*** Discussion Draft Not for Distribution ***

Transcription

1 *** Discussion Draft Not for Distribution *** Draft PV Cash Flow Analysis Falmouth Wind Turbines Options Analysis Process December 3, 2012 Sustainable Energy Advantage, LLC

2 Assumptions: Modeling Inputs Category Input Category Input Capacity 2 MW dc O&M Expense $20/kW-yr Net Capacity Factor 14.5% Annual Degradation 0.5% O&M Escalation Insurance 2.5%/yr 0.4% of cost Project Life 25 years Project Management $10K/yr Total Project Cost* $3.00/Watt Net Metering Credit Rate, year 1 15 /kwh % Financed w/ Muni Bond 100% Electricity Value Escalation 2.5%/yr Bond Tenor 20 years Rev. from Sale of Wind 1 & 2** $400, year Interest Rate 3.75% Lender s Fee 1.5% SRECs Year 1-10 SRECs Year $150/MWh $40/MWh * Before grants and revenue from turbine sale. ** Used to reduce amount financed with muni bond. Key changes from previous analysis noted in red. Sensitivity conducted to test impact of grants from $500K to $3M. 1

3 Original Est. of PV Cash Flows in Sell Turbines Case Debt repaid over 10-years in all scenarios. Slight CF variations in years due to how model estimates insurance. As practical matter, these values should be interpreted as being the same. *Even if the Town paid the Stipulated Refund, MA CEC would need to waive other contract terms violated by the sell turbines case. ** This is a Discussion Draft and Not an Official Town Financial Document** 2

4 Revised CF: 20-year bond, reduced by proceeds of turbine sale Debt now repaid over 20- years in all scenarios. Drop in revenue after year 10 due to loss of SREC revenue. Revenue from sale of wind turbines used to reduce debt obligation. *Even if the Town paid the Stipulated Refund, MA CEC would need to waive other contract terms violated by the sell turbines case. ** This is a Discussion Draft and Not an Official Town Financial Document** 3

5 Discussion of Revised CF Results On a cumulative basis, a grant of $1.75M would likely allow the solar project to cover its own debt and expenses as well as the remaining debt from Wind I. Individual negative cash flow years will apply; but if cash flow in positive years is reserved, funds will be available to service Wind I debt until maturity. This scenario assumes that net metering credits can be converted into cash, either by NStar or through the Town s budgeting process. If this is not the case, then no cash will be available to service Wind I debt as all value would be captive in electricity bill credits. WWTP electricity expense has been removed from this analysis. The analysis is indifferent to whether net metering credits are applied to the WWTP or other accounts. The analysis must assume, however, that electricity bill savings (WWTP or otherwise) are available to pay down PV and wind project debt. The Wind I REC contract with MassCEC includes a Stipulated Refund in the event that RECs are not delivered. This is estimated at approximately $135K per year. After this expense (and including the same $1.75M grant), the project would still have positive cumulative cash flow of approximately $240K in year 25 years, but negative cash flow in all preceding years. 4

6 3 rd Party Ownership Models The PV asset is owned by a private entity. Town purchases Net Metering Credits generated by the project at a discount to their face value. In the current market, it is common for all land lease payments, property tax payments and electricity savings to be combined into a single discount factor which is applied to the net metering credit. The result may be net metering credits purchased at an approximate 25% to 35% discount to face value although this amount may vary significantly based on proposals from interested solar developers. If net metering credits are assumed calculated at 15 /kwh and are forecast with 2.5% annual escalation, then Falmouth could expect to generate benefits of $115K to $160K per year most likely in the form of credits that can be applied to NStar utility bills, not in cash. This amount is insufficient to meet Wind I debt repayment obligations (which range from $215K to $425/year). 5