economic study for elect gen 29-3-2011-merge

7/31/2019 Economic Study for Elect Gen 29-3-2011-Merge

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Economic Feasibility StudyFor Electricity Generation

from Sea Waves Energy


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Table of Contents

Preface

Project Description

Likely Project Clients

Chapter One: Sources of Electrical Energy Generation Used in theEgyptian Network

1.1 Hydraulic Generating Stations

1.2 Steam Generating Station

1.3 Internal Combustion Engines Generating Stations1.4 Compound Generation Stations

1.5 Wind Power Generating Stations

1.6 Solar Energy Generating Stations

1.7 Nuclear Generating Stations

Chapter Two: Estimation of the Investment Costs and Calculation of the

Elements of Income of the Project


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2.2.6. Liabilities Interests

2.2.7. Cost of After Sales Service

2.3. Estimation of Income

2.4 Costs of a Unit of Production

2.5. Project Income Statement

2.6 Project Cash flow Statement

Chapter Three: Indicators of the Project Economic Feasibility

3.1. The Present Net Worth for the Cash Flow

3.2. Payback Period for the Project

3.3. Internal Rate of Return

3.4. Measuring the Relative Advantage of the Project

3.4.1 Cost of Kw.h. Using Diesel Generator

3.4.2. Cost of government electrical power

3.4.2.1. The cost of domestic use

3.4.2.2. Prices for Commercial Uses3.4.2.3. Prices for Industrial Uses

3.4.3 Cost of Generated Electricity from the Project Station


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Introduction

PrefaceDuring summer Egypt becomes exposed to hot waves where ambient

temperature exceeds 450c during the day time and this forms a threat

of power station failures due to the excessive electrical demand loads

to operate air conditioning units to overcome such temperatures. This

is expected to increase to reach temperatures in the Gulf area during

the upcoming years.

The Egyptian ministry of Energy and electricity resorted to

disconnecting electrical power from some districts for periods of half

hour to one hour to prevent electrical network failures in Egypt. Also,

the ministry of Electricity asked the citizens to participate in solving

the electrical power crises during peak hours and also to reduceconsumption particularly in using air conditioning which is widely used

as a result of the large financial facilities offered by the producing

companies.

The electrical power demand in Egypt have increased such that the

peak loads increased from 3206 megawatt in 1980/1981 to 22750megawatt in 2009/2010 and this was accompanied by an increase in

generated power from 20 billion Kw h to 129 billion kilowatt hour in


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From the above, it becomes important to search for other sources of

generating electricity that is economical in production and utilization

by consumers.

Project Description

The invention is a device which transfer sea waves energy into

electrical energy and the can transform more than 90% of the sea

wave internal energy of the motion into kinetic energy whereas the

capability of the other sources in transforming the internal energy into

kinetic energy does not exceed 20%.

The invention obtained an Egyptian Patent number 27404 on

2/6/2010 and is registered internationally according to the following

1. PCT Application: International application number: PCT/EG2007/000014

Title: SEA WAVE ENERGY CONVERTER

Inventor: EL-Fikky, Alaa ElDeen Hassan (EG/EG); 6 El Negma

Street, Heliuopoliss, P.O. 11351, Cairo(EG).

International publication date 6 November 2008

International publication Number: WO 2008/131786 A1

International Patent Classification: F03B 13/18 (2006.01)


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Probable Customers for the Project

It is expected that the probable customers are from the projects closer tothe north coast where the sea waves are high and suitable to operate the

station and therefore it is possible to be useful for:

Coastal Villages

Coastal Hotels

Installation of stations for the distribution companies owned by theElectrical Distribution Holding Company as a giant project which will

cover the gap in the current demand between the loads and the

generated electrical energy.


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ChapterOne

Sources of Electrical Energy Generation Used

in the Egyptian Network

1.8 Hydraulic Generating Stations

These stations are in the High Dam, Aswan Dam, Esna and Naga Hamady.

The generation of electricity is based on the difference in water levels

between two points and by using the potential energy resulting from the

water fall, the turbines are rotated which in turn rotates the generator to

supply the electrical power.

