Pres. Duterte announced the Philippines will revisit the Bataan Nuclear Power Plant project for possible generation of stable and cheaper electricity
Pres. Duterte announced the Philippines will revisit the Bataan Nuclear Power Plant project for possible generation of stable and cheaper electricity
Here is the ready-to-use project finance model to evaluate the financial viability of rehabilitating and reviving the mothballed Bataan Nuclear Power Plant (BNPP). The plant's loan has been fully paid and is considered sunk cost. At best, doing nothing means the project was built at a cost with not a single kW of electricity generated and sold of value. All it has is plain scrap value less the accumulated cost of maintaining the plant while in mothball status, and electricity used to keep the moving and rotating machineries so they wont collapse on their own weight and be miss-aligned.
There were proposals too that will convert the large diameter atmospheric pressure steam turbines to coal thermal plant or combined cycle gas turbine (CCGT) thermal plant using diesel, bunker or natural gas. But this is not possible as the nuclear power plant's steam turbines are low-pressure large diameter equipment while the multi-pressure small diameter steam turbines are needed by the coal thermal and CCGT power plants.
Some components need to be scrapped, retired and replaced with newer technology so the net capital investment (new investments - sale of old assets) and the remaining economic life, together with its fixed and variable O&M costs, G&A costs, nuclear fuel costs and efficiency, will determine the first year cost or levelized cost of energy, short run marginal cost (to compete in the WESM) and the long run marginal cost (annualized investment cost, fixed O&M, variable O&M, fuel & lubricating costs) so it may be part of the optimal generation mix determined by the DOE when it runs the IEA (International Energy Agency) MESSENGER optimization software (a mixed integer linear programming or LP modeling and matrix solving model) to determine the least cost capacity expansion plan (generation mix on a yearly basis). Least cost capacity expansion plan means the sum of annualized investment cost, fixed O&M, variable O&M, G&A costs, nuclear fuel & lubricating costs) over the economic life of the various projects during the planning horizon (e.g. 2020 to 2050) is minimum while meeting yearly project demands and environmental emission targets such as CO2 or GHG emissions and other pollutant emissions. This modeling system will force out or replace old and inefficient technologies even before it reaches its economic life if a newer, more efficient and cheaper technology is capable of replacing the obsolete, inefficient and expensive technology, so as not to burden the consuming public with expensive power, thereby, making the country competitive in the international arena in terms of logistics (efficient and cheaper electric vehicles) and utilities (lower power costs and cost of production).
Given the new rehab net cost and O&M cost, the model will determine the first year tariff to meet the target equity or project returns (IRR, NPV, PAYBACK) or WACC (weighted average cost of capital). Or given the target tariff of say 2.50 PHP/KWH, the model will determine the maximum new rehab net cost that must not be exceeded during the rehab, otherwise the project will not be viable as it will fail to met expected equity or project returns, mainly the IRR of around 12.0% p.a. of WACC.
To know more about Nuclear Energy and current trends in nuclear power generation, click on the links below:
Here is the procedure for evaluating the viability of this rehab project:
How to run the expanded Nuclear power plant model (7 years or 84 month’s construction, 40 year’s operating period) – hurry 50% discount till Aug 31
UPDATED August 7, 2020 10:13 PM (FINAL VERSION)
A good discussion on identifying and mitigating potential project risks during the project development and feasibility study preparation is also covered in this excellent article. If a random range of +/-% 10% (i.e. 90% to 110% of fixed input) will lead to non-convergence of the IRR or NPV, then that input variable is a potential project risk and deal breaker that must be addressed by estimating it correctly and limiting its value to the allowable range for convergence.
A quick user guide on how to use the 3 model versions may be found in the documents below. The documents also show the tables (***) that could not be displayed properly by LinkedIn:
Yes, your energy technology expert has updated its advanced Nuclear power plant from
its current capability of 7 years (84 months) and 30 years to 40 years, based on an actual request by a model purchaser.
