Another shot at production...
I've attempted to determine the possibility for the Chandgana Power Plant (PP) going on line. The data takes into account information from past news releases, NI 43-101 Technical Reports, Feasibility studies and the November 2012 Corporate presentation plus my assumptions.
The PPA is approved at $77.50 per MW with 2% annual excalations for each year after the 1st year.
Chandgana PP goes on line in 2016 at 150MW and adds a 150MW as scheduled foreach additional year until 2019 when a total of 600MW is expected to be attained (PCY should at least consider the condition that the P&I on the Capex will begin only with production of a 150MW unit,
but the lender may balk).
The total equity financing of $220M as outlined in the November 2012 Corporate presentation for PCY and the Private Equity Investor (PE) , but changed for PCY's part to be Debt financing to limit dilution, while the PE's part will be according to equity financing.
The Capex, Opex and potential before tax cash flows are given in the data below,
Segments of sales and expenses are calculated below to determine project viability based on the selected data and assumptions to show that debt inancing required by PCY for its part of the $220M or $147.4M can possibly work based on how the loan is assumed to be structured,
The DATA....
The Chandgana Power Plant (PP) gets the go ahead with Prophecy Coal (PCY) obtaining a 40% Participating Interest and the Private Equity Investor a 20% Participating Interest and the Sponsor a 40% Participating Interest according to p13 of PCY's November 2012 Corporate Presentation. To obtain their Participating Interests the PCY and the PE must together provide $220M in equity financing from 2013 thru 2016 at $60M in 2013, $64M in 2014, $59M in 2015 and $37M in 2016 according to p14 of the presentation.
https://www.theenergyreport.com/cs/user/download/co_file/3510/PCYcorppres1112.pdf
This calculation assumes that PCY will finance its part of the required $220M by debt to limit share dilution. PCY requirements in such an arrangement would be [40/(40+20)], or 67% and would require their part of the $220M, to be $147.4M when converted to debt would require four separate loans from 2013 thru 2016 at $40.2M in 2013, $42.9M in 2014, $39.5M in 2015 and $24.8M in 2016 respectively. The loans will be backed by PCY's other interests and are assumed to be at 5% interest and provided by an International Agency, such as the World Bank. Over the initial 4 years, its assumed that PCY is debited interest payments only, for a total of $19.7M. In the fifth year (2017) after the PP achieves 300MW the $147.4M plus the $19.7M interest becomes a loan totaling $167.1M at 5% on a 10 year basis, requiring P&I payments of $21.6M annually.
The PPA of $77.50MW/h is averaged from Steag's Feasibility Study dated 12/17/2012 at $60 MW/h and the Mongolia Wind Farm tariff of $95.00 MW/h. The initial $77.50 PPA is assumed to be increased by 2% annually for each year after the first year of operation.
The PP goes on line producing 150 MW during 2016, then adds 150MW to its annual year end capacities until it achieves 600 MW in 2019 and continues at that rate with PP debt financing mandated to begin at the start of each 150MW unit.
PP Capex and Opex costs are taken from Steag's Feasibility Study dated 12/17/2012 which stated “The plant’s power production cost is US $0.023/kWh (including coal). Capital recovery, including loan principal and interest payments, is estimated to be US $0.025/kWh.”. The PPA is $77.50MW or $0.0775kWh as stated above.
Capex and Opex costs percentages per Steag based on the PPA of $0.0775kWh:
(0.023/0.0775)100 = 29.68%, (Plant power production cost is US $0.023/kWh (including coal)
(0.025/0.0775)100 = 32.26%, (Capital recovery cost, including loan principal and interest)
100 - (29.68 + 32.16) = 38.06% (Before tax profit potential)
Steag is a German firm specializing in the planning, financing, construction and operation of highly efficient, thermal power plants for fossil fuels.
The Power Plant Debt financing is from the November 2012 Corporate Presentation. CAPEX requirements are $217M for 2013. $252M for 2014, $261M for 2015 and $157M for 2016 and total $889M and is divided into four separate financing's with annual interest at 5.5%.
