Efficient Energy Provision in Industrial Paper Mill Park
Description:
The proposed project concerns the construction and operation of a 50MW coal-fired cogeneration plant (generating 357,000 MWh electricity annually, and producing 6,257,790 GJ heat annually) in a centralized industrial paper mill park located in
The proposed cogeneration plant is designed by “Liaoning High-Tech Energy Cogeneration Design Institute”, which holds the second ranked qualification for cogeneration plant design in
Important approvals are granted, agreements are in place and studies such as the FSR and EIA are issued and approved. Construction will commence once financing is secured and the expected commissioning date follows 12 months after.
The project has an attractive expected equity IRR of 55% (calculated over the total equity, after taxes). In addition, this project has environmental advantages of significant energy provision improvements.
The project developer is seeking an investment of 109 million RMB in this 420 million RMB project (investment in a newly formed SPV).
Timing:
The construction will start once financing has been secured. After a 12 months construction period, the plant is expected to be operational for 20years.
- Year 1: 12 month construction period
- Year 2 – 21: Operational period
Key Financial Parameters:
|
Total investment excluding rolledup interest (RMB) |
408,600,000 |
|
Equity IRR (over total equity, after taxes) |
55% |
|
Project IRR (after taxes) |
24% |
|
Pay Back Period (yrs) including construction period |
4 |
|
Non-Convertible Debt provided by investor (RMB) |
21, 000,000 |
|
Subordinated Convertible Debt provided by investor (RMB) |
51,900,000 |
|
Equity provided by investor (RMB) |
36,300,000 |
Proposed Financial Structure:
The following proposed financial structure is subject to further negotiation:
- 65% Chinese Bank debt (10 years, 7% annual interest)
- 5% Non-convertible debt provided by investor (10 years, 8% annual interest rate)
- 30% Equity, of which 30% held by the project developer, and 70% held by the investor
In addition to the financing structure above, it is also possible for the investor to become the sole equity share holder and operate the project for a number of years under an ESCO type arrangement which would need to be negotiated with the Chinese developer.
The financing structure may be subject to requirements from the Chinese government, depending on the legal status of the investor.
More details and a tailored investment proposal can be discussed.