Here are the minimal starting inputs to develop your initial model, for further refinements as your study gets more up to date data:
construction period = 7 years x 12 = 84 months
operating period = 40 years (economic life)
gross capacity = 1,330 MW
net capacity factor = % availability x % load factor x (1 - % own use)
= 96.67% x 98% x (1 - 5%) = 90%
fist year annual generation (net) = 1,330 x 365 x 24 x 90%
= 10,485,720 MWh/yr
Plant capacity degradation rate = 0.5% per year
Capital cost buildup inputs and % Local Cost (LC) composition: (table found in the doc file):
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all-in capital cost = 5,530 $/kW
total capital cost = 5,530 x 1,330 x 1,000 = 7,354,900,000 USD
fixed O&M = 3% p.a. of total capital cost = 3% x 7,354,900,000 USD / (1,330 x 1,000 kW)
= 165.90 USD/kW/yr
variable O&M = 1% p.a. of total capital cost = 1% x 7,354,900,000 USD / (10,485,720 MWh)
= 7.01 USD/MWh
fixed G&A (general and admin costs) = (50,000 / 53 USD/mos) x 1.30 fringe x 13 mos/yr x 50 engineers = 797,170 USD/yr
NOTE: you may set select flag (cell Q32 = 1) to 1 to select the old values of the model (in brown font) or to zero (cell Q32 = 0) to select the default calculations for the targets ($/kW, $/kW/yr and $/MWh) shown above.
nuclear fuel cost = 365 fuel + 400 fabrication = 765 USD/kg = 765,000 USD/MT
nuclear fuel energy to electricity efficiency = 33.23% GHV
plant heat rate = 3,412 / 33.23% = 10,268 Btu/kWh
GHV of nuclear fuel = (3,900 GJ / kg) x (10^6?kJ / GJ) / (1.05506 kJ / Btu) / (2.2046 lb / kg)
=?1,676,708,808 Btu/lb
Lube consumption = 5.4 g/kWh
Density of lube oil = 0.98 kg/L
Lube oil rate = (5.4 /1000) / (0.98 kg/L) = 0.0055 L/kWh
Lube oil cost = 200 PHP/L
Capital structure:
30% equity with 14% p.a. target IRR
70% debt with:
49% local debt = 10% p.a. interest, 10 year’s term,
51% foreign debt = 8% p.a. interest, 10 year’s term
local and foreign upfront financing fees = 2.0% one time
local and foreign commitment fees = 0.50% p.a. on undrawn loan
local and foreign loan grace period = 6 months
local and foreign loan debt service reserve (DSR) = 6 months
days receivables = 30 days
days payables = 30 days
days fuel inventory = 60 days
refurbishment (overhaul cost) = 10% of original cost, on the 10th year
salvage value = 10% of original cost
With Board of Investments (BOI) incentives tax regime (1 = none, 2 = BOI, 3 = PEZA):
BOI tax incentives (enter 2)
income tax holiday (ITH) = 0
income tax rate after ITH = 10% of taxable income
property tax rate from COD = 2% of 80% valuation of net book value (NBV) of properties (equipment, building), land is not depreciated while equipment and building are depreciated
depreciation rate = 1 / economic life = 1/40 per year
LGU tax = 1% of last year's revenues
Gov't share (for RE projects) = 0% (for fossil and non-RE projects)
ER 1-94 contribution = 0.01 PHP/kWh sold
Withholding tax on interest (foreign currency) = 10%
Gross receipts tax on interest (local currency) = 1%
Based Foreign Exchange Rate = 53.00 PHP/USD
Forward Fixed Exchange Rate = 53.00 PHP/USD
Inflation Rate:
Local CPI = 0.0% p.a. (OPEX) = 4.02% p.a. (CAPEX)
Foreign CPI = 0.0% p.a. (OPEX) = 2.0% p.a. (CAPEX)
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With the above information and using the Discounted Cash Flow Internal Rate of Return (DCFIRR) method, you can determine the equity and project returns (IRR, NPV, PAYBACK, DSCR) and all financial ratios, show income and expense statement, balance sheet and cash flow.
It is now available too in 3 versions: deterministic (fixed inputs), sensitivity (varying set of inputs or scenario) and stochastic or probabilistic inputs (randomly changing set of inputs) that will help you as project developer to identify project risks.
Following are the results for Deterministic model:
% Local Component (funded by local debt) = 49%
% Foreign Component (funded by foreign debt) = 51%
Capital cost buildup results: (table found in the doc file):
***
First year tariff (LCOE, LRMC) to hit target equity IRR = 9.48125 PHP/kWh
= 0.12921 USD/kWh
Levelized tariff (NPV of asset value / NPV of generation), discounted at pre-tax WACC
?= 6.78853 PHP/kWh = 0.12809 USD/kWh
SRMC = 9.48125 PHP/kWh = 0.17899 USD/kWh
Pre-tax WACC =11.98% p.a.?
After-tax WACC = 8.39% p.a.
WACC = (30% x 14% p.a.) + 70% (49% x 10% p.a. + 51% x 8% p.a.) = 10.49% p.a.
Equity IRR = 14.00% p.a.
Equity NPV = 0.0
Equity PAYBACK = 7.67 years
Project IRR = 10.63% p.a.
