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Feasibility Report Project Cost APPRAISAL

This document provides details on the preparation of a feasibility report for a project cost appraisal. It discusses the key components of the capital cost estimate including works cost, overheads, interest during construction, and working capital margin. Sample calculations are also provided for working out interest during construction and typical examples of cost breakdowns for various project components like civil works, mechanical works, electrical works, and coal transportation system. The cost of energy analysis includes financial cost of energy, economic cost of energy, and levelized cost of energy.

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Ezhil Vendhan Palanisamy
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147 views30 pages

Feasibility Report Project Cost APPRAISAL

This document provides details on the preparation of a feasibility report for a project cost appraisal. It discusses the key components of the capital cost estimate including works cost, overheads, interest during construction, and working capital margin. Sample calculations are also provided for working out interest during construction and typical examples of cost breakdowns for various project components like civil works, mechanical works, electrical works, and coal transportation system. The cost of energy analysis includes financial cost of energy, economic cost of energy, and levelized cost of energy.

Uploaded by

Ezhil Vendhan Palanisamy
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Feasibility Report Project Cost APPRAISAL

May, 2007

PREPARATION OF FEASIBILITY REPORTS


COMPONENTS OF FEASIBILITY REPORT CAPITAL COST
WORKS COST OVERHEADS INCLUDING PROJECT MANAGEMENT, PRE-COMMISSIONING, CONSULTANCY EXPENSES INTEREST DURING CONSTRUCTION & FINANCING CHARGES WORKING CAPITAL MARGIN
(CONTD...)

PREPARATION OF FEASIBILITY REPORTS


WORKS COST
CIVIL WORKS PLANT & EQUIPMENT
MECHANICAL WORKS ELECTRICAL WORKS COAL TRANSPORTATION SYSTEM INITIAL SPARES

(CONTD...)

PREPARATION OF FEASIBILITY REPORTS


OVERHEADS
PRE-COMMISSIONING EXPENSES PROJECT MANAGEMENT EXPENSES CONSULTANCY INTEREST DURING CONSTRUCTION (IDC) & FINANCING CHARGES INTEREST DURING CONSTRUCTION FINANCING CHARGES WORKING CAPITAL MARGIN
(CONTD...)

PREPARATION OF FEASIBILITY REPORTS


FINANCIAL ANALYSIS
COST OF ENERGY (Ist YEAR) - FINANCIAL LEVELISED COST OF ENERGY CASH FLOW ANALYSIS

SENSITIVITY ANALYSIS ANTICIPATED COMPLETION COST INTER PROJECT COMPARATIVE STATEMENT


(CONTD...)

PREPARATION OF FEASIBILITY REPORTS


BASIS FOR PREPARATION OF COST ESTIMATES FOR WORKS COST BASED ON THE BOQ FURNISHED BY PROJECT ENGINEERING, THE ESTIMATES ARE PREPARED SYSTEMWISE BASED ON THE RECENT AWARDS PLACED FOR THE SIMILAR WORKS. THE AWARDED PRICES ARE DULY ESCALATED TO REFLECT THE LATEST PRICES.
(CONTD...)

PREPARATION OF FEASIBILITY REPORTS


BASIS FOR PREPARATION OF ESTIMATES FOR OVERHEADS SUCH AS PROJECT MANAGEMENT EXPENSES, CONSULTANCY, PRE-COMMISSIONING EXPENSES, ETC. BASED ON THE PAST DATA / ACTUAL EXPENDITURE INCURRED FOR THE PREVIOUS PROJECTS, THE CENTAGES ARE APPLIED TO WORK OUT THE ESTIMATED COST FOR SUCH EXPENSES.
(CONTD...)

PREPARATION OF FEASIBILITY REPORTS


BASIS FOR CALCULATION OF INTEREST DURING CONSTRUCTION (IDC) & FINANCING CHARGES IDC IS DEPENDENT UPON VARIOUS FACTORS SUCH AS :
DEBT : EQUITY RATIO TYPE OF DEBT - EXTERNAL COMMERCIAL BORROWINGS(ECB) / DOMESTIC COMMERCIAL BORROWINGS(DCB)
(CONTD...)