The source of energy generated is the cleanest and cheapest source,

however, it cant be relied on greatly specially in summer as the powerformthese station relies on the irrigation water discharge which is determined by

the Ministry of Water Resources in addition to the negative effect of

temperature rise during the summer season as well as the aging of a large

proportion of these stations which has been in operation since the sixties.

Therefore the hydraulic power represents only 9.2% of the total power in

2009/2010.

The following table shows the saving in the use of fuel as a result of relying


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1.9 Steam Generating Station

Steam Power Stations rely on obtaining steam in its gaseous form(Superheated Steam) resulting from boiling water using natural gas. The

steam is ejected through valves which will rotate the turbine which then

rotates the generator. These stations use different types of the available

fuels like coal, liquid petroleum, and natural or synthetic fuel gas.

The steam stations are large and their costs are low relative to their largecapabilities and have the advantage of the possible use in desalination.

This dual function makes it useful in places where there is lack of non-

saline fresh water and therefore it is usually built closer to sea coasts. Also,

they are built near rivers. Stations are built closer to electrical energy

consumption centers to save the costs of constructing transmission lines.

In Egypt, these stations are in Shoubra Al Khaima west Cairo Korimat

Sidi Kirir Abu Qir while the consumption centers are in the cities and

populated areas, commercial centers and industrial areas. The stations of

this type generate 38.5% of the total power generated from generating

stations.

1.10 Internal Combustion Engines Generating Stations

Power plants using Internal Combustion use fuel oil or natural gas which


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1.12 Wind Power Generating Stations

Egypt enjoys a relatively steady wind activity and a speed reaching (8 to 10m/s) in the Suez gulf area and the red sea coast between Ras Ghareb and

Safaga as well as in Sharq El Owinat. Wind Power generating plants have

been installed in Hurgada and Zafarana for a total power of 145 Mw, saving

up to 125 thousand tons of equivalent petroleum fuel per year which

reflects positively on the economics of the renewable energy projects.

The total electrical power generated from the wind power plants reach 1122

Mw.h (0.08% of the power generated from other plants) and this has a

running cost of 172 Million pounds where the average cost is EGP 0.15 per

kw.h. from Zafarana plant and 1.07 from Hurgada and is being sold to

distribution companies at EGP 0.142 per kw.h. where the Government

subsidize the price difference. The New and Renewable EnergyOrganization incurred losses of EGP 129 million during 2009/2010 after the

addition of EGP 241.5 million to its expenses, being the interests on debts

resulting from financing its investments using local and external finances,

which reflects the high costs of these investments which exceeds EGP 2

billion and contributes only 0.08% of the generated energy.

1.13 Solar Energy Generating Stations

Th b f h f hi i th t i l f i l


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The difference in the nuclear power stations is that instead of the chamber

where the fuel ignites there is a nuclear reactor where heat is generated as

a result of uranium atom splitting due to the impacts of the electrons

moving in the outer layer of the atom. This huge thermal energy is used in

boiling water in water boilers and evaporating it into a very high pressure

and temperature steam. Egypt started to construct the first nuclear reactor

in " EL Dabaa " .

Distribution of generated power according to the type of generation (Kw.h.)

Mw.h.

Hydraulic Power Plants 12,862

Thermal Power Stations distributed as follow:

Steam 53,520

Gas 11,429

Combined Cycle 46,621

111,576

Wind Generated Energy station in Zafranaa Kw.h 1,122

Power purchased from the industrial companies 26

Power Generated from private sector BOOT 13,184


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Chapter Two

Estimation of the Investment Costs andCalculation of the Elements of Income of the Project

In this chapter, the investment costs for the project are estimated in order

to reach the required capital necessary to start the project then measuring

the elements of costs of the product followed by measuring the income

according to the volume of expected demand from the product of theproject in order to determine the benefits from the project.

