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Introduction We designed this exercise to test simple modeling and Excel skills. We would like to emphasize that we do not intend to consume many
Introduction
We designed this exercise to test simple modeling and Excel skills. We would like to
emphasize that we do not intend to consume many hours of the candidates time.
Rather, we prefer a focus on simple, clear, concise, efficient and logical modeling.
Clean formatting and presentation of results are important. There is no template for
this exercise this document and MS Excel is all that you will need.
The Situation
You are on a plane flying to a meeting with your boss and have the good fortune of
sitting next to her. For the meeting, she must know whether the Arevon Investment
team wants to pursue an investment opportunity called Blue Horseshoe Solar BHS
Unfortunately, there is no wireless on this flight and you brought a personal laptop
without a template. You need to build a quick model from scratch using only the few
assumptions available. Here is what you know:
Blue Horseshoe Solar is a MWac MegawattAlternating Current solar photovoltaic project in
Paradise, USA. It is a singlesite, groundmounted solar array that will provide electrical energy
to Anacott Steel under a longterm contract. Because Anacott Steel has a plant located next to
the project site, the energy delivery point is at the projects substation.
Production: BHS is located in Paradise, USA, where there is plenty of sunshine. As we will build
the plant with the latest PV modules, the ratio of MWdc to MWac is x and the annual
production assessment is MWhMWdc net of availability and electrical losses
Construction Cost: An engineering firm has proposed a cost of $ per Wdc to construct the
full MWac plant including substation and balance of system They have requested a full
months to build BHS Payment terms call for upfront with balance paid in equal monthly
milestones.
Development Fee: $ per Wdc to be at the Commercial Operations Date COD
Timing: If approved by the Arevon Investment Committee, your fund will fully acquire BHS on
December
Lifetime: The project will operate for years. You know that plants of this type degrade at
in output per year. There are no decommissioning costs.
Operating costs: the same engineering firm that is building the project will provide the
operations and maintenance O&M services for $ per installed kWdc of capacity,
escalated at pa
Land Lease: The project leases its land from a local owner for years at a cost of $
pa escalated at annually.
Energy sales: Anacott Steel will purchase of the power from the project for $ per MWh
Megawatthour through a year Power Purchase Agreement PPA
Terminal Value: Please assume a terminal value equal to of total capital expenditures.
Clarifications
There are no additional costs or expenses besides those described above
Please build a quarterly model.
Cash flow based only statements are not required
Feel free to use any approach you are comfortable with and consider professional
Return Metrics & Sensitivities
Return Metrics
Unlevered pretax IRR
Levered pretax IRR
Levered pretax average cash yields years, years, years, each from COD
Sensitivities
What is the impact on returns if payment of the development fee was at the start of
construction?
What would be the impact to returns from adding a annual escalator to the PPA price?
What would be the impact to returns if land lease costs were USD in year versus
USD
Assume no leveragedebt on the project, so you dont have to worry about unlevered versus levered IRR.
The ask is to construct a model commencing st January with one year of construction time and years of operations Total of years to be broken down into quarters in line with the requirement of the quarterly model
You only need the attached pdf and a blank excel workbook.
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