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Fjrmlagreining jarhitavirkjana
Kristjn B. lafsson
28.5.2014
Kristjn B. lafsson
Senior
Analyst
Kristjn
B. Financial
lafsson kbo@simnet.is
kbo@simnet.is
Kristjan B Olafsson
Kristjan B Olafsson
Senior Financial Analyst
Economist from the University of Iceland.
MBA from Copenhagen Business School.
Tel. + 354 892 9200 e-mail: kbo@simnet.is
Consent Energy LLC Washington DC - partner
Consultancy and energy project development
www.consentenergy.com
Geothermal experience from Reykjavik Energy and Reykjavik Energy Invest:
Hellisheidi power plant
Nesjavellir power plant
Hverahlid 90 MW geothermal project
Djibouti Assal geothermal project (2008-2010): REI and Djibouti
A.
B.
C.
D.
E.
F.
Financial analysis
Operational analysis
Risk analysis and risk mitigation
Project Finance
Corporate Finance
Contract structure
G.
H.
I.
J.
Consultancy for:
MFA (Ministry for Foreign Affairs / Benedikt Hskuldsson), Mannvit, Verkis, NEA
(National Energy Authority / Orkustofnun), Icelandic Power Companies, Banks, Investors,
etc.
Cooling towers:
Steam pipelines:
Power Plant:
Wells:
Nesjavellir
Iceland: The power system totals 2.637 MW and its 100% renewable from hydro and geothermal
The Icelandic power system totals 2.637 MW and its 100% renewable
from hydro and geothermal resources
Transmission
cost in Iceland:
Example:
50 MW and
98% utilization
Cost: 0,6
cent/kWh
HS Energy;
1.349.743; 7%
Geothermal
5.245.021
29%
Wind
5.485
0%
Fossil
2.750
0%
National Power
Company
12.838.236
71%
Reykjavik Energy
HS Energy
Hydro
12.862.843
71%
Hydro
Geothermal
Wind
Fossil
0
Steingrmsst 1960
1961
1962
rafoss 1963
ver 1964
Mrar 1965
Brfell 1969 1972
Nmafjall 1969
Smyrlabjarga 1969
1970
Brfell 1971
Brfell 1972
Andakll 1973
Lax 1973
1974
Blvardals 1975
Lagarfoss 1975
Mjlk 1975
Skeisfoss 1976
Krafla 1977
Sigalda 1977
Svartsengi 1977
Sngurfoss 1977
Sigalda 1978
1979
Svartsengi 1980
Hrauneyjafoss 1981
Hrauneyjafoss 1982
Blvardals 1983
1984
1985
1986
1987
1988
Svartsengi 1989
1990
Blanda 1991
Lax 1991
Reihjalli 1991
Blanda 1992
Svartsengi 1993
Lax 1994
1995
1996
Brfell 1997
Krafla 1997
Brfell 1998
Nesjavellir 1998
Reykjanes 1998
Sultartangi 1999
Svartsengi 1999
Hsavk 2000
Sultartangi 2000
Nesjavellir 2001
Vatnsfell 2001
Vatnsfell 2002
ver 2002
2003
Smvirkjanir 2004
Mlavirkjun
Nesjavellir 2005
Hellisheii 2006
Reykjanes 2006
Gnguskars 2007
Hellisheii 2007
Krahnjkavirkjun 2007
Lagarfoss 2007
Lind 2007
Ljs 2007
Selrvirkjun 2007
Svartsengi 2007
Bjlfsvirkjun 2008
Hellisheii 2008
Glsvirkjun 2009
Mjlk 2010
Hellisheii 2011
Breiadalsvirkjun 2012
Skgargeri 2012
2013
Barhls 2014
It was a political decision in 1961 to seek ways how Iceland could best use its energy resources and what kind of power intensive industry could be build in the country.
The National Power Company (Landsvirkjun) was formed in 1965 and the first new power plant, Burfell, was commissioned 1969.
