Consequently, the actual cost to build NKPP could be substantially more than 1 billion euros, and could top 1.35 billion dollars.
B. Debt Financing: Interest Rate Costs
For the purposes of this report, IEEFA assumes a mid-range construction cost for NKPP of 1.35 billion. Earlier published plans assume a 70 percent debt to 30 percent equity ratio. The Kosovo economic development minister confirmed this capital structure in his recent announcement. IEEFA assumes that the New Kosovo Power Plant would therefore carry €945 million in debt and €405 million in equity. The cost of carrying the debt is 34.93 EUR/MWh and the cost of the equity is 40.97 EUR/MWh (see Table 5: Price of Electricity from New Kosovo Power Plant).
IEEFA uses the recently announced …show more content…
Cost of Equity Financing
IEEFA assumes that the designated project developer will provide 30 percent equity financing for the deal. ContourGlobal was recently designated the preferred bidder by the economic development minister. ContourGlobal is the sole bidder on the project. It was the only company that responded to the government of Kosovo’s bid in February 2015.
ContourGlobal’s business strategy concentrates on infrastructure projects in high-risk locations and relies upon high degrees of leverage. Given the relative position of the company and its business model, the €405 million equity infusion provided by the company will carry a 21.5 percent rate of return. IEEFA assumes an aggressive schedule of five-year principal payback, reflecting the company’s current risk profile and its privileged position as the preferred developer.
ContourGlobal owns and operates power projects in Europe, Africa, the Caribbean, South America, and the United States. Additionally, the company has five projects totaling 215 MW of generating capacity under construction in various locations (the Company does not list NKPP among projects it plans to bring into commercial operation over the next two years). The projects ContourGlobal has in its development pipeline are a mix of coal, natural gas, wind, hydro, solar, biomass, and fuel …show more content…
$1.9 billion in debt underwritten by the cash flow from its existing projects to its investors. The company uses the leverage of each project to raise its equity contributions. The company’s business model is thus highly sensitive to execution risks during the development and construction process. The highly leveraged nature of the business makes it highly dependent on stable cash flow from its projects. The company seeks to diversify and thereby strengthen its overall cash flow position by adding more development and acquisitions. A Moody’s Investors Services November 2014 report on the company says that if ContourGlobal can operationalize its proposed five new projects it will have achieved two important goals: diversification of its cash flow and decreased exposure to politically risky countries.
ContourGlobal recently experienced significant financial problems at its Maritsa coal-fired power station in Bulgaria due to changes in the Bulgarian government. The company faced substantial delays and ultimately was forced to renegotiate the deal and accept lower (though purportedly more stable) payments. This is significant because the Maritsa project comprises 37 percent of ContourGlobal’s earnings before interest, taxes, depreciation, and amortization (EBITDA), a concentration level that creates financial exposure for the company and affects its cash
B. Debt Financing: Interest Rate Costs
For the purposes of this report, IEEFA assumes a mid-range construction cost for NKPP of 1.35 billion. Earlier published plans assume a 70 percent debt to 30 percent equity ratio. The Kosovo economic development minister confirmed this capital structure in his recent announcement. IEEFA assumes that the New Kosovo Power Plant would therefore carry €945 million in debt and €405 million in equity. The cost of carrying the debt is 34.93 EUR/MWh and the cost of the equity is 40.97 EUR/MWh (see Table 5: Price of Electricity from New Kosovo Power Plant).
IEEFA uses the recently announced …show more content…
Cost of Equity Financing
IEEFA assumes that the designated project developer will provide 30 percent equity financing for the deal. ContourGlobal was recently designated the preferred bidder by the economic development minister. ContourGlobal is the sole bidder on the project. It was the only company that responded to the government of Kosovo’s bid in February 2015.
ContourGlobal’s business strategy concentrates on infrastructure projects in high-risk locations and relies upon high degrees of leverage. Given the relative position of the company and its business model, the €405 million equity infusion provided by the company will carry a 21.5 percent rate of return. IEEFA assumes an aggressive schedule of five-year principal payback, reflecting the company’s current risk profile and its privileged position as the preferred developer.
ContourGlobal owns and operates power projects in Europe, Africa, the Caribbean, South America, and the United States. Additionally, the company has five projects totaling 215 MW of generating capacity under construction in various locations (the Company does not list NKPP among projects it plans to bring into commercial operation over the next two years). The projects ContourGlobal has in its development pipeline are a mix of coal, natural gas, wind, hydro, solar, biomass, and fuel …show more content…
$1.9 billion in debt underwritten by the cash flow from its existing projects to its investors. The company uses the leverage of each project to raise its equity contributions. The company’s business model is thus highly sensitive to execution risks during the development and construction process. The highly leveraged nature of the business makes it highly dependent on stable cash flow from its projects. The company seeks to diversify and thereby strengthen its overall cash flow position by adding more development and acquisitions. A Moody’s Investors Services November 2014 report on the company says that if ContourGlobal can operationalize its proposed five new projects it will have achieved two important goals: diversification of its cash flow and decreased exposure to politically risky countries.
ContourGlobal recently experienced significant financial problems at its Maritsa coal-fired power station in Bulgaria due to changes in the Bulgarian government. The company faced substantial delays and ultimately was forced to renegotiate the deal and accept lower (though purportedly more stable) payments. This is significant because the Maritsa project comprises 37 percent of ContourGlobal’s earnings before interest, taxes, depreciation, and amortization (EBITDA), a concentration level that creates financial exposure for the company and affects its cash