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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.