PREPARATION OF FEASIBILITY REPORTS


RATE OF INTEREST FOR ECB / DCB TIME SCHEDULE PHASING OF EXPENDITURE

TYPICAL EXAMPLE FOR WORKING OUT IDC


ESTIMATED COST : DEBT : EQUITY RATIO : TIME SCHEDULE : PHASING OF EXPENSES
Ist Year IInd Year IIIrd Year IVth Year : : : :

Rs. 100 Crores 70 : 30 4 YEARS


Rs. 20 Crores Rs. 30 Crores Rs. 30 Crores Rs. 20 Crores

RATE OF INTEREST :

10%
(CONTD...)

TYPICAL EXAMPLE FOR WORKING OUT IDC


ASSUMING DEBT AND EQUITY BEING SOURCED TOGETHER IN THE SAME PROPORTION, THE DEBT COMPONENT EVERY YEAR WILL BE AS FOLLOWS :
Ist Year IInd Year IIIrd Year IVth Year :Rs. 14 Crores (Rs. 20 Cr.x 0.7) :Rs. 21 Crores (Rs. 30 Cr.x 0.7) :Rs. 21 Crores (Rs. 30 Cr.x 0.7) :Rs. 14 Crores (Rs. 20 Cr.x 0.7)

(CONTD...)

TYPICAL EXAMPLE FOR WORKING OUT IDC


SINCE EXPENDITURE WILL BE OCCURING THROUGHOUT THE YEAR, IT WILL BE ASSUMED AT A MIDPOINT FOR WORKING OUT THE INTEREST ON LOAN COMPONENT. THEREFORE, THE INTEREST COMPONENT DURING CONSTRUCTION WILL BE AS FOLLOWS
Ist Year drawn IInd Year drawn : Interest component for the loan during first year for 6 months(mid point) Interest component for the loan during first year(i.e opening balance for IInd Year) for full one year + Interest component for the loan for second year for 6 months(mid point)
(CONTD...)

TYPICAL EXAMPLE FOR WORKING OUT IDC


IIIrd Year drawn : Interest component for the loan during first two years for full year +Interest component for the loan for IIIrd Year for 6 months (mid point) Interest component for the loan drawn during first three years for full year + Interest component for the loan for fourth year for 6 months (mid point)
(CONTD...)

IVth Year

TYPICAL EXAMPLE FOR WORKING OUT IDC


ACCORDINGLY, INTEREST DURING CONSTRUCTION COMPONENT WORKS OUT TO BE :
Ist Year IInd Year : : Rs. 0.7 Crs.(Rs. 14 Cr.x0.1x0.5) Rs. 2.45 Crs.( Rs. 14 Cr.x 0.1+Rs. 21 Cr.x0.1x0.5) Rs. 4.55 Crs.(Rs. 35 Cr.x 0.1+Rs. 21 Cr.x0.1x0.5) Rs. 6.3 Crs.(Rs. 56 Cr.x0.1+Rs. 14 Cr.x0.1x0.5) Rs. 14.0 Crs.

IIIrd Year
IVth Year TOTAL

:
: :

TYPICAL EXAMPLE FOR FEASIBILITY REPORT SUMMARY OF PROJECT CAPITAL COST Capacity : 1000MW
Sl No Ite m Figure s in Rs. Million Ca pita l Cost Tota l FC IC 0.00 7712.41 7712.41

1.0 Preliminary & Civ il W orks(incl. Physical Contingency) 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 Plant & Equipment Mechanical Equipment Electrical Equipment Coal Trasportation System Initial Spares Misc. Tools & Plants Taxes and Duties Physical Contingeny Tota l 2.0 W orks Cost 3.0 Pre-Commissioning Expenses 4.0 Project Management 5.0 Consultancy Proje ct Cost(e x cl. IDC) 6.0 Interest During Construction(IDC) incl. Financing Charges Tota l Cost incl. IDC 7.0 W CM Proje ct Cost incl. IDC & W CM Cost / MW