The Power Plant debt CAPEX loans and their terms (If power production doesn't come on line at the brgining of the year given below, the loan payments will start on the date it does)
The 2016 Loan of $217M at 5.5% over a 10 years term requires annual P&I of $28.8M
The 2017 Loan of $252M at 5.5% over a 9 year term requires annual P&I of $36.2M
The 2018 Loan of $261M at 5.5% over a 8 year term requires annual P&I of $41.2M
The 2019 Loan of $157M at 5.5% over a 7 year term requires annual P&I of $27.6M
The annual P&I payment for 2016, $28.8M, for 2017, $65.0M, for 2018, $106.2M and $133.8M from 2019 and each year until the loan is paid off.
The PPA at $77.50/MW/h has no increase during 2016, then annual increases of 2% for each year thereafter. For 2017 it's $79.05/MWh. For 2018 it's $80.63/MWh. For 2019 it's $82.24/MWh. For 2020 it's $83.89/MWh. For it's $85.57/MWh. For 2022 it's $87.28/MWh. For 2023 it's $89.02/MWh. For 2024 it's $90.80/MWh. For 2025 it's $92.62/Mt'W/h. For 2026 the first year of no loan payment it's $94.47/MW/h. For 2036 it's $115.16/MW/h and for 2046 (yr 30) it's $140.38/MW/h.
Power Plant Sales for selected years
2016 sales, 77.50 x 150 x 24 x 365, or $101.8M
2017 sales, 79.05 x 300 x 24 x 365, or $207.8M
2018 sales, 80.63 x 450 x 24 x 365, or $317.8M
2019 sales, 82.24 x 600 x 24 x 365, or $432.3M (PP''s first year at 600MW)
2020 sales, 83.89 x 600 x 24 x 365, or $440.9M
2021 sales, 85.57 x 600 x 24 x 365, or $449.8M
2022 sales, 87.28 x 600 x 24 x 365, or $458.7M
2023 sales, 89.02 x 600 x 24 x 365, or $467.9M
2024 sales, 90.80 x 600 x 24 x 365, or $477.2M
2025 sales, 92.62 x 600 x 24 x 365, or $486.8M
2026 sales, 94.47 x 600 x 24 x 365, or $496.5M (no P & I during 2026 forward)
2036 sales, 115.16 x 600 x 24 x 365, or $605.3M
2046 sales, 140.38 x 600 x 24 x 365, or $737.8M
Selected annual sales versus P & I payments for Plant CAPEX and capital recovery
2016, 0.3226 x 101.8 = $32.8M > than 1st year P & I of $28.8M, or $4.0M positive
2017, 0.3226 x 207.8 = $67.0M < than 2nd year P & I of $65.0M or $1.8M positive
2018, 0.3226 x 317.8 = $102.5M > than 3rd year P & I of $106.2M or ($3.7M) negative
2019, 0.3226 x 432.3 = $139.5M > than 4th year P & I of $133.8M or $5.7M positive
2020, 0.3226 x 440.9 = $142.2M > than 5h year P & I of $133.8M or $8.4M positive
2021, 0.3226 x 449.8 = $145.1M > than 6th year P & I of $133.8M or $11.3M positive
2022, 0.3226 x 458.7 = $148.0M > than 7th year P & I of $133.8M or $14.2M positive
2023, 0.3226 x 467.9 = $150.9M > than 8th year P & I of $133.8M or $17.1M positive
2024, 0.3226 x 477.2 = $153.9M > than 9th year P & I of $133.8M or $20.1M positive
2025, 0.3226 x 486.8 = $157.0M > than 10th year P & I of $133.8M or $23.2M positive
2026, 0.3226 x 496.5 = $160.2M positive for 11th year and increases each year thru year 20
2036, 0.3226 x 605.3 = $195.3M positive for 20th year and increases each year thru year 30
2046, 0.3226 x 737.8 = $238.0M positive for 30th year
The ($3.7M) negative value is assumed to be easily made up by the value of $47.8M left over from positive production costs and free cash flows (fcf) from plant operations
After the eleventh year P & 1 payments end and the PP's annual income will increase considerably from the 11th through the 30th year based on the average of ($160.2M +$238.0M) or $199M per year over 20 years and total ~$3.98B plus the $102.1M (from 2016 - 2026) for a total close to ~$4.1B before taxes to the PP owners credit and will be available for capital improvements or applied as free cash flow fcf per ownership interests