2.1. Project Investment Costs

2.1.1. Estimation of the Cost of Adminstration Building:

It is a place characterized by easily accessible and is located in the middleof a classy and an area of 200 m and estimated price per meter

comprehensive finishes and trims the necessary and appropriate about

4000 pounds, total value 800.000 L.E

2.1.2. Equipment and Tools:

The project relies on installing production line to assemble the purchased

equipment components procured from the suppliers and hence needs the

f ll i i d l


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2.1.3. Transportation

The project needs Transportation Cost - 2 Toyota Busses, 14 PassengerEach. a total cost of EGP 440.000

Adminstration Building 800.000

Equipment and tools 61.250

Transportation 440.000

Total 1.301.250

Add: Cash for starting the activities 6000.000

Add: 10% contingency for estimation errors 130.125

Total Investment Cost 7.431.375

2.2. Project Running Costs

The running costs consist of:-

2.2.1. Labor Cost

Th t d ti t th t di t th l l f i d


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Worker

Unskilled(Ordinary) Worker 2 Average 3 1,000 2,000

MarketingEngineer

3 High 5 3,000 9,000

Security Person 2 High 3 750 1500

Drivers 2 High 5 1,200 2400

Total 33.900

Salaries have been calculated for the period of the study years according tothe following assumptions:

Average rate of yearly increase in salaries is 15%. Medical Care for workers according to regulations for health

insurance.

Hours of daily work (one shift) is 8 hours including one hour rest.

2.2.2. Cost of Production Components


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2.2.3. Cost of Station Building

This is the building which houses the equipment which transforms themotion energy extracted from the wave motion with a total number of 56

pieces in addition to the generator which transforms the mechanical motion

into electrical power.

The building is concrete, prepared to install the equipment and is

constructed of sea water and environment resisting materials to resist alsothe weather conditions in coastal areas. The building will be constructed

inside the sea at a distance between 5 to 50m from the shore over an area

of 400 Square meters, at 4 m height above sea level. The cost per square

meter for these specifications including finishes and preparations for

installing the equipment is estimated at EGP 3000 per square meter with a

total of EGP 1,200,000

2.2.4. Other Production Requirements

Building Maintenance

- For administrative buildings EGP 20 per Square meter, i.e. a total

of EGP 8000 for 400 Square meters.- For production buildings EGP 5 per Square meter, i.e. a total of

EGP 4000for 800 Square meters.


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2.2.5. Cost of Packing:

Packing materials consists of pallets (for every two units) and woodestimated at 0.02% of the selling value of a unit of production according to

the average cost of packing of equipment.

2.2.6. Liabilities Interests

The study estimates that the project owner will borrow 30% of the

investment costs from banks at a rate of 16% which include the cost of:

interest, commission of highest debit, government relative stamps fee, and

that the loan will be paid from the project income on 5 yearly installments,

starting from the second year of its operation.

2.2.7. Cost of After Sales Service:

These are the maintenance services which the project is obliged to do

during the year after selling and is estimated at 5% of the selling value of

the sold units.

2.3. Estimation of Income

There is no determined price for selling the product as there are no similar


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Therefore it is possible to start the process of supply and installation of

several stations in different locations and hence continue in the process of

producing equipment and the related processes to absorb the fixed costs of

the project.

The number of stations which the project can produce and sell each year

can be estimated to be TWO stations in the first year, rising gradually in the

following years.

2.4 Costs of a Unit of Production

Table 3 shows the unit production cost which includes the direct variable

cost and the previously estimated fixed cost. The portion of cost for the unit

of production from the fixed cost is estimated based on the average

available energy for the project through the years of its useful life, less 20%

as a contingency which represents the ability of the project to sell all its

planned products and therefore the fixed cost can be spread over 6

stations per year.

2.5. Project IncomeStatement

Table 4 in the attachment shows the project income in 8 years and the


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understanding the liquid cash in the project during the years of its work and

also the exposure of any form of unbalance in the financial structure of the

project. It also gives the scenarios for the decrease in income and its effect

on the project obligations.


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Chapter Three

Indicators of the Project Economic Feasibility

This chapter discusses calculating the economic indicators of the project

which expresses the financial status of the project during a future financial

period as determining the payback period for the owner to get the invested

money back from the project profit, the present value for cash flow and the

internal rate of return.

