Assumptions:

Prices are reducing from 1999-2009

Covenants of Revolving Credit remain same for the period considered.

Given: WACC:
300million to build 1 plant. 4 plants built in 1 year. βasset
βequity
rf
Exhibit 5 Rp
Output in MW 1000
Availability 90% we
Market price of electicity ($/MWh) wd
1999 31 market heat rate = 11,000
2009 24 market heat rate = 7,500 Re
Rd

Gas price ($/MBtu) 2.2 WACC

Plant heat rate (Btu/kWh) 7500
Implied fuel cost ($/MWh) 16.5

O&M expense ($/MWh) 3.5

Capital costs 500,000,000
Years to construct 2
Depreciable life 30
Debt to capitalization ratio 65%
Pretax cost of debt 7.75%
Tax rate 38%
Inflation rate 2%
 0.2 Given
0.42
5.66 10 yr bond
5.00 Assumed

0.350
0.650

7.75%
5.89%

6.54%
Year 1999 1999 2000
Example New Model
Capacity in MWs
Production in MWHs 7,884,000
Price in $/ MWH 31 31.0 30.3

Revenue 244,404,000

Fuel Costs 130,086,000

OM costs 27,594,000
Upfront fee 15,000,000
Total Expense 157,680,000 15,000,000 -

EBITDA (15,000,000) -
Depreciation 16,667,000 30,000,000 40,000,000
EBIT (45,000,000) (40,000,000)
Interest 47,300,000 77,187,500
PBT (92,300,000) (117,187,500)
Tax
PAT

FCF (62,300,000) (77,187,500)

Terminal Value
TOTAL FCFF (62,300,000) (77,187,500)
PV (58,474,560) (67,999,358)
NPV 1,411,996,640

Equity 430,000,000 477,300,000

Debt 470,000,000 770,000,000
Cumulative networth 900,000,000 1,247,300,000
ROCE - -
EBITDA/Interest - -
Total Capital
Capital expenditure with 25% savings required 900,000,000 300,000,000
Debt taken 470,000,000 300,000,000
d/C 0.52 0.62
Interest expense 47,300,000 77,187,500
Depreciation 30,000,000 40,000,000

Fuel 16.50 15.68

Operating 3.50 3.15
Depreciation 2.11 1.58
 2001 2002 2003 2004 2005

2,365 2,965 2,965 2,965 2,965

18,645,660 23,376,060 23,376,060 23,376,060 23,376,060
29.6 28.9 28.2 27.5 26.8

551,911,536 675,568,134 659,204,892 642,841,650 626,478,408

292,270,721 366,419,741 366,419,741 366,419,741 366,419,741

58,733,829 73,634,589 73,634,589 73,634,589 73,634,589

351,004,550 440,054,330 440,054,330 440,054,330 440,054,330

200,906,987 235,513,805 219,150,563 202,787,321 186,424,079

40,000,000 40,000,000 40,000,000 40,000,000 40,000,000
123,719,487 158,326,305 141,963,063 125,599,821 109,236,579
77,187,500 77,187,500 77,187,500 77,187,500 77,187,500
46,531,987 81,138,805 64,775,563 48,412,321 32,049,079
47,013,405 60,163,996 53,945,964 47,727,932 41,509,900
76,706,082 98,162,309 88,017,099 77,871,889 67,726,679

164,562,332 186,018,559 175,873,349 165,728,139 155,582,929

164,562,332 186,018,559 175,873,349 165,728,139 155,582,929

136,071,504 144,368,335 128,113,419 113,310,397 99,842,252

477,300,000 477,300,000 477,300,000 477,300,000 477,300,000

770,000,000 770,000,000 770,000,000 770,000,000 770,000,000
1,247,300,000 1,247,300,000 1,247,300,000 1,247,300,000 1,247,300,000
0.10 0.13 0.12 0.10 0.09
2.60 3.05 2.84 2.63 2.42

0.62 0.62 0.62 0.62 0.62

77,187,500 77,187,500 77,187,500 77,187,500 77,187,500
40,000,000 40,000,000 40,000,000 40,000,000 40,000,000
 2006 2007 2008 2009

2,965 2,965 2,965 2,965

23,376,060 23,376,060 23,376,060 23,376,060
26.1 25.4 24.7 24.0

610,115,166 593,751,924 577,388,682 561,025,440

366,419,741 366,419,741 366,419,741 366,419,741

73,634,589 73,634,589 73,634,589 73,634,589

440,054,330 440,054,330 440,054,330 440,054,330

170,060,837 153,697,595 137,334,353 120,971,111

40,000,000 40,000,000 40,000,000 40,000,000
92,873,337 76,510,095 60,146,853 43,783,611
77,187,500 77,187,500 77,187,500 77,187,500
15,685,837 (677,405) (17,040,648) (33,403,890)
35,291,868 29,073,836 22,855,804 16,637,772
57,581,469 47,436,259 37,291,049 27,145,839

145,437,719 135,292,509 125,147,299 115,002,089

1,262,928,987
145,437,719 135,292,509 125,147,299 1,377,931,075
87,600,865 76,486,363 66,406,510 686,270,913

477,300,000 477,300,000 477,300,000 477,300,000

770,000,000 770,000,000 770,000,000 770,000,000
1,247,300,000 1,247,300,000 1,247,300,000 1,247,300,000
0.08 0.06 0.05 0.04
2.20 1.99 1.78 1.57

0.62 0.62 0.62 0.62

77,187,500 77,187,500 77,187,500 77,187,500
40,000,000 40,000,000 40,000,000 40,000,000