5753.72 0.00 0.00 325.43 0.00 0.00 182.37 6261.52 6261.52 0.00 0.00 0.00 6261.52 3102.39

21856.64 2951.77 242.53 951.27 101.50 1028.66 813.97 27946.34 35658.75 209.60 2121.01 104.80 38094.16 2378.81

27610.36 2951.77 242.53 1276.70 101.50 1028.66 996.34 34207.86 41920.27 209.60 2121.01 104.80 44355.68 5481.2

9363.91

40472.97 1153.90

49836.88 1153.90 50990.78 50.99

9363.91

41626.87

TYPICAL EXAMPLE FOR FEASIBILITY REPROT


CIVIL W ORKS Sl No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Ite m Figure s in Rs. Million Ca pita l Cost Tota l FC 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IC 10 104.4 45.35 0 0 0 388.24 583.63 0 0 3784.91 0 392.68 0 0 1177.11 0 0 1001.46 7487.78

Surv ey & Soil Inv estigation Land and R&R Site Clearance & Lev elling Roads, Bridges, Culv erts, Drains, etc. Permanent Siding Boundary W all & Permanent Fencing Enabling W orks Permanent Township Admn. & Serv ice Building Piling & Foundation General Civ il W orks Structural Steel W orks Chimney Coal Handling Plant Fuel Oil Handling Plant C.W . System W ater Treatment System Ash Handling Plant Ash Dyke Tota l

10.00 104.40 45.35 0.00 0.00 0.00 388.24 583.63 0.00 0.00 3784.91 0.00 392.68 0.00 0.00 1177.11 0.00 0.00 1001.46 7487.78

TYPICAL EXAMPLE FOR FEASIBILITY REPROT


MECHANICAL W ORKS Sl No Ite m Figure s in Rs . Million Ca pita l Cos t Tota l FC 3121.02 0.00 2483.75 0.00 0.00 117.45 0.00 0.00 0.00 31.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5753.72 IC 8805.70 0.00 5615.82 134.26 0.00 214.44 2496.38 0.00 1513.08 328.10 1277.02 125.48 142.83 0.00 3.42 0.00 0.00 286.98 187.73 18.81 39.80 0.00 666.79 21856.64

1 Steam Generator along with associated auxiliaries 2 Electrostatic Precipitator 3 Turbine Generator along with its associated auxiliaries 4 Condensate Polishing Plant 5 E.O.T Crane 6 C&I incl. DAS 7 Coal Handling System 8 Fuel Oil Handling System 9 Ash Handling System 10 CW Pumps incl. Make up W ater System 11 Cooling Tower incl. Civ il W orks 12 W ater Treatment Plant& ETP 13 DM Plant 14 Compressed Air System 15 Misc. Pumps 16 Hydrogen Station Plant 17 Station Piping 18 Fire Protection System incl. Civ il W orks 19 Air Conditioning & Ventilation 20 W orkshop & Lab Equipment / Hoisting Eqpt. 21 Diesel Generator 22 Equipment Cooling System 23 Station Piping incl Make-up &ETP pipe Tota l

11926.72 0.00 * 8099.57 * 134.26 * 0.00 * 331.89 * 2496.38 0.00 1513.08 359.60 1277.02 125.48 142.83 0.00 3.42 0.00 0.00 286.98

# *

* *

187.73 # 18.81 39.80 * 0.00 * 666.79 27610.36

* Package cost is included in Main Plant Equipment Package cost

TYPICAL EXAMPLE FOR FEASIBILITY REPROT


ELECTRICAL W ORKS Sl No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Ite m Figure s in Rs. Million Ca pita l Cost Tota l FC 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 IC 234.77 190.17 0.00 0.00 160.56 0.00 184.76 0.00 0.00 0.00 116.61 120.96 434.67 736.30 458.16 85.42 0.00 200.00 19.20 10.20 0 2951.78

