Escondido Power Plant - Case study

Group Members:
MS15A037
MS15A039
MS15A047
MS15A049
MS15A056
MS15A068

Prerana Gautam
Ragini Jain
Santhosh Raghavan
Saranraj S P
Srilakshmi S
Vivek Ravichandran

Assumptions:
1. Revenue and variable cost is calculated based on the availablity of 94% (of 500 MW) of power capa
2. Construction cost after 18 months (263.126 million dollars) is taken as a one time cash outflow at th
3. Inflation is considered only for Fixed cost. In the case given the inflation component is asked to be c

Given Data
PowerPlant Capacity
500 MW
Term
20 Years
Initial Revenue
$28.00 Per MWh
Heat Rate
7 MMBtu/MWh
Dispatch Guarantee
100%
Cash Balance/Working Capital
$15,000,000
Availability
94%
Credit Suisse First Boston Construction Cost
Overall Plant Cost
$263,126,000.00
Construction Cost
$250,000,000.00
Construction Cost Term
18 Months
Three Month LIBOR
5.13%
Interest Rate
7.1300%
Debt
60%
Equity
40%
Total Liabilities
$278,126,000.00
Total Equity
$111,250,400.00
Enron Equity (50%)
$55,625,000.00
GE Equity (50%)
$55,625,000.00
Total Debt
$166,876,000.00
CFS Boston Debt (80%)
$133,501,000.00
IFC Debt (20%)
$33,375,000.00
CFS and IFC Debt Cost
Three month LIBOR
5.13%
Interest Rate
7.6300%
Amortization Schedule
15 Years
Depreciation - Straight Line 20 Years
$13,156,300.00 Per Year
Salvage Value
$200,000.00 Per MW

Corporate Tax Rate

Cost of Capital

40%
12%

% (of 500 MW) of power capability

s a one time cash outflow at the starting of the project
on component is asked to be considered for fixed cost

Years
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Fixed Cost
$10,000,000.00
$10,160,000.00
$10,322,560.00
$10,487,720.96
$10,655,524.50
$10,826,012.89
$10,999,229.09
$11,175,216.76
$11,354,020.23
$11,535,684.55
$11,720,255.50
$11,907,779.59
$12,098,304.07
$12,291,876.93
$12,488,546.96
$12,688,363.71
$12,891,377.53
$13,097,639.57
$13,307,201.81
$13,520,117.03
Net Present Value of Project
NPV of ENRON

Variable Cost
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$6,587,520.00
$42,609,295.26
$8,755,862.06

Fuel Cost
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20
$53,692,405.20

Total Cost
$70,279,925.20
$70,439,925.20
$70,602,485.20
$70,767,646.16
$70,935,449.70
$71,105,938.09
$71,279,154.29
$71,455,141.96
$71,633,945.43
$71,815,609.75
$72,000,180.70
$72,187,704.79
$72,378,229.27
$72,571,802.13
$72,768,472.16
$72,968,288.91
$73,171,302.73
$73,377,564.77
$73,587,127.01
$73,800,042.23

Revenue
$115,281,600.00
$117,126,105.60
$119,000,123.29
$120,904,125.26
$122,838,591.27
$124,804,008.73
$126,800,872.87
$128,829,686.83
$130,890,961.82
$132,985,217.21
$135,112,980.69
$137,274,788.38
$139,471,184.99
$141,702,723.95
$143,969,967.53
$146,273,487.01
$148,613,862.81
$150,991,684.61
$153,407,551.57
$155,862,072.39

Gross Margin
$45,001,674.80
$46,686,180.40
$48,397,638.09
$50,136,479.10
$51,903,141.57
$53,698,070.64
$55,521,718.57
$57,374,544.87
$59,257,016.39
$61,169,607.46
$63,112,799.98
$65,087,083.59
$67,092,955.73
$69,130,921.82
$71,201,495.37
$73,305,198.10
$75,442,560.08
$77,614,119.84
$79,820,424.56
$82,062,030.16

EAT
$27,001,004.88
$28,011,708.24
$29,038,582.85
$30,081,887.46
$31,141,884.94
$32,218,842.38
$33,313,031.14
$34,424,726.92
$35,554,209.84
$36,701,764.48
$37,867,679.99
$39,052,250.15
$40,255,773.44
$41,478,553.09
$42,720,897.22
$43,983,118.86
$45,265,536.05
$46,568,471.90
$47,892,254.74
$49,237,218.09

Depreciation
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00
$13,156,300.00

Dep. Tax Savings

$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00
$5,262,520.00

Interest
$12,732,638.80
$11,883,796.21
$11,034,953.63
$10,186,111.04
$9,337,268.45
$8,488,425.87
$7,639,583.28
$6,790,740.69
$5,941,898.11
$5,093,055.52
$4,244,212.93
$3,395,370.35
$2,546,527.76
$1,697,685.17
$848,842.59
$0.00
$0.00
$0.00
$0.00
$0.00

Interest Tax Savings

$5,093,055.52
$4,753,518.49
$4,413,981.45
$4,074,444.42
$3,734,907.38
$3,395,370.35
$3,055,833.31
$2,716,296.28
$2,376,759.24
$2,037,222.21
$1,697,685.17
$1,358,148.14
$1,018,611.10
$679,074.07
$339,537.03
$0.00
$0.00
$0.00
$0.00
$0.00

Accounts Receivable
$0.00
$6,316,800.00
$6,417,868.80
$6,520,554.70
$6,624,883.58
$6,730,881.71
$6,838,575.82
$6,947,993.03
$7,059,160.92
$7,172,107.50
$7,286,861.22
$7,403,451.00
$7,521,906.21
$7,642,256.71
$7,764,532.82
$7,888,765.34
$8,014,985.59
$8,143,225.36
$8,273,516.97
$8,405,893.24
$8,540,387.53

