Solar Development in South Carolina

You have been approached by a developer with South Carolina solar project. Your manager wants to understand how attractive S.C. market could be or not the particular opportunity is feasible and meets the companys investment criteria:

The Following part is the information regarding the project:

Investment Date: 2014

Commercial Operation Date: 2015

Life of Plant: 20 years (assume no terminal value)

Depreciation Assumptions: 5-year straight line depreciation (assume no salvage value)

Production per-year: 50,000 MWh

Price (you get for each MWh you deliver): $150/MWh (Price will be escalating at the rate of CPI)

CPI: 2.5%

Capital Expenditure: $40,000,000 (Cost of the Plant)

Operating Expenses: Operating expenses (COGS) are 25% of EBITDA for year 1 and escalating each year at CPI.

Investment Tax Credit: South Carolina provides 3% investment tax credit on the initial investment.

Taxes: 35%

Based on the information provided, please calculate the IRR and NPV based on the after-tax cash flows and discount rate is 8%. What is your assessment?