10. Financial viability of the Project
10.1. Basic provisions
Internal Rate of Return (IRR) was adopted to be the index, characterizing financial
viability of investments for Se Kong 5 project.
The result of the conducted analysis is the tariff of electric energy generated at
Se Kong 5 HEP at Ban Soke substation, which will provide 15% IRR for share holders.
Calculations of investment viability are made in US dollars. US dollar escalation
rate in main computational case is taken to be equal to 1.5% per annum. Other cases of
US dollar escalation are considered in analysis of sensitivity and risks.
Calculated period is taken to be equal to 30 years starting from the first year of
project construction. For this particular period benefits and costs are calculated and all
emerging financial flows are taken into account.
The following taxes are considered in calculations: income tax and royalty
charge.
Income tax is calculated in the following way: the first 7 years of operation the tax
is 0% (tax free period), the next 5 years the tax makes up 5% of taxable income, further
the tax is equal to 15% of taxable income.
Royalty charge is calculated as follows: the first 7 years of operation the tax is
0% (tax free period), the next 8 years the tax makes up 5% of trade turnover, further the
tax is equal to 10% of trade turnover.
10.2. Main technical and economic indices of the Se Kong-5 HEP