Change in Acc. Recev

-$6,316,800.00
-$101,068.80
-$102,685.90
-$104,328.88
-$105,998.14
-$107,694.11
-$109,417.21
-$111,167.89
-$112,946.57
-$114,753.72
-$116,589.78
-$118,455.22
-$120,350.50
-$122,276.11
-$124,232.53
-$126,220.25
-$128,239.77
-$130,291.61
-$132,376.27
-$134,494.29

Accounts Payable
$0.00
$3,850,954.81
$3,859,721.93
$3,868,629.33
$3,877,679.24
$3,886,873.96
$3,896,215.79
$3,905,707.08
$3,915,350.24
$3,925,147.69
$3,935,101.90
$3,945,215.38
$3,955,490.67
$3,965,930.37
$3,976,537.10
$3,987,313.54
$3,998,262.41
$4,009,386.45
$4,020,688.48
$4,032,171.34
$4,043,837.93

Change in Accounts Payable

$3,850,954.81
$8,767.12
$8,907.40
$9,049.92
$9,194.71
$9,341.83
$9,491.30
$9,643.16
$9,797.45
$9,954.21
$10,113.48
$10,275.29
$10,439.70
$10,606.73
$10,776.44
$10,948.86
$11,124.04
$11,302.03
$11,482.86
$11,666.59

Operating CF
Financing CF
-$263,126,000.00 $166,876,000.00
$34,890,735.21
-$11,125,066.67
$37,935,445.05
-$11,125,066.67
$38,621,305.80
-$11,125,066.67
$39,323,572.92
-$11,125,066.67
$40,042,508.90
-$11,125,066.67
$40,778,380.45
-$11,125,066.67
$41,531,458.54
-$11,125,066.67
$42,302,018.47
-$11,125,066.67
$43,090,339.95
-$11,125,066.67
$43,896,707.17
-$11,125,066.67
$44,721,408.86
-$11,125,066.67
$45,564,738.37
-$11,125,066.67
$46,426,993.74
-$11,125,066.67
$47,308,477.79
-$11,125,066.67
$48,209,498.17
-$11,125,066.67
$49,130,367.48
$0.00
$50,410,940.32
$0.00
$51,712,002.33
$0.00
$53,033,881.33
$0.00
$114,376,910.39
$0.00

Salvage Value (Investing CF)

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$60,000,000.00

Net Cash Flow

-96,250,000.00
23,765,668.54
26,810,378.38
27,496,239.13
28,198,506.25
28,917,442.23
29,653,313.79
30,406,391.87
31,176,951.81
31,965,273.29
32,771,640.51
33,596,342.19
34,439,671.70
35,301,927.07
36,183,411.12
37,084,431.51
49,130,367.48
50,410,940.32
51,712,002.33
53,033,881.33
$114,376,910.39

Cash Balance
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00
15,000,000.00

Dividend Payable
8,765,668.54
11,810,378.38
12,496,239.13
13,198,506.25
13,917,442.23
14,653,313.79
15,406,391.87
16,176,951.81
16,965,273.29
17,771,640.51
18,596,342.19
19,439,671.70
20,301,927.07
21,183,411.12
22,084,431.51
34,130,367.48
35,410,940.32
36,712,002.33
38,033,881.33
99,376,910.39

Enron Cash flow

-55,625,200.00
4,382,834.27
5,905,189.19
6,248,119.57
6,599,253.13
6,958,721.12
7,326,656.89
7,703,195.94
8,088,475.90
8,482,636.64
8,885,820.25
9,298,171.10
9,719,835.85
10,150,963.54
10,591,705.56
11,042,215.75
17,065,183.74
17,705,470.16
18,356,001.16
19,016,940.66
49,688,455.19

PV of OCF
-$209,762,436.22
$24,834,536.15
$24,108,661.14
$21,914,766.11
$19,922,545.84
$18,113,197.48
$16,469,703.93
$14,976,660.30
$13,620,117.80
$12,387,443.05
$11,267,191.39
$10,248,992.66
$9,323,448.23
$8,482,038.18
$7,717,037.52
$7,021,440.59
$6,388,892.85
$5,853,051.80
$5,360,816.00
$4,908,795.46
$9,452,395.01
$42,609,295.26

PV of Enron Cash Flow

-$55,625,200.00
$3,913,244.88
$4,707,580.67
$4,447,288.09
$4,193,944.67
$3,948,565.24
$3,711,912.40
$3,484,534.64
$3,266,799.76
$3,058,923.81
$2,860,996.31
$2,673,002.00
$2,494,839.77
$2,326,338.85
$2,167,272.81
$2,017,371.53
$2,783,701.13
$2,578,701.53
$2,387,006.87
$2,207,995.69
$5,151,041.41
$8,755,862.06

Loan
Payments
Annual Interest Rate
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

$166,876,000.00
15
0.0763
Payment
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67
11,125,066.67

Interest
12,732,638.80
11,883,796.21
11,034,953.63
10,186,111.04
9,337,268.45
8,488,425.87
7,639,583.28
6,790,740.69
5,941,898.11
5,093,055.52
4,244,212.93
3,395,370.35
2,546,527.76
1,697,685.17
848,842.59

Remaining Principal
155,750,933.33
144,625,866.67
133,500,800.00
122,375,733.33
111,250,666.67
100,125,600.00
89,000,533.33
77,875,466.67
66,750,400.00
55,625,333.33
44,500,266.67
33,375,200.00
22,250,133.33
11,125,066.67
0.00