Husum Wind Energy 6th of June Johannes Ritter Partner Solution Matrix

Transcription

1 Husum Wind Energy 6th of June 2013 Johannes Ritter Partner Solution Matrix

2 Solution Matrix Europe s nr. 1 authority on Business Case 326 Business Case consulting projects since 1994 Over 1 billion approved budgets for our clients 4 books on Business Case method Over 50 journal articles Patent on statistical procedure Several presentation on international conferences 2

3 8 journal articles on wind & solar 3

4 Challenges for renewables Wind & solar have become a mature market no significant growth lack of (decisive) innovation Cost effectiveness becomes more important than technical feasability Investors & banks want to know about finance, not technical possibilities Investors & banks ask for convincing risk analysis 4

5 Reasons for this trend Becoming a mature market is a normal developement Furthermore, wind & solar have the following characteristics High fix cost Uncertain lifecycle cost Technical risk For a mature market with these characteristics investors need more proof 5

6 How to address the challenges Learning to avoid focusing on technical features only Thinking from the investors point of view Translating the possibilities of technical features into cash flow Offering solid risk and sensitivity analysis 6

7 A Business Case is the best tool A Business Case is the tool with which these challenges are met Delivering investors a decision basis they understand (cash flow, KPI) Translating technical details into cashflow (Influence Map) Offering solid proof (risk and sensitivity analysis) 7

8 A Business Case in a nut shell A Business Case quantifies cost, benefit, and risk The Influence Map captures your project with all its technical details of business relevance and all its uncertainties A financial model gathers high quality data given by experts in interval estimates A risk and sensitivity analysis validates the results statistically 8

9 Influence Map Offshore Windpark Form Parameter Scaling Factor Wind Speed Euler s Number e Hub height Reference height / measuring height Natural logarithm Roughness length Salinity, humidity and temperature Wind speed probability density function Insurances and servicing contracts Property lease Other operating costs Maintenance and servicing costs Wind speed at height H Air density Rotor disk area Total operating costs per year Power Hours of wind speed category per year Gross energy yield per year in MWh Wake effect Availability Electrical efficiency Net energy yield per year in MWh Feed-in tariff per MWh Revenue per year Scrap value Economic life in years Total revenue over economic lifetime Profit of Wind Park Waves, currents and tides Marine growth Icing Foundation behaviour Cost of wind turbines Costs for foundations Grid connection, transformers, and internal wiring Property costs Planning and construction costs Total investment costs Total costs over economic lifetime Scour Costs for planning and approval Other costs (Monitoring, Supervision) Costs for building site preparation, transport, assembly, and commissioning

10 Influence Map Onshore Windpark Form Parameter Scaling Factor Wind Speed Euler s Number e Wind speed probability density function Wind speed at height H Hub height Reference height / measuring height Natural logarithm Air density Rotor disk area Power Hours of wind speed category per year Gross energy yield per year in MWh Wake effect Feed-in tariff per MWh Net energy yield per year in MWh Scrap value Inflation Rate Exchange Rate Risk Country Risk Roughness length Revenue per year Cost of wind turbines Costs for foundations Grid connection, transformers, and internal wiring Capital expenses Availability Electrical efficiency Economic life in years Total revenue over economic lifetime Property costs Costs for planning and approval Planning and construction costs Total costs over economic lifetime Cashflow of Wind Park Other costs (monitoring, supervision) Costs for building site preparation, transport, assembly, and commissioning Planned downtime Mean time between failure Mean time to repair Availability Repair costs Operating expenses Debt Service Cover Ratio (DSCR) Maintenance costs Insurance costs Cash Flow Available for Debt Service (CFADS) Administrative costs Property lease Debt outstanding Interest rate Repayment rate Cash balance at beginning of period Debt Service (DS)

11 Form Parameter Influence Map Onshore Windpark Scaling Factor Wind Speed Euler s Number e Wind speed probability density function Wind speed at height H Hub height Reference height / measuring height Natural logarithm Air density Rotor disk area Power Hours of wind speed category per year Gross energy yield per year in MWh Wake effect Feed-in tariff per MWh Net energy yield per year in MWh Scrap value Inflation Rate Exchange Rate Risk Country Risk Roughness length Revenue per year Cost of wind turbines Costs for foundations Grid connection, transformers, and internal wiring Capital expenses Availability Electrical efficiency Economic life in years Total revenue over economic lifetime Property costs Costs for planning and approval Planning and construction costs Total costs over economic lifetime Cashflow of Wind Park Other costs (monitoring, supervision) Costs for building site preparation, transport, assembly, and commissioning Planned downtime Mean time between failure Mean time to repair Availability Repair costs Operating expenses Debt Service Cover Ratio (DSCR) Maintenance costs Insurance costs Cash Flow Available for Debt Service (CFADS) Administrative costs Property lease Debt outstanding Interest rate Debt Service (DS) Repayment rate Cash balance at beginning of period

12 Influence Map Solar Plant Total kwp of plant Scenarios Insolation Current Course & Speed New Solar Power Plant Systemic losses Other losses Inverter efficiency Solar panel efficiency Power production per kwp Total annual power production Solar panel degradation Total revenues Decisions Number of panels Type of cells Location... Lifetime Lease Maintenance Insurance Administration Annual operating cost Total cost Project Cash Flow Principal payment Interest payment Annual debt service Key Material cost Decision Installation cost Other cost Plant cost Value Uncertainty Influence

13 High quality data required Dealing with project periods of years Dealing with various uncertainties Projected results are the only option Not if, but how to project is the real question Collect data in expert interviews Collect data in format that can be statistically validated interval estimates instead of point estimates 13

14 Calculated end results KPI Profit over 20 years % ROI 103,8% 14

15 Statistically validated end results Investors want not only numbers, but reliable numbers they can base a decision on A point estimate for 2032 will not be sufficient A range of possible results to be expected in 2032 has credibility 15

16 Risk and sensitivity analysis A Monte Carlo simulation validates the results (a Microsoft Excel Add-on) The risk analysis tests the probability of the end result. The answer is given with a probability density function The sensitivity analysis test the importance of each uncertainty singularily. The answer is given with a tornado diagram that quantifies the risk factors 16

17 Simulation all possible combinations are tested 100,000 times Assumptions Forecast 17

18 Advantages of simulations In contrast to a Business Case without risk and sensitivity analysis it offers: End results as precise as possible Validated end results by identifying probability of its occurence Priorization of risk factors it is what banks and investors are looking for 18

19 Profit over 20 years for offshore windpark with 80% probability 19

20 Probability for breakeven for offshore windpark 20

21 Most important risk factors Total Profit 20 years 320'000' '000' '000' '000' '000'000 Maintenance and repair costs per year Availability 92% 96% Cost per foundation Downside Wake effect 90% 93% Upside Electrical efficiency 92% 95% Total costs for grid connection, transformers, and internal wiring Total costs for planning, approval, and project management

22 Convince banks & investors with a Business Case Confronted with a mature market that deals with high and uncertain cost and high risk investors & bank ask for solid proof This proof is a Business Case that is true to the technical potential of wind & solar true to the business side of wind & solar true to the risk awareness of investors 22

23 Match project, investor, and developer Onshore, off-shore, and solar have very different risk profiles. As have individual projects It is important to match the right developer with the right project with the right investor We are happy to help 23

24 Our books on the Business Case method 24

25 Contact Johannes Ritter Partner Solution Matrix Europe s number 1 authority on Business Case Johannes_Ritter@SolutionMatrix.de