Generator Bus Duct Unit and Aux. Transformers LT Outdoor Transformers LT Indoor Transformers HT Switchgear HT BusDuct LT Switchgear DC Battery & Charges Station Lighting System Control & Relay Panels HT Power Cables LT Power & Control Cables Cabling, Earthing & Lighting Protection Generator and Tie Transformer Switchyard Shunt Reactor ICT Switchyard Erection Computer Facilities Satellite Communication Facilities Common Facilities Tota l

234.77 190.17 0.00 0.00 160.56 0.00 184.76 0.00 0.00 0.00 116.61 120.96 434.67

* # # * # * # # # * # # #

736.30 # 458.16 85.42 0.00 200.00 19.20 10.20 0.00 2951.78

* Package cost is included in Main Plant Equipment Package cost

TYPICAL EXAMPLE FOR FEASIBILITY REPROT


COAL TRANSPORTATION SYSTEM Sl No Item Figures in Rs. Crores Capital Cost Total FC 0.00 IC 242.53

1 Permanent Way materials incl. E/W Bridges, Culverts, Flyovers, etc. 2 Permanent Siding 3 Wagons including Lineside Equipments 4 Locomotives 5 Signalling & Telecommunications 6 In Motion WeighBridge 7 Workshop Equipment incl. Building Total

242.53

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 242.53

0.00 0.00 0.00 0.00 0.00 0.00 242.53

TYPICAL EXAMPLE OF COMPONENTS OF PROJECT COST


2% 19% Civil Works Plant & Equipment Taxes and Duties Overheads IDC WCM 52% 15%

4% 9%

COST OF ENERGY
COST OF ENERGY(FINANCIAL) : THIS REPRESENTS THE COST TO PRODUCE ONE UNIT OF ELECTRICITY AT BUS BAR TERMINAL. FINANCIAL COST OF ENERGY INCLUDES ALL TAXES & DUTIES. COST OF ENERGY(ECONOMIC) : ECONOMIC COST OF ENERGY DO NOT INCLUDE THE COMPONENT OF TAXES & DUTIES AND ANY SUBSIDIES, IF PAID BY GOVERNMENT. COST OF ENERGY(LEVELISED) : LEVELISED COST OF ENERGY REPRESENTS THE LIFE TIME COST OF ELECTRICITY AT PRESENT DAY PRICES. FOR WORKING OUT PRESENT DAY PRICES, NORMALLY A DISCOUNT FACTOR OF 12% IS USED.

COMPONENTS OF COST OF GENERATION


1. Fixed Charges
1. 2. 3. 4. 5. Depreciation Interest on Loan Return on Equity O&M Expenses Interest on Working Capital

2. Variable Cost
1. Price of Fuel and its transportation

(CONTD...)

COMPONENTS OF COST OF GENERATION


1. DEPRECIATION : THROUGH DEPRECIATION, SUNK COST(CAPITAL COST) IS RECOVERED THROUGH THE USEFUL LIFE OF THE PROJECT. DEPRECIATION PERMITTED IS 90% OF THE CAPITAL COST. BALANCE 10% IS TREATED AS SALVAGE VALUE . DEPRECIATION IS CHARGED AS PER THE NORMS.
(CONTD...)

COMPONENTS OF COST OF GENERATION


INTEREST ON LOAN : THIS COMPONENT RELATES TO THE INTEREST PAYMENT PAYABLE FOR THE LOANS TAKEN. INTEREST ON LOAN KEEPS REDUCING EVERY YEAR DEPENDING UPON THE TERMS OF PAYMENT FOR THE LOAN AND BECOMES ZERO ONCE 100% LOAN IS REPAID RETURN ON EQUITY : THIS CORRESPONDS TO THE RETURN TO BE PROVIDED TO THE INVESTOR ON THE EQUITY CONTRIBUTED IN THE PROJECT . AS PER PRESENT NORMS, IT IS 14% PER ANNUM
(CONTD...)

