pricing mechanisms, including PPA 7. COSTS Capex PV panels Invertor and Invertor Replacement Transformer Land Price Grid Connection cost Balance of Plant Operating and Maintenance 8. INCENTIVES AND TAXES Review of different International Incentives Effect of Incentives and Taxes on Project Economics [EXERCISE] : Delegates exercises in the effect of accelerated depreciation on project economics DAY 3 9. FINANCING Equity Debt The effects of different debt financing on project economics 10. Putting It All Together Developing your Financial Model Step by step development of Excel Model

5 Comparison of different metrics Putting a value to your project [EXERCISE] : Presenting your economic modelling results to management The above is a guide to the topics covered during the course and the approximate timing of the topic. The presenter reserves the right to make modifications to these depending on the AT A GLANCE COURSE OVERVIEW DAY 1 Session 1, Overview of Solar Power Session 2. Solar Power Value Chain Session 3. Developing Cash Flow Models DCF Modeling Economic Criteria Session 4. Risk Identification and Assessment DAY 2 Session 1, Revenue Solar Irradiance Billable KWh Session 2. Costs Capital Expenditure Operating and Maintenance Session 4. Incentives and Taxes DAY 3 Session 1. Financing Equity Debt Session 2. Putting It All Together Developing a Financial Model (Part 1) Session 3. Putting It All Together Developing a Financial Model (Part 2) Session 4. Wrap Up AT A GLANCE COURSE OVERVIEW DAY 1 DAY 2 DAY 3 Session 1 Overview of Solar Power Converting sun s rays to electricity forecasting Financing your project Equity Debt Session 2 Solar Power Value Chain Predicting revenue Designing your Model Session 3 Economic Metrics Costs Capex O&M Designing your Model Session 4 Risk Identification & Assessment Government Incentives and Taxes Wrap up

6 The above is a guide to the topics covered during the course and the approximate timing of the topic. The presenter reserves the right to make modifications to these depending on the delegates background and experience and the progress of the course. Full course notes and excel spreadsheets will be available for all participants. COURSE FACULTY Peter Cockcroft Peter Cockcroft has almost forty years in the international energy sector, and has been in charge of successful projects in Australia, Indonesia, Thailand, the Philippines, Vietnam, India, Pakistan, France and West Africa (most of these in excess of US$100 million). He is recognized as being a world authority on energy risk identification and assessment, and has lectured on this topic in over twenty countries. He can certainly walk the talk as not only has he been in charge of a 135MW IPP, but has also held executive positions for international organizations such as BHP and Shell, state owned companies in Indonesia and Korea, as well as being advisor to various Governments. He also presents a sister, more detailed, course on solar project economics. ENROLLMENT In order to allow sufficient time for arranging travel plans, early enrollment is recommended. Registration will be closed on 4 September Late enrollment may result in course cancellation. CANCELLATION, SUBSTITUTION & REFUND The tuition fee will be refunded (less US$ 100 registration fee) only if notification of cancellation is received at least 10 days prior to the commencement. Non payment of tuition fee does not constitute automatic cancellation of participation. Substitution may be made at any time for those enrolled. CERTIFICATE A certificate of participation will be awarded to each person completing the course TUITION FEE Tuition fee at Rp. 10,000, % VAT per delegate (the tuition fee will be adjusted based on the prevailing rate) is due and payable upon confirmation of enrollment. The fee is excluded accommodation. Payment should be settled at the latest on 4 September Any bank charges in connection with payment in Rupiah must be added to tuition fee payment. Tuition fee includes admittance to the course, course materials, daily refreshments and full lunch. Payment can be transferred to PT. Geoservices Bank Mandiri (Persero) Tbk. KC Jakarta Kebon Sirih Jl. Tanah Abang Timur No. 1 2, Jakarta Account No. : (IDR)