Project NPV = -67,377,584 ‘000 PHP
Project PAYBACK = 6.43 years
Debt Service Cover Ratio (DSCR) min = 1.21
Debt Service Cover Ratio (DSCR) ave = 1.54
Debt Service Cover Ratio (DSCR) max = 2.29
Benefits to Cost (B/C) Ratio, discounted at pre-tax WACC = 1.201 (greater than unity)
Financial Ratios (liquidity ratios, solvency ratios, efficiency ratios, profitability ratios, market prospect ratios) = see bottom of the Financials worksheet)
Results for Sensitivity Model (NEW model):
If we vary the price of the nuclear fuel from 765, 715, 775, 615, and 565 ‘000 USD/MT, the resulting WACC and equity and project returns are as follows (table found in the doc file):
***
The sensitivity model also uses the Excel Table Function to calculate automatically (pressing F9) to determine the impact of minute or incremental changes (user inputs) of debt ratio, forward exchange rate, unit capacity, plant availability factor, plant degradation rate, gross heating value (GHV) of fuel, plant heat rate, fuel cost, construction period, and operating period (e.g. independent variables) with the dependent variables: net capacity factor, equity and project returns (IRR, NPV, PAYBACK), pre-tax WACC, after-tax WACC, SRMC and LRMC (or LCOE).
When the sensitivity switch (sens = cell U116 = 1 in the Inputs & Assumptions worksheet) is set to 1 and you press F9, the Excel Table Function automatically updates the table. Example is the impact of changing the debt ratio from 0.01% to 70% to 90% in intervals of 10% to the above mentioned dependent variables (then set cell U116 to zero again) before you save and exit the model to make it ready for the next run):
***
Results for Monte Carlo Simulation (MCS model):
You enter the number of random trials (500 – 1,000). If number of trials is in bold font, the MCS model will generate a distribution graph for each of the 9 variables being simulated (equity and project returns such as IRR, NPV and PAYBACK, pre-tax WACC, SRMC and LRMC). For lack of space, the SRMC and LRMC are not displayed in the table below (table found in the doc file):
***
You can view the distribution graph from the file:
How to run the deterministic models:
Update first the blue inputs
Calibrate the model to meet the targets (run macro 2, ctrl + f):
View the results:
How to run the sensitivity analysis (NEW) models – up to 5 sets of inputs or scenarios:
How to run the stochastic or probabilistic (MCS) models – up to 500 to 1,000 random trials)
When an input variable changes in random by +/- 10% from the fixed input, and the model fails to converge the IRR or NPV, that variable is a potential project risk in the proposed project and must be estimated carefully and accurately as it can bring the model to an undefined value for IRR and NPV.
For instance, the diesel genset model cannot handle more than +/- 3% variation in any of its input variable as it will result in undefined IRR and NPV, so when running the stochastic or probabilistic version (MCS or Monte Carlo simulation), the maximum random error must be less than 3% for the MCS model to arrive at a stable answer for IRR and NPV.
Use the USD model to model any local currency. For example, you can use the USD model to mimic the PHP model by entering the exchange rate of 53.00 PHP to a USD, and you can get the same result as running the PHP model.
To run the demo (locked reports) model, please click the link below:
deterministic (fixed inputs)
sensitivity (5 scenarios expandable by user by adding case columns)
stochastic (randomly changing inputs for risk analysis)
The Monte Carlo Simulation uses a default +/- 10% range (user may change the range). If the IRR or NPV does not converge at the assumed % range, then that input variable is a potential risk that needs to be mitigated by estimating it correctly and limiting the value of that input variable between that allowable range as the IRR or NPV becomes undefined.
X (random) = X (fixed) * [90% + (110% - 90%) * rand() ]
where X = electricity tariff, plant availability factor, fuel heating value, debt ratio, plant capacity per unit, variable O&M cost $/MWh, fixed O&M cost $/kW/yr, fixed G&A cost $/yr, cost of fuel, plant heat rate and all-in capital cost
rand() = Excel random number generator, between 0 (zero) and 1.0 (one)
Monte Carlo Simulation (MCS) add-in = you must run this first before you run the MCS models above
and if you want to run the unlocked model (unlocked reports), please order, remit payment thru PayPal and download immediately the unlocked models for the 3 versions (deterministic USD400, sensitivity USD400 and stochastic USD400 = USD1,200 for all 3 versions in PHP and USD currencies) using the link in my on-line store:
50% discount from Aug 1 – 31, 2020. Hurry. Limited Offer Only.
Marcial Ocampo
63-915-6067949 (globe mobile)
marcial.ocampo (Skype)
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