COMPONENTS OF COST OF GENERATION


O&M EXPENSES : THESE EXPENSES ARE TO BE INCURRED FOR MAINTAINING THE POWER PLANT DURNG THE LIFE OF THE PLANT. THESE BROADLY COVER ESTABLISHMENT EXPENSES, EXPENSES TOWARDS SPARES, CONSUMABLES, LABOUR, ETC. AS PER THE NORMS, THESE ARE Approx 11.84 lakhs/MW/p.a. WITH THE PROVISION OF ESCALATION EVERY YEAR. INTEREST ON WORKING CAPITAL : THIS CORRESPONDS TO THE INTEREST TO BE PAID TO THE FINANCING AGENCIES IN RESPECT OF THE LOAN TAKEN TOWARDS MAINTAINING WORKING CAPITAL. (CONTD...)

COMPONENTS OF WORKING CAPITAL


COAL BASED STATIONS COST OF COAL FOR 1-1/2 MONTHS FOR PIT HEAD GENERATING STATIONS AND TWO MONTHS FOR NONPIT-HEAD GENERATING STATIONS, CORRESPONDING TO TARGET AVAILABILITY. COST OF SECONDARY FUEL FOR TWO MONTHS CORRESPONDING TO TARGET AVAILABILITY. OPERATION AND MAINTENANCE EXPENSES FOR ONE MONTH MAINTENANCE SPARES @ 1% OF THE HISTORICAL COST ESCALATED @ 6% PER ANNUM FROM THE DATE OF COMMERCIAL OPERATION RECEIVABLES EQVT. TO TWO MONTHS OF FIXED AND VARIABLE CHARGES FOR SALE OF ELECTRICITY CALCULATED ON THE TARGET AVAILABILITY
(CONTD...)

COMPONENTS OF WORKING CAPITAL


GAS TURBINE / COMBINED CYCLE STATIONS FUEL COST FOR ONE MONTH CORRESPONDING TO TARGET AVAILABILITY DULY TAKING INTO ACCOUNT THE MODE OF OPERATION OF THE GENERATING STATION ON GAS FUEL AND LIQUID FUEL. LIQUID FUEL STOCK FOR MONTH. OPERATION AND MAINTENANCE EXPENSES FOR ONE MONTH MAINTENANCE SPARES @ 1% OF THE HISTORICAL COST ESCALATED @ 6% PER ANNUM FROM THE DATE OF COMMERCIAL OPERATION RECEIVABLES EQVT. TO TWO MONTHS OF FIXED AND VARIABLE CHARGES FOR SALE OF ELECTRICITY CALCULATED ON THE TARGET AVAILABILITY
(CONTD...)

COMPONENTS OF COST OF GENERATION


VARIABLE(FUEL CHARGES) : THESE EXPENSES ARE BASICALLY THE FUEL CHARGES AND THE TRANSPORTATION CHARGES FOR BRINGING THE FUEL FROM FUEL SOURCE TO THE PLANT.

Annual Fuel Cost Coal Fuel Oil Total Fuel Cost (4) Tonnes Kilo Litres 0

14016

30000 0

420.48 420.48

0 0

420.48 420.48

Cost per KWh sent out Fixed Charges per KWh Fuel Charges per KWh Total Cost per KWh sent out

Paise/kWh Paise/kWh Paise/kWh

0 6.00 6.00

Assumptions: 1. Station Heat Rate 2. Auxiliary Power Consumption 3. Gross Calorific Value 4. Oil Consumption 5. Annual Operation

KCal/kWh % KCal/Kg. ml/kWh Hours

2450 0 3550 2 7008

For the purpose of estimate of Cost of generation debt equity ratio has been considerd on project cost excl.WCM. 100% working capital has been assumed to be financed through short term borrwings.

2 37.5 .

4797025. 35

1519.6 7

7289.9

7289.9

A u x i 6. Price of Coal l

Rs./Ton nes

1535

73.68

1608.6 8

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