MSc defence by Chagaka John Kalimbia

Chagaka Kalimbia, MSc Fellow in Sustainable Energy Engineering at Reykjavík University will defend his MSc project on Thursday 11 April, 2019 at 13:00 at Reykjavík University, room M325.

The title of the project is:

Financial modelling and analysis of power project finance. A case study of Ngozi geothermal power project, southwest Tanzania

Chagaka's supervisor:

Páll Jensson, Professor, Reykjavík University.

The external examiner will be Bjarni Pálsson, Manager Geothermal Department, Landsvirkjun.

Everyone's welcome to attend.

Abstract:

This study undertook Excel-based financial modelling which entailed construction of an analytical instrument that performs detailed financial and economic analysis for a 30 MW Ngozi geothermal power project investment over its economic useful life. The new bankable project is transacted using project finance structure with a 70% debt share and 6% interest arrangement in long-term debt financing. The model was built to quickly process a comprehensive list of project input assumptions to establish investment key performance indicators (KPIs) from the detailed analysis of projected cash flows. The results of the analysis are useful to lenders, sponsors and off-taker in evaluating the attractiveness of the investment and subsequently facilitate making financial decisions. The deterministic KPIs results were subjected to the risk analysis to mirror a range of data variations and thus account for future uncertainties of the cash flows. The probabilistic estimation of project CAPEX made with a 90% confidence level amounts to 129 million USD. The project required a total of 21 million USD to meet the lender's fees, interest during construction and initial funding of reserve accounts. The project yielded an equity and project NPV of 24 million USD and 62 million USD respectively. The IRR of the project was 10% > calculated WACC of 6% while the IRR of equity was 17% > 10% of expected return on equity. The model yielded lender’s ADSCR of > 1.4, LLCR of > 2.1 and PLCR of 1.9, all cover ratios above their minimum requirement indicating the robustness of the project on its ability to service and repay debt. The project produced the LCOE of 60 $/ MWh. The model analysis proved the viability of power project investment to all project stakeholders. The risk analysis indicated the price of electricity and energy production to be the most sensitive parameters to the KPIs results.