Understanding Bonus Valuation by answering questions I will answer Shneps questions. My answers in bold red. Shneps questions in black print
Correct me if I am wrong but are you not currently negotiating for a contract to build 70MWDC or 35MWAC plus storage?
No, the contract was re-approved by PREPA on May 28, 2020. This whole effort is having PREPA accepting their originally signed contract with PBJL (Greenbriar PR subsidiary). It was always 100MWac since 2011 and then re-adjusted in 2020 to 80MWac (160MWdc). Storage is 32 MW for 4 hours or 128Mwh of storage. Our DC/AC ratio is 2:1 vs 1.2:1 for everyone else. That doubles revenue
You are working to secure a $191M valuation through this contract?
The USD $191 Million valuation has increased for the many reasons as stated below
How did you possibly manage to lower the project CAPEX by 50% within a time period of rising steel cost, increased cost of polysilicon, increased labour costs, years of overhead and legal costs. I would love to see the two differentiated cost reports.
Cutting a project's capital cost outlay by 50% is outstanding.
If you actually have well done.
Raw commodity prices have increased for sure but nowhere near the solar panel power ratings which have escalated substantially in 5 years since the US $191 million NPV court ordered valuation. In addition, solar panel efficiency is higher (not as high as power ratings), DC/AC convertor efficiency is way up, two year on-site pyranometry (which other do not have) show marketable higher insolation and irradiation. Raw material cost escalation, although real and well known, is only a tiny offset of the monumental increases in solar equipment yield increases. You stated efficiency - which is a well-used term, (16% a few years ago to 22% now), but the real driver is bifacial power output. This is a different measurement. Efficiency is the conversion within the wafer, but power output is the density of the wafers within a given panel, plus bifacial panels that capture the radiation as it goes through the panel and then bounces off the ground and returns to the panels back side. Power output through increased wafer density is key. Since the 2016 NPV report, a common utility scale panel (2m X 1m) has gone from 300w to 530w. (Trina 530Mw panel) That is a 175% increase in output per same piece of land. Add the fact the same panel costs went from 70 cents per watt to 38 cents in the same time frame. Add much lower converter costs per unit plus higher efficiency, battery storage went from $1 million per Mwh down to $250,000 fully installed. This entire suite of improvements, towers over the raw increase of the metals within the technology. Think escalating raw material costs but compare your laptop new from Apple in 2016 vs now. What is the cost per byte? Your laptop power cost per byte is way down even if the laptop material cost more.
Thank God for the Puerto Ricans they did not have to pay not only crazy exorbitant capital costs but significantly higher kw/H rates within the previous power purchase agreements, that were cancelled.
Wrong and bad analogy. Puerto Ricans pay 30 to 40 cents per kwh for the past 12 years. Any delay at any of the PPOA prices has caused harm to Puerto Rico. If they took the 2020 contracts PR folks would be better off. If they took the 2011 pricing PR folks would be better off.
Again correct me if I am wrong but your solar panels have gone from 22% to 47% efficiency?
That is unheard of in the solar panel industry.
Well done.
Wrong analogy. It is the power density of the panel that is way up, (175%) not the gain in efficiency from 16 to 22%. Plus the halving in panel costs due to manufacturing technology improvements.
So exactly how many contracted projects and valuations does the company actually have because I really can't seem to find those in the financial documents. Having a signed contract from another party to pay you for executing a project would most definitely be on the books.
Please help.
No ower contract of any kind, in any company, is carried on the books. IFRS or US GAAP does not offer an IAS 16 opportunity like in real estate. The contract value needs to be understood by management and any reader that understands the business. Even if you have a $5 billion PPA from a AAA credit worthy counterparty, the value of that contract is never on the books as there was no capitalized cost to obtain it. A PPA (or PPOA in PR) gets on the FS when it is built and then through the P&L, but the full NPV is never shown on the FS, never. You can publish the NPV report, but it never enters the FS.
Does this means you have cancelled your agreement with CMEC to design, build and supply the panel equipment?
No, because engineering is a small part of the cost and an EPC wrap is indifferent to equipment country of origin.
This is amazing you were able to cut the projects capital costs by 50% and now have all the steel components manufactured in the US, pay union wages (as opposed to non union rates - 35% cheaper)
Read my above comments and PR always had union rates.
I see the union wage rate needs also to be carried into the OPEX cost as well.
It is not a brownfield site so the company unfortunately doesn't qualify for the additional 10%.
It qualifies for the 40% and PR was always union rates for electrical workers we hired per the PPOA
Would like to see the breakdown costs of all the steel components required compared to the overall material supply costs. (must be US supplied)
Send me your full email, name and address via Stockhouse and I will send you an NDA to sign. Steel racking for the panels is a small portion of the CAPEX
Will you have CMEC supply some of the panels and have a portion supplied by US manufacturers to the meet the 40%?
Remember CMEC is an EPC wrap and finance house, not a panel or equipment manufacturer. They do not build equipment. They are technology agnostic.
Are all these project CAPEX cost increases offsetting the 4% to potentially 14% increase in tax incentives?
Would be interesting to see the actual comparative numbers.
The ITC dropped to 22% end of this year, so the 40% is almost a 100% gain in federal funding.
Send me your full name and address and I’ll send you an NDA. Send your info via Stockhouse.
Out of curiousity Jeff. How does the company factor their cost adjustments for the solar panels 25 -30 year longevity where the average 0.8% degradation solar rate is approx. 24% over that 30 year period?
Yes and panels get partiallyreplaced during the lifetime of the PPOA.
Is the entire project based on a cost projection just for the timeframe of the PPOA and then is it decommisioned (and requires cost) or are the projects designed to have to be continually inputing new panels as required to meet the supply design requirements.
Trying to get a handle on OPEX costs for the duration of the PPOA.
OPEX covers panel replacements during the PPOA term for design. CAPEX covers some extra panel inventory upfront before OPEX kicks in.
Also, after the PPOA expires, the terminal value is positive, not negative.
Cheers
Now don't come back with repetitive, circular or silly questions please. If you don't understand what I wrote above, call me or take a few courses in solar energy at Stanford.