World Energy Engineering Congress 2010 Carolyn Roos, Ph.D. Northwest Clean Energy Application Center Washington State U

2. RELCOST Financial:Financial Analysis of Energy Projects Presentation Outline General overview Program use Overview of inputs Summary of results A review of input screens A quick look at each input screen to give you a sense of its look and feel and comprehensiveness. More content in this PPT than we can cover

3. Program Overview RELCOST for Financial Analysis of Energy Projects Evaluate financial viability of energy projects Create financial statements needed for support Quickly evaluate performance visually Test sensitivity of viability to unknown factors Developed by Washington State University Energy Extension Program www.energy.wsu.edu Northwest Clean Energy Regional Application Center http://www.chpcenternw.org

4. Find it On the Web Northwest Clean Energy Regional Application Center http://www.chpcenternw.org Click on �Software, Resources and Links� Direct link: http://www.chpcenternw.org/ResourcesSoftwareLinks/Software.aspx Also, available on our website Example analyses User�s Manual PowerPoint presentations

5. Program Overview General purpose analysis tool Can be used for any project with income streams and expenses But intended for a variety of energy projects Power generation District energy Combined heat and power Alternative energy Wind, Solar, Biomass, Geothermal, etc. Anaerobic digestion with multiple revenue streams

6. Program Overview A MicroSoft Excel spreadsheet template� Template facilitates input From Rule-of-Thumb & preliminary input To detailed, project-specific factors Unprotected spreadsheet Create templates of common project types Any user familiar with Excel can customize All calculations visible Easy integration with other tools Excel used as output and input for many programs Extends reporting, analysis, & integration with the tools you use.

11. Pro Formas Proforma financial statements that can be printed out for records, funding applications, tax purposes, etc. Income Statement Balance Sheet Use of Funds Cash Flow Stakeholders want to know your cash flow, earnings, expenses, etc. in every year of the project Lenders Equity investors Policy analysts Project developers

12. 20 Year Analysis Period Results Example: Income statement has a column for each year

13. Visuals of Pro Forma Statements

14. �Financial Score Card� Visual indicators of viability Red, yellow and green indicators Decision values defined by user

15. Sensitivity Analysis Sensitivity or �What If� Analysis What if I have a cost overrun? What if I don�t get the sales price I expect? What if I don�t get the grant I�m expecting? ? How does that impact my internal rate of return? Sensitivity Factors and Results Shown Side-by-Side Identify which factors most impact the viability of your project Multiply inputs across many sheets all in one place for easy exploration of scenarios

16. Sensitivity Analysis

17. Automatic Spider Diagrams New version of RELCOST includes automatic creation of spider diagrams for easy investigation of scenarios Select performance measure and parameters Enter sensitivity factors to define scenarios Click the button to recalculate the spider diagram.

18. A Review of Input Sheets General Information Plant Operating Factors Capital Expenditures Funding Plan Purchased Fuels O&M Expenses Major expenses (overhauls) Income, Sales Taxes, Fees Dividends (shareholder) Cost escalation Cash accounts

19. First Input SheetGeneral Information Enter basic info on plant and financial assumptions Facility Description Discount and inflation rates Dispatch and availability factors

22. Depreciation �Recovery� of the cost of an asset whose value declines over time Machinery, equipment, structures, etc.

23. Funding Plan Three funding source types Loans, grants, equity Multiple types can be used in same project period Up to 10 sources for each type Any project year Multiple investors, lenders Monthly calculation used for borrowed funds Short duration loans Construction financing or working capital.

24. Income from Sales Nine sales income types Can be user defined for specific project needs Example income streams Power sales Heat, cooling sales Co-products Tipping fees Savings due to efficiency improvements Direct use by-products, such as flowers from heated greenhouse

25. Purchased Fuels Can have multiple fuel types or sources in same year Separate inputs for each project year Energy units can be changed

26. Operation & Maintenance Multiple user-defined expense categories For example Misc. Fixed & Variable Property taxes & insurance Labor & benefits Overhead

27. Major Expenses

28. Environmental Credits

29. Incentives

30. Income Taxes and Fees Multi-jurisdictional: Federal, state, local Tax rates can vary by project year Tax incentives: Refundable tax credits Tax credit carry forward

31. Cash Accounts Current Account and Operating Reserve Account Interest bearing Accounts receivable & payable floats

32. Dividends Annual cash distributions made to investors Dividend payout policies vary greatly User-defined logic can be created for specific projects.

33. Cost Escalation

34. Escalation Forecasts Four escalation forecast types can be entered None � costs are not escalated Conservative � lowest cost escalation Likely � most probable escalation Aggressive � highest cost escalation Forecast is selected on �What If� drop down menu

35. Cost Allocation Allocation of costs of sales Used in calculating levelized costs

36. User�s Manual Guide to financial analysis using RELCOST Background on financial concepts References for cost data and typical values Modeling tips Information on incentives � more