3.000
1.500
690
13
17 1 0
105
3 1
35
70
4 8
50
2 1
0 8 6 2 30
100
6
70
140
0
4
50
3 0
100
5 5
60 30
60 30 45 45
40 30 20 60
2
0
0
MW
TWh
300
6,0
Electricity gen. per year in TWh
Husavk 2 MW 2000
150
3,0
90
100 33
90
2
60
30
30
6
30
30
30
30
0,0
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
90
40
30,00
20
14,60
Energy tax
0,11
1%
11,63
4,90
Transmission
and distribution
4,92
34%
4,21
2,58
0,6
0
Reykjavik
Energy:
Household
incl. 25,5%
VAT.
Value Added
Tax
2,97
20%
Reykjavik
National
National
Estimated
Transmission Household in
Energy:
Power
Power
Tariff from a
cost
Country X:
Household
Company:
Company:
new
Estimated
excluding Heavy Industry
Heavy
geothermal
tariff 30
25,5% VAT.
including
Industry, old power plant.
cent/kWh or
transmission.
contracts,
even higher.
partly
including
transmission.
Energy price
4,42
30%
Fixed charge
2,18
15%
MW
60
50
50
30
30
13
6
Well 1
Well 2
Well 3
Well 4
Well 5
Well 6
17
20
Accumulated MW
13
30
50
50
Geosciences
Legal and
institutional
framework
Engineering
Finance
Financial Models
A: PP
B: PPP
Public project
Public Private
Partnership
ICELAND
C: IPP
The private sector
D:
Separation of
steam collection
and power
generation
10
Sponsors / Investors
Lenders
Equity
Reykjavik Energy Invest, IFC and
MDBs
Financing Agreements
IFC and MDBs
Project
Company
Djibouti
PPA
& PA
Contractor
Operator
Reykjavik Energy
Construction Contract
Reykjavik Energy
Operations and Maintenance
Contract
Off-taker
EDD Djibouti
Insurers
Risk Mitigation
11
Geothermal development
R&D
Exploration
Drilling
Confirmation
Engineering
Construction
O & M +25 Y
ISOR
Iceland Drilling
Mannvit
Verkis
Efla
12
MUS$
300
Page 41:
Low estimate:
2,8 MUS$/MW
Medium estimate: 3,9 MUS$/MW
High estimate:
5,5 MUS$/MW
195
200
176
150
150
100
75
76
45
30
25
19
5
0
Pre-feasibility and 4 Additional Production
exploration &
wells
production wells
Re-injection wells
MUS$
Start up and
commissioning
Accumulated cost
13
3,00
Cent/kWh
Fixed Cost: Supervision of
machines
2,00
1,50
0,75
38%
0,50
25%
0,75
0,50
0,25
0,25
0,00
Fixed Cost:
Maintenance
work
O&M cent/kWh
Variable Cost:
Superv. of
Reservoir
Variable Cost:
Operational
supplies
0,25
0,25
13%
Fixed Cost:
Supervision of
machines
0,25
12%
Variable Cost:
Make-up or
maintenance
drilling
0,25
12%
Variable Cost: Make-up or
maintenance drilling
Accumul. cent/kWh
14
Grant 0%
IPPs and Investors not willing to taka 100% risk to prove the resource
Example: Djibouti 2008-2010
MUS$
200
A: First step
B: Second step
C: Total financing
140,0
100
60,0
140,0
60,0
19,8
30,0
48,0
40,2
24,0
0
6,0
12,0
0,0
Grant 0%
IPP Company
Multiple Donors
MDBs
Equity
Equity 30%
Debt 70%
Debt
Total
15
MUS$
200
A: First step
B: Second step
C: Total financing
119,0
100
60,0
51,0
119,0
15,0
30,0
16,8
30,0
30,0
30,0
30,0
34,2
Grant 15%
Equity
15,0
0
IPP Company
Multiple Donors
Others
MDBs
Equity 30%
Debt
Debt 70%
Total
16
MUS$
200
A: First step
B: Second step
C: Total financing
105,0
100
45,0
105,0
45,0
0,0
0
Power Company
Grant 0%
Equity
Debt
Total
17
MUS$
250
Risk profile:
From high to low
200
200
4) CapEx 200 MUS$
150
119
100
100
19
60
50
51
51
30
30
30
30
30
30
Pre-feasibility and
Feasibility Study
2) Financial Close 60
MUS$
0
Pre-feasibility
Operation period
18
Key findings
Return on equity, Grant and Tariff
Cent/kWh
ROE %
25,0%
20,00
25,0%
20,0%
13,27
10,00
11,0%
8,78
12,5%
4,21
0,00
0,0%
A: Africa: No grant
Tariff 13,27 cent/kWh
Project Finance.
