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Thank you!

Thank you so much for watching the series. I am planning to start a new series where I will go through every and each step to build a fully fledge financial model with BESS. I am just a busy lately, with no free time to record and edit!

@@bankrun2023 Kindly do it. We will be eagerly waiting :). I believe you had made a BESS and PV model from before but just without the tax and other financial details which would be the ideal case. Do you have any templates that have PV + BESS (optional) we can use to secure funding from banks?

Thank you!

I have a full series on depreciation. I recommend you watch it! ruclips.net/p/PLlW0IhpkW9AcB9v6_u2PAnMfmPzQRSNi0

@@bankrun2023 Thanks will do!

Hi, Thank you for your question. The calculation is correct.The reason why the LCOE geared is higher than the ungeared is because the LCOE geared also has the cost of debt included on it. Usually, you should not calculate LCOE geared, and the only reason why I used it in this example is because I wanted to compare the LCOE vs LPPA. Let me know if you have more questions. Best, BankRun

@@bankrun2023 Thanks, Bankrun. When you say the "calculation is correct', you are referring that your calculation or my correction? Also, when changing my interval period to be more than 1 quarter I am getting a "DIV" error in the cells because the construction period is contained in the 6 months so it reads FALSE which wont count the CAPEX. For reference, what I have as inputs for interval between periods = 2 quarters and construction period = 1 quarter. In other words, the model want to have construction period to always be higher than interval between period which is not robust. How can we solve this?

@@bankrun2023 Another question, I am trying to incorporate a degradation rate for the battery and PV production, how can I go about this?

@@truthfulguidance1452 My calculation should be correct. the LCOE geared is greater than the LCOE ungeared because for the LCOE geared you have to add the financial cost (interest expense). I can't help you with the error without seeing the model.

@@truthfulguidance1452 The calculation for the degradation is almost the same as for the calculation for escalation, where the generation from the previous period will be multiplied by (1-degradation %).

Thank you!

Can you let me know in which row do you think the mistake is? In principle it should be correct as both the interest expense and debt repayment are costs that will impact the cash flow of the project. BR, BankRun

@@bankrun2023 I am sorry; the mistake is mine. The principal payment should be included; I meant in the calculations of LCOE. However, I believe the NPV calculations should not count the CAPEX in unleveraged and Equity in leveraged as we should not discount it. Let me know your thoughts

@@musabalfarsi9191 In a nutshell, I am of the opinion that the LCOE should only be used for unlevered projects, but I have used LCOEs on levered calculations and I have seen these calculation in other models. Principal payment should not be part of the cost. For the NPV calculations, you should NPV everything according to your timeline. Eventually what happens is that you have an early model, where all your capex falls into period 0 and then you do not NPV your CAPEX because it is at period 0. But this is a simplification. If I recall correctly, all cash flows in this video are calculated at 31-DEC-2022.

Yes. This is correct!

I agreed with your first comment, bit I disagree with this one. Calculating the CFADS based out of the EBIT is a simplification. This is because the CFADS determines the Debt Size, and Debt Size determines interest expense. And interest expense changes your EBT, which changes your tax payable. Because you change your tax payable, you also change the cash flow of the projects and therefore your CFADS. In this video (ruclips.net/video/gVliFCP8xHs/видео.html) I did use this shortcut.. but it is a simplification.

@@bankrun2023 I would definitely argue with that :) I believe that the problem of CFADS and circularity has a psychological origin mostly, as probably long time ago some analysts invented it showing - as it seemed to them - to their superiors obvious and beautiful figures inside financial statements that were somehow prepared beforehand. So that’s an issue of mixing direct and indirect counting. And in future financial modellers started to copy this approach that led to circularity in Excel. But what actually happens in reality? When you use direct counting: First, you should count everything before Debt and interest. As I mentioned above, maximum you could get to is EBIT (you do not know your interest yet). If we try to implement algebraic approach, tax impact could be defined in the following way: all positive cashflows include tax inside (let’s say income tax rate is 30%), so every positive cash flow generates extra 30% of tax liabilities and every cash outflow and depreciation generates extra 30% of tax asset. Very similar approach to how VAT is calculated. If we would like to calculate everything before debt and interest probably we will get a tax liability (that equals EBIT multiplied by 30%). As debt service includes interest and principal, we have to confirm that these two cash outflows have different features. Interest generates extra tax shield (assets) and principal does not. So the most issues are connected with interest as it generates more CFADS only if there is a Tax Liability before Debt payments. And if there is a Tax Asset, Interest does not lead to reduction of tax payments in this period. So I suggest to use EBIT in the beginning and call it “Opening CFADS” and after Debt and Interest is calculated, you can add a tax reductions due to the interest back and calculate Closing CFADS for the period. Besides the problem of taxation makes circular issue more complicated as due to NOL transferring from period to period modeling becomes a pain - as it restores periodic dependency. And it seems to me that CFADS as a financial item was invented in order to structure debt only on the basis of cash flows before debt of every current period without the influence of anything that happens in other periods:) But we can make a suggestion that we will not have any periodic loss in our model (i.e. in every modeling period net income is to be generated), so you can use very simple trick - just multiply interest rate on a tax shield (1 - tax rate), and you will get the same result (as the circularity does).

Hi, It is very difficult for me to provide a feedback on your questions as I do not know what you did. I would recommend you to either watch the video again and check the formulas or go to the website and purchase the final version of the document. Best.

@@ismaelthiombiano3596 if you go to the input tab, you will see the calculation as land area per MW × land cost per square meter x capacity of project a / million.

I will check it out.

Well.. This is a good question and there is an argument for not discounting the generation. I have also seen calculations that use different discount rates for the Generation and for the Costs. When you calculate the NPV of generation, you are annualizing it, or considering that electricity generated today is more valuable than electricity generated 10 or 20 years in time. However, it might very well be the opposite, that the electricity in 10 years time will be more valuable than today. The most important thing to me is that you know what you are calculating and when you can use LCOE. LCOE is very useful to either compare the cost of the same technology over time or to compare the same project using different technologies (for example: a 100 MW site in a given location). Using the LCOE to other purposes is not really useful in my opinion. Best

Thank you

Same with me. It doesn't work

The problem may be fixed if you watch the video @22.47. This is a bit trick of a formatting context and you need to follow each step carefully, particularly when choosing the "Rule Type"

Thank you for letting me know. The one below should be working: discord.gg/jU7DCtqsS3

You are absolutely right! I am pretty sure I used Match for the scenario manager in other situations... Not really sure why I did not use the Match at this case. A valide comment is that I most often record the video as if it is the first time I am doing it, without looking at the final version of the model.

If these are costs that your project will incur during the construction phase, then it should be added in the CAPEX Sheet. Very unlikely to have O&M costs though in this phase of the project.

This is mostly likely because you are adding financing costs into the LCOE geared.

Glad it was helpful!

There are two ways you can go about it: though the Discord community where I share more information and have deeper discussions with viewers and students (discord.gg/wUbJPJpr) or with 101 classes. For this you can email me at info@bankruntemplates.com

Hi @starnwilson, could you email me your questions? I am not really sure if I understood them. Email me at info@bankruntemplates.com

The assumption is that on a project finance structure, the project does not generate revenue, reason why there is no interest payment during the construction.

@@bankrun2023 yes i know that but you still have to fund the interest doing the constrcution period or have you assumed that there is equity covering the cost or is the interest capitalised

Hi. This is a good question and I plan to do a video on this topic. If you are interested in digging on it by yourself, just google "nominal vs real interest rates".

I will make another video to check out if Chat GTP has improved! :)

Thank you so much!

I haven't shared that. But I am preparing a 2024 series where I will make it available.

I can do it, the problem is that it would take too many hours. It is quite complex and very few people would follow all the away through.

Hi, can you please send me an email to info@bankrutemplates.com to let me know where the discrepancy is? I will take a look into it and if there is an error, I will forward to you the final version of the model and add a note to the video. Thank you.

I do not. But the only thing you need to add is a new row with the fuel cost.

@@bankrun2023 Thanks. How do you model for possible price variations in the fuel costs?

@@Osowoaji If you want to measure the change of fuel costs over time, you need to adapt your inputs to account for it. If on the other hand you want to check the different LCOEs for different fuel costs, you would need to do a sensitivity analysis.

@@bankrun2023 Thank you for your reply. Would it be possible to do a video for a biomass plant with fuel cost, including a sensitivity analysis?

Depreciation should not be part of the cash flow calculations because it is a non-cash expense.

Obrigado! Sou sim.

@@bankrun2023 que legal, trabalha com project finance aqui no Brasil?

Thank you for watching!

Thank you! I am now preparing a new series which should be ready in a month!

Glad it was helpful!

Thank you so much. I'm now working on a more detailed project finance series. I hope I can start releasing it during July.

Thank you!

yes you are correct. He made a mistake. The total amount of h2 produced should be calculated by SUM and not with the NPV. Resulting in 255.000.000 kgH2

Hi, Thank you for your feedback. Would you be able to forward me your excel file so I can check the points you raised on your comments? Could you email it to info@bankruntemplates.com? Best, BRT