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Table 6 Project finance scenarios

From: The commercial performance of cellulosic ethanol supply-chains in Europe

Finance variable

Scenario

 

Reference-case

First-plant

First-plant capital subsidy

N th plant – no subsidy

Beta

 

2.37a

2.37a

1.32b

Risk-free ratec

 

4.39%

4.39%

4.39%

Market-risk premiumd

 

5%

5%

5%

Debt ratio = d/(e+d)

 

20%e

20%e

55%f

Cost of debtg

 

6%

6%

6%

Discount rate/cost of capitalh

6%

14%

14%

7%

Investment life (years)

15

15

15

15

Salvage value at end of project (% initial investment)

 

5%

5%

5%

Investment grant (%)

  

25%

 

Salvageable fraction of working capital at end of project (%)

 

5%

5%

5%

Build profile year: -2

 

20%

20%

20%

Build profile year: -1

 

50%

50%

50%

Build profile year: -0

100%

30%

30%

30%

Tax rate on net income

 

30%

30%

30%

Insurance – % fixed capital

1%

1%

1%

1%

Maintenance – % fixed capital

2%

2%

2%

2%

Working capital – % fixed capital

4%

4%

4%

4%

  1. aUnlevered Beta, total for industry. Sector: petroleum producing. Source: http://www.damodaran.com
  2. bUnlevered Beta. Sector: energy – alternate sources. Source: http://pages.stern.nyu.edu/~adamodar/pc/datasets/betaEurope.xls
  3. cDetermined via the interest rate of government bonds of a length equivalent to the investment useful life. Here we use the annual average yield from British Government Securities, 10 year nominal par yield of 4.4% (value at 31.12.2005, available on the Bank of England website section on 'statistics').
  4. dUK average. Source: http://pages.stern.nyu.edu/~adamodar/pc/datasets/ctryprem.xls
  5. eEstimated % debt obtainable for first-plant (personal communication fromUK Carbon Trust Venture Capital team).
  6. fEstimated % debt obtainable for a grain-to-ethanol plant [31].
  7. gAverage cost of debt for petroleum producing sector 2005. Source Damodaran.com
  8. hCalculated using the Capital Asset Pricing Model.