3.1. The Present Net Worth for the Cash Flow

Is the present value of the cash flow of the project for a future period i.e.

the present purchasing power of the cash flow that the project will gain inthe future. The value of one EGP which will be gained in 2013 will be

equivalent to EGP 0.23 in 2020 and can be calculated from the following

formula:

PV = (1/(1*1+D)k)

Where A = Cash Flow, D = Discount Rate and K = Number of years

The discount rate is used with a 20% to be equivalent to the expected


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The data of the present net worth table indicate that the project can pay

back the capital invested (EGP 1.431 million) if the assumed sales values

in the study are achieved, in a period of one and half year. If the payback

period is calculated on the bases of discounting the real achieved values

during the years, we find that the payback period not to exceed the fourth

year of operation.

3.3. Internal Rate of Return

The Internal Rate of Return isthe discount rate for cash flow which makes

the total present value for the net cash flow equal to the investment cost.

Table numbershows that the Internal Rate of Return is approximately

116% .

3.4. Measuring the Relative Advantage of the Project

The relative advantage of the project is represented in the comparison

between the investment cost and the running cost of the project with the

alternatives of obtaining the same power from:

Purchasing a 1000 kw.h. generator

Or Government Electrical power

This part answers the following question: how much is the return that the


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Total Investment Cost 3.550.000

RunningCosts

Fuel: 100 liter/hour x EGP 1.1 per liter = EGP110/hour

For two generators = EGP 220/hour

220

Oil consumption at a rate of 100 (liter/250 hour)

x EGP 20 /Liter

x 2 Generators=EGP 16/hour

16

Periodic Maintenance and spare parts at anaverage of EGP 500/250 hours of operation =EGP 2 X 2Generators=4 per hour

4

Depreciation at a rate of 10% yearly and thismeets the Useful life of the equipment

40.5 per

hour

Cost of one hour work of the generators 280.50/hour

Cost of Kw.h 0.280

3.4.2. Cost of government electrical power

The cost of power sold to different users:


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3.4.2.2. Prices for Commercial Uses

Kw.h/month EGP/Kw.h

First 100 0.24

Next 101 to 250 0.36

Next 251 to 250 0.46

Next 601 to 1000 0.58

More than 1000 0.60

3.4.2.3. Prices for Industrial Uses

Peak TimeEGP/Kw.h Non PeakEGP/Kw.h

First: Industries Requiring High Consumptionof Energy. (Cement Iron Aluminum Cupper-Fertilizers Petrochemicals)

High Voltage 21.7 0.226

Ordinary Voltage 26.3 0.395Medium Voltage 35.8 0.538

Second: Glass Ceramic - Porcelain


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or times when the waves are inadequate to operate the station the

following will be the results:

Type ofCost

Cost Elements Value

Capital

Costs

Costs of purchasing 1000 kw.h. station

complete with all connections andpreparations inside the station

+ Standby Generator

4.800.000

1.775.000

Total Capital Costs 6.575.000

Running

Costs

Cost of maintenance contract with thesupplying Company after the first year of

operation complete with the service andspare parts EGP 50,000 / year/365days/24 hours = EGP 5.7/hour EGP 5.7 /hour

Depreciation at 10% yearly and thismatches with the end of the useful life ofthe equipment

Therefore, Depreciation per hour =480.000/365days/24hours = EGP 54.80

/hourEGP

54.80/hour


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Therefore the final result in the case when the client consumes 600.000

kw/.h per month

thecase ofhotelaccountableby 45piasteirs/kw

Using theGovernment

Electrical Power inCommercial +

Standby Generator

Using 2 Diesel

Generators to operatefor 24 hours

Using the ProjectStation + Diesel

Generator covering30% of operation

EGP 211.680 EGP 168.600 EGP 47.200

The calculations are based on the following:

Cost of using Government electrical power = (420.000 Kw.h x

EGP 0.45) + (180.000 kw.h x EGP 0.126) = EGP 211680

Cost of Operating 2 Generators (one at a time, swapping oneanother) 12 hours each, the cost of operation = (Fuel EGP

220/hour) + (Oil EGP 16 /hour) + (maintenance EGP 4/hour) +


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If we assume that the age of plant of the proposed project 20 years, the

volume of savings per year is about 2.11 million pounds and the

customer can recover its expenses at the station after 2.4 years

It is thus clear that the project achieves the client's big advantage in

operating cost compared to other alternatives

As far as the government is concerned, the ability of the project to generate

electricity and the coefficient of transformation of energy are consideredadvantages, as in the overall scheme, the objective is to cover the gap in

electrical power loads.


