Oryx Electricity Generation Project (BOOT)
Capital Expenditure during construction period: 174 OMR/MWH (megawatt-hour). Depreciation on straight line basis over ten years such that book value at the end of ten years is zero.
Construction Period - 2 years: 40% in year 1 and 60% in year 2. Interest rate on construction loan is 12% per year. Commitment Fee charged by the bank is 0.5% per annum. (Assume that first year construction cost is spread equally over the 12 months in the first year, and second year construction cost is spread equally over the 12 months in the second year).
After construction the project will generate and sell electricity for ten years.
Revenue 57 OMR/MWH (annual revenue growth 1.5 % base case, can vary between 1.5% to 2.5%). MWH means megawatt per hour. Assume a year has 365 days and day has 24 hours
Input costs plus operating expenditure: 4 OMR/MWH ( annual inflation 1% base case, can vary between 1 to 3%)
Electricity generation capacity: 300 MWH. Expected Capacity utilization 90%.
Tax rate 20%. After ten years the project will be transferred to the government free of charge.
Calculate CFO, EBIT, EBITDA, NPV and IRR for the base case.
DSCR (Debt Service Coverage Ratio) should be more than 1.5 in every year of operation. Sponsors expect a minimum Equity IRR of 20% and Lenders expect a minimum Debt IRR of 14%
Estimate the optimal capital structure for this project ?
Sensitivity Analysis: Show the behavior of CFO, EBITDA and Debt Service Coverage Ratio under different scenarios. Present using graphs.
Prepare a three page report showing your main findings and conclusions. Attach printed copies of Excel worksheets and graphs.