ROE
C: Iceland: No grant
Tariff 4,21 cent/kWh
Corporate Finance
Transmission cost:
0,6 cent/kWh.
19
MW
MUS$
MUS$/MW
Nr.
MWe
Nr.
MUS$
MUS$
MUS$
MUS$
MUS$
MUS$
% of CAPEX
%
%
%
%
%
%
GWh/Year
MUS$
cent/kWh
% of CAPEX
MUS$/Year
%
Years
Years
Years
cent/kWh
%
MUS$
%
MUS$
Years
Years
cent/kWh
cent/kWh
cent/kWh
cent/kWh
Africa
Iceland
Project finance
Corpor. Fin.
A
B
C
50
50
50
200
200
150
4,0
4,0
3,0
12
12
9
4,2
4,2
5,6
6
6
6
30
30
60
60
100
100
58
100
100
93
A
B
C
60
51
45
140
119
105
Project finance
Project finance
State/Municipality
0
30
0
0%
15%
0%
6%
6%
3%
25%
20%
11,0%
11,7%
10,2%
5,4%
10,9%
9,4%
5,0%
A
B
C
90%
90%
92,5%
10%
10%
7,5%
394,2
394,2
405,2
52,3
34,6
17,0
A
B
C
2,0
2,0
0,85
3,9%
3,9%
2,3%
7,9
7,9
3,4
A
B
C
20%
20%
20%
25
25
25
25
25
25
25
25
25
A
B
C
13,27
8,78
4,21
15,3%
9,3%
5,7%
53,9
-1,3
9,7
25,0%
20,0%
11,0%
0,0
0,0
0,0
6,0
9,1
13,1
11,0
22,1
5,15
5,00
2,82
5,15
4,34
2,82
3,95
3,72
2,16
1,19
1,28
0,67
No resource tax, tax holidays or carbon credit revenues.
Iceland:
No direct grant
Loan guarantee from owner
No resource tax
Return on equity 11%
WACC after tax 5%
20
Income tax
0,70
8,0%
Depreciation
2,03
23,1%
10
Interest
1,25
14,3%
2,03
2,00
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Depreciation
Interest
Net Income
O&M incl.
Make-up
2,00
22,8%
Net Income
2,79
31,8%
Income tax
21
Levelized Cost
Tariff 8,78 cent/kWh
LCOE 5,00 cent/kWh
LCOE after Grant 4,34 cent/kWh
15,0
15,0
cent/kWh
cent/kWh
10,0
10,0
8,78
5,00
5,0
5,00
4,34
5,0
3,72
2,79
2,03
2,00
1,25
0,70
0,51
0,77
0,00
0,0
0,0
O&M & Mup
Royalties
Interest
Tariff
Levelized
Cost
LC after
Grant
LCOE Capital
LCOE Total
22
150
20%
150
20,00%
20%
ROE 20%
Iceland: ROE 11%
9,26%
0%
1
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
-150
Debt
0%
1 2 3 4 5 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
-20%
Equity
-1,3
-150
-20%
Equity
GRANT
GRANT
Acc. Disc. Cash Flow to Equity
Debt
Free Cash Flow to Equity
Acc. Equity IRR
23
1.
2.
3.
4.
New Electricity Act 2003 and increased demand from aluminum industry willing to sign long term PPA.
5.
6.
7.
8.
9.
10. Local geothermal capacity building (UNU, ISOR, NEA (Orkustofnun), Engineering companies, etc.) and a local
geothermal drilling company.
Iceland would be facing a different geothermal picture without State/Municipal Power Companies, Corporate
Finance instead of Project Finance, local know-how, local drilling company, experience from central heating
projects and increased demand from aluminum industry.
24
Tariff 8,78-13,27
cent/kWh
Financing is a difficult
step
Reliable
energy
Renewable
energy
Generation capacity
factor > 90%
No reliance on fossil
fuel, rain, wind or sun
25
Kristjan B Olafsson
Senior Financial Analyst
Reykjavik Iceland
E-mail: kbo@simnet.is
Tel: +354 892 9200
Kristjn B. lafsson kbo@simnet.is
26