Finance

Lecture # 6

Jan H. Jansen

E-mail: jan.jansen@han.nl

• Guest lecture ASN BANK (2011.10.20)• Main topics• Conclusion

Wind energy

Minor Wind Energy Project Management

Project

Finance

Law

Supply Chain Management

Construction

Mechanical Engineering

Energy

Programme

Lecture Topic

1 Overview Energy Market

2 Annual Reports & Management Accounting

3 Management Accounting &Project Financials

4 Project Financials

5 Case study WEPM, DOSIT Methodology, Risk & Return

6 Case study WEPM (self study)

7 Case study WEPM & Annual Report, Business Model

8 Written Exam

Plan the financial chapter

• Planning of the financial chapter– Data & Assumptions– Cash Outflow– Cash Inflow– Calculations

• Financial criteria: IRR, NPV, ROI, BET & DSCR • Friday morning in period 2 consultancy

– Yellow Hurricane (09.00 – 09.20)– Blue Energy (09.30 – 09.50)– Green Air (10.10 – 10.30)– Red Viventorum (10.30 – 10.50)– Black Offshore(11.10 – 11.30)

Structure Excel model

Assumptions

Data

Cash Outflows

Cash Inflows

Results

Recap lectures # 1 - 5

Lecture 1

(Wind) Energy MarketAnnual ReportsFinancial Ratios

Strategic Information

What is our ambition?

• Recognizing trends in the Wind Energy market• Analyzing an annual report of a wind energy

supplier;• Constructing an cash flow overview of wind

energy project;• Establish risk awareness (project- , exchange -,

interest rate- and political risks)• Decision criteria for an investment in a wind

energy project (PBP, ROI, NPV, IRR and BET).• Financially sourcing a wind energy project.

Annual reports• Market & Strategy• Corporate Governance• Corporate Social Responsibility (CSR)• Sustainability• Financial ratios– Profitability– Liquidity– Solvency– Activity

Lecture 2

ETOTCOQC

Lecture 3

Exposures(ER, IR, INFL, EP etc)

Excel model

Lecture 4

Project Finance

Principles of Project Finance, Yescomb

Lecture 5

Risk & Return

DOSIT Methodology

Guest lectures• Green Giraffe Bank• ASN BANK

Structure Exam• Assignment 1 (25%)

– Excel Investment Model– Theoretical concepts lectures 1 - 5

• Assignment 2 (25%)– Financial Analysis Wind Energy Sector (Annual Reports)– Theoretical concepts lectures 1 - 5

• Assignment 3 (25%)– Analysis Wind Energy Market & Sector – Theoretical concepts lectures 1 - 5

• Assignment 4 (25%)– Guest lectures Green Giraffe Bank & ASN Bank– Theoretical concepts lectures 1 - 5

Project Information

• Gazturbeneg SA (Vesoul)– €urozone based SME company in France– Producing & selling components for industrial

gas turbines in a B2B market• Investment budget of € 20 million• Production plant or Distribution Centre (in

combination with a warehouse and sales department) outside the €urozone – Economic life: 20 years– Annual net cash flows € 2.5 million (in foreign

currencies)

What is your job?

• You have to write an advice for the management team of Gazturbeneg SA to invest or not

• You have to present and defend your report in a management team (MT) meeting

Financial appendix (in MS Excel)

• Financial data– Exchange rate (€ 0,75 / $ 1)– Interest rate (EU: 2% and USA: 3%)

• Investment: € 20 million– Equity: 30% (Parent company)– Debt: 70% (Bank Loan)

• Duration: 20 years• Cash Inflows– € 2.5 million in year 1 (in foreign currency)

• Investment in USA (example)

Structure Excel model

• Data & Assumptions• Calculations• Results– Payback Period– ROI– NPV– IRR– Break Even Time