Essay Roof-Mounted PV Project in India – M05: Investment and Financing – Arts and Humanities Assignment Help

Assignment Task:

Case Study description1 
You are introduced to a proposed renewable energy project in the Indian state of Gujarat: the project owner plans to install roof-mounted solar PV systems in an industrial park. The PV system would cover a total roof area of approx. 50,000 m2, spread over five different industrial buildings. The owner expects a total system capacity of approx. 5 MWp (see also Excel file, sheet “parameters” for further technical parameters of the proposed system).

Task 1

You are asked to evaluate the financial analysis. The analysis shows a project NPV of approx. 1 MUSD and an internal rate of return (IRR) of approx. 12%. Simple Payback has been computed at 7 years. The project owner interprets these figures are very favorable and argues that there is a strong case for realizing the proposed project. 
You are asked to re-check and to eventually confirm or reject this statement. In order to do so, you not only check the financial indicators already provided, but you compute the following additional indicators: 
• Modified internal rate of return

• Discounted Payback Period (DPB)

• Levelized Cost of Energy (LCOE) 
Do these additional indicators confirm or refute the project owner’s claim to propose an attractive project? 
You should cover this task on no more than 1 page (plus calculations in Excel). You can earn 20% of the total score on this task. 

Task 2:

You miss a detailed analysis of risks associated with the project. You therefore decide to perform a short sensitivity analysis: 
• Identify the main risks associated with the project: what might affect project attractiveness and why?

• Set up a small sensitivity analysis (Excel file) and show the financial impact of the identified risks. Which risks are “critical” and which ones seem to be manageable?

• Which risk management actions would you propose to the project owner? 
You should cover this task on approximately 3 pages (plus calculations in Excel). You can earn 60% of the total score on this task. 
 
Task 3:

The financial analysis provided does not make explicit assumptions about the project’s financing structure. You wonder whether the project would be considered attractive enough by potential project sponsors to provide the necessary capital. You therefore complement the analysis with a small financing analysis that is based on the following scenario: 
30% of investment cost will be provided by the project owner as equity capital, the remaining 70% are financed through debt with 1+10 years maturity at an interest rate of 13%, meaning that in the first year only interest has to be paid and in years 2 to 11 principal has to be repaid in 10 equal installments at the end of each period (i.e. first installment due at the end of period 1), interest payments are due at the end of each period together with debt installments. Compute the: 
• Average Debt Service Cover Ratio (AVDSCR)

• Loan Life Cover Ratio (LLCR) 
for this financing structure. Would you recommend financing the project? 
You should cover this task on approximately 1 page (plus calculations in Excel). You can earn 20% of the total score on this task.