A

T-348ENERGY PROJECT

Cut ENERGY cost by half?or more?

Q:Is this POSSIBLE?A: YES!

Income Statement – no IMPROVEMENTS• Total Revenues RRRRR

• Total Expenses EEEEEE

• NIBIT (Net Income Before Interest and Taxes)

• Less: Interest Payments

• Less: Taxes

• NIAT (Net Income After Taxes)

Cash Flow Statement – no IMPROVEMENTS• Sources Revenues LESS Costs

• Uses Taxes PLUS Interest PLUS Principal

• NNCF (Equity & Project Streams) Sources LESS Uses

• IRR (Equity & Project) Dependent upon Investment and NNCF

Income Statement – with IMPROVEMENTS• Total Revenues RRRRR + EEE

• Total Expenses EEE

• NIBIT (Net Income Before Interest and Taxes) = HIGHER

• Less: Interest Payments = slightly higher (influenced by decisions)

• Less: Taxes = very slightly higher

• NIAT (Net Income After Taxes) = HIGHER

Cash Flow Statement – with IMPROVEMENTS• Sources Revenues LESS Costs = HIGHER

• Uses Taxes PLUS Interest PLUS Principal = (decisions)

• NNCF (Eq & Proj Streams) Sources LESS Uses = HIGHER

• IRR (Equity & Project) Higher Streams == HIGHER IRR

Tristan Calasanz – I have been there before

1.Vice President for Utility Operations – National Power Corporation• Assets: US$10 billion; Gross Revenues: US$1 billion

(1983)

• Energy-Efficiency Savngs: US$15 million (1983)

2.Vice President for Project Development – First Private Power Corporation• Co-Generation Faciility: Conceptualization, Feasibility

Studies, Engineering, Bid Evaluation

• Project Investment: US$65 million

3.Associate for Energy Management – SGV&CO/ArthurAndersen&CO

PROJECT "TRIO"• PROPONENT

– Target– Small Equity, &/or No Cash Out Possible– Signs a Fixed-Term Contract with an IPP

• Ind. Power Producer (IPP) / Target Subsidiary– BOT - Build-Operate-Transfer– BOO - Build-Operate-Own

• Financing Institution– JP Morgan / Target Bank: "Project-Finance“– Loans are assured with Contract

IPP's Business Elements• Partner with an Engineering Firm• Design and Build Standardized Packaged Units

– in Container Vans for Portability• Requirement: Clean Fuel, e.g., Natural Gas• Equipment

– ICE: Caterpillar, and/or Clunkers– Heat Pumps: York, and/or Sanyo + Kawasaki

+ Mitsubishi + HVAC/R Contractor• Project-Finance

Overall Net Effect• ELECTRICITY

Owner: Reduced outside procurementIPP: Displaced with energy from fuel and from heat pumpP&L Income Stream: Displaced electricity - Proponent-Owned

• ENERGY SERVICESOwner-Owned: Substantial savingsIPP-Owned: High Internal Rate of Return

• PRODUCT/COMMODITYIPP: Pioneer in "packaged cogeneration" systems (a Niche)IPP: Eligible for Export

Merchandise / Commodity

1.Services Provided• Supply energy in the form of electricity, heating, chilling

• Radically alter the Income Statement: Revenues, Expenses, Bottom Line

2.Strategic Advantage• Energy Cost Reduction

• Transportable for easy replication to different sites

3.Competition• Walmart, Trader Joe’s, Haggen, Whole Foods, Safeway

• Costco, Sam’s Club