Sales vs Power production costs (including coal) Coal costs are taken from Boyd as per their NI-43-101 and were given at ~$17.70 per tonne annually over the 30 years
2016, 0.2968 x 101.8 = $30.2M > than 1st year coal at $15.5M leaving $14.7M for production
2017, 0.2968 x 207.8 = $61.7M > than 2nd year coal at $31.0M leaving $30.7M for production
2018, 0.2968 x 317.8 = $94.3M > than 3rd year coal at $46.5M leaving $47.8M for production
2019, 0.2968 x 432.3 = $128.3M > than 4th year coal at $62.0M leaving $66.3M for production
2020, 0.2968 x 440.9 = $130.9M > than 5th year coal at $62.0M leaving $68.9M for production
2021, 0.2968 x 449.8 = $133.5M > than 6th year coal at $62.0M leaving $71.5M for production
2022, 0.2968 x 458.7 = $136.1M > than 7th year coal at $62.0M leaving $74.1M for production
2023, 0.2968 x 467.9 = $138.9M > than 8th year coal at $62.0M leaving $76.9M for production
2024, 0.2968 x 477.2 = $141.6M > than 9th year coal at $62.0M leaving $79.6M for production
2025, 0.2968 x 486.8 = $144.5M > than 10th year coal at $62.0M leaving $82.5M for production
2026, 0.2968 x 496.5 = $147.4M > than 11th year coal at $62.0M leaving $85.4M for production
2036, 0.2968 x 605.3 = $179.7M > than 20th year coal at $62.0M leaving $117.7M for production
3046, 0.2968 x 737.8 = $219.0M > than 30th year coal at $62.0M leaving $157.0M for production
Relative to production costs annual increases in coal prices and labor are possible over the power plant's life, but the sums left for production are adequate, especially at 600MW production
Before tax free cash flow (fcf) based on PCY's 40% participating Interest and include PCY's P&I payments for their separate $167.1M, 5% 10 year loan requiring payment of u $21.6M annually thro 2026.
2016, 0.3806 x 101.6 x 0.40 = $15.5M 1st year, is not applicable for loan payment, leaving $15.5M
2017, 0.3826 x 207.8 x 0.40 = $31.6M 2nd year is > than $21.6M P & I, leaving $10.0M positive
2018, 0.3806 x 317.8 x 0.40 = $48.4M 3rd year is > than $21.6M P & I, or $26.8M positive
2019, 0.3806 x 432.3 x 0.40 = $65.8M 4th year is > than $21.6M P & I, or $44.0M positive
2020, 0.3806 x 440.9 x 0.40 = $67.1M 5th year is > than $21.6M P & I, or $45.5M positive
2021, 0.3806 x 449.8 x 0.40 = $68.5M 6th year is > than $21.6M P & I, or $46.9M positive
2022, 0.3806 x 458.7 x 0.40 = $69.8M 7th year is > than $21.6M P & I, or $48.2M positive
2023, 0.3806 x 467.9 x 0.40 = $71.2M 8th year is > than $21.6M P & I, or $49.6M positive
2024, 0.3806 x 477.2 x 0.40 = $72.6M 9th year is > than $21.6M P & I, or $51.0M positive
2025, 0.3806 x 486.8 x 0.40 = $74.1M 10th year is > than $21.6M P & I or $52.5M positive
2026, 0.3806 x 496.5 x 0.40 = $75.6M 11th year is > than $21.6M P & I or $54.0M positive
2036, 0.3806 x 605.3 x 0.40 = $92.2M 20th year positive
2046, 0.3806 x 437.8 x 0.40 = $112.3M 30th year positive
Each of the first 11 years are fcf cash flow positive and total $444.0M plus the annual average between 2027 to 2046, of (77.1+112,3)/2 or $94.7M over 19 years for $1.8B or a total of $2.2B before taxes
Potential before tax (fcf) to PYC over life of the 600MW Project could be as high as 2.2B + 0.4(4.1B), or $3.8B when P&I funds are not applied to capital improvements