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Item Area Unit Cost Total

Adminstration Building 200 m2 200 4,000 800,000

Total Cost of Buildings and Construction 800,000

Wooden (Oak) Benches 1.5 x 3 m 5 1,600 8,000

German or Italian Tools Set 15 750 11,250

Adminstration Furniture 1 30,000 30,000

Comuter Sets 4 3,000 12,000

Total Cost of Buildings and Construction 61,250

Transportation Cost - 4 Toyota Busses, 14

Passenger Each2 220,000 440,000

Total Investment Costs for the Project 1,301,250

Capital Equipment (Used in Production

Table "1" Project Total Investment Costs


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Parts Unit uantit Source Unit Cost Value

Motion Guide Rails Steel

Sections 12 cm

m 8 Egypt 50 400

Flanges for Fixing the Steel

Beams in the Concrete Columns

no 20 Egypt 6 120

Bolts for Fixing the Steel

Sections in the Concrete

Columns

no 40 Egypt 1 40

Moving Transformation Box

Steel Sides of the Box

800x400x5 mm

Kg 30 Egypt 6 180

Base and Cover of the box 200x

800x 10 mm

Kg 30 Egypt 6 180

First: Cost of the Components of an Apparatus for Transformation of Energy

Transformation of Power 18 - 30 kw.h

Table No "2" Direct Cost of Protioon of Electrical Generation Station

Motion Guides


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Rotation Unidirection Fixation

Unit

no 2 Foreign 1200 2400

Motion Directing Gears inside

the Box Fixed to the Motion

Direction Fixation Units

no 4 Egypt 120 480

Bolts for for Fixing the Rotation

Motion Direction Unit

no 20 Egypt 1 20

Steel Rollers to Maintain the

Chain Position in Side the Box

no 10 Egypt 25 250

Steel Rollers Fixing Components no 20 Egypt 0.2 4

Motion Transmission ShaftBearin Fixed in the Box

no 1 Egypt 650 650

Bolts fo Fixing the Bearing no 8 Egypt 1 8

Impact Receing Flanges in Top

and Bottom of the Box

no 2 Egypt 140 280


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Sping Guide Shaft Fixed in the

Flange

no 3 Egypt 55 165

Motion Transmission Gears

Lower End Gear to Fix the Chain

Vertically

no 1 Egypt 120 120

Main Tranmission Gear no 1 Egypt 120 120

Rotation Unidirection Fixation

Unit with the Main Gear Fixed


Motion Transmission Patrs

Main Shaft for Motion

Transmission from the Float to

the Transformation Mobile Box

m 4 Egypt 60 240

Main Rotation Shaft Connected

to Main Motion TransmissionGear

m 0.5 Egypt 220 110

Transmission Gears from the the no 3 Egypt 200 600


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Connection with Several Axis

Fixed at the End of the Rotating

Shaft


Bearings for Rotatin Shafts

Including the Roller Bearings

no 2 Egypt 120 240

Chain Size 60 m 20 Foreign 40 800

Float

Float 2.5 m Diam. And 2 m

height

Kg 1100 Egypt 5 5500

Negative Pressure ChamberFixed below the Float 2m Diam

and 2.5m Height

Kg 600 Egypt 5 3000

Axial Connection to Fix the

Vertical Transmission Shaft

Connected to the Moving Box

no 1 Egypt 550 550

Chemical Treatment and

External Surface Paint of the

Float

1 Egypt 1500 1500


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Item Value

First: Variable Cost of Production

Direct Production Components 2,397,304

Packing Materials 19,200

Equipment and Transport Maintenance 10,025

Building Maintenance 4,000Cost of After Sales Services for Sold Stations 480,000

Vehicle Fuel 79,200

Cost of Station Building 1,200,000

Total Variable Production Cost 4,189,729

Second: Fixed Production Cost

Salaries 101,700

Debit Interests 89,177

Depreciation of Fixed Assets 22,531

Total Fixed Production Cost 213,408.00

Total Production Costs for the Station 4,403,137

add : 25% Adminstrative costs 1 100 784

Table "3" Cost of Production Unit


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Item 2013 2014 2015 2016 2017 2018 2019 2020

No of sold production units 2 3 5 7 10 12 15 20

Price of unit of production 4,800,000 4,800,000 4,800,000 5,040,000 5,292,000 5,556,600 5,834,430 6,126,152

Total selling Value 9,600,000 14,400,000 24,000,000 35,280,000 52,920,000 66,679,200 87,516,450 122,523,030

Direct Production Requirements 4,794,586 7,191,878 11,986,464 16,781,050 23,972,928 28,767,514 35,959,392 47,945,856

Filling and Packing Material 19,200 28,800 48,000 70,560 105,840 133,358 175,033 245,046

Maintenance of Equip. and Transport 10,025 12,531 15,038 20,050 27,569 35,088 40,100 45,113

Buildings Maintenance 4,000 4,200 4,410 4,631 4,862 5,105 5,360 5,628

Cost of after sales Servicing Sold Stations 480,000 720,000 1,200,000 1,764,000 2,646,000 3,333,960 4,375,823 6,126,152

Vehicles Fuel 79,200 81,576 84,023 86,544 89,140 91,815 94,569 97,406

Cost of Station Building 2,400,000 3,960,000 6,600,000 9,240,000 13,200,000 15,840,000 19,800,000 26,400,000

Total of variable Production Cost 7,787,011 11,998,986 19,937,935 27,966,834 40,046,339 48,206,839 60,450,277 80,865,200

Wages and Salaries 406,800 467,820.0 537,993.0 618,692.0 711,495.7 818,220.1 940,953.1 1,082,096.1

Debit Interests 356,706 356,706 285,365 214,024 142,682 71,341 - -

Depreciation of Fixed Assets 90,125 90,125 90,125 90,125 90,125 90,125 90,125 90,125

Total Fixed Production Costs 853,631 914,651 913,483 922,841 944,303 979,686 1,031,078 1,172,221

Total Production Costs 8,640,642 12,913,637 20,851,418 28,889,675 40,990,642 49,186,525 61,481,355 82,037,422

Net Result 959,358 1,486,363 3,148,582 6,390,325 11,929,358 17,492,675 26,035,095 40,485,608

Income Taxes 191,872 297,273 629,716 1,278,065 2,385,872 3,498,535 5,207,019 8,097,122

Net After Taxes 767,487 1,189,091 2,518,866 5,112,260 9,543,486 13,994,140 20,828,076 32,388,487

Table 4: Project Income Statement

First: Income

Second: Cost

Third: Net Project Results

Second: Fixed Production Costs

First:Variable Production Cost


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Item 2013 2014 2015 2016 2017 2018 2019 2020

Net Profit After Tax 767,487 1,189,091 2,518,866 5,112,260 9,543,486 13,994,140 20,828,076 32,388,487

Add Annual Depreciation 90,125 90,125 90,125 90,125 90,125 90,125 90,125 90,125

Subtract installement of Loan Pay 445,833 445,833 445,833 445,833 445,833

Net Cash Flow 857,612 833,383 2,163,158 4,756,552 9,187,778 13,638,432 20,918,201 32,478,612

Item 2013 2014 2015 2016 2017 2018 2019 2020

Net Cach Flow 857,612 833,383 2,163,158 4,756,552 9,187,778 13,638,432 20,918,201 32,478,612

Rate of Return 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233

Net Present Value of Cash Flow 714,676 578,738 1,251,828 2,293,862 3,692,362 4,567,612 5,837,887 7,553,517

Average Present Value for Net Cash Flow

2013 2014 2015 2016 2017 2018 2019 2020

( 1+D )K 2.169 4.705 10.204 22.133 48.006 104.126 225.848 489.865

1/( 1+D )K 0.461 0.213 0.098 0.045 0.021 0.010 0.004 0.002

PVE 395,395 177,144 211,987 214,909 191,387 130,981 92,621 66,301

sum

R

3,311,310.20

1,480,724

2.169

Table No "7" internal rate of return"

Table No "5" Cash Flow Statement

Table No "6" Present Net Value For Incoming Cash Flow

Cash Flow

economic study for elect gen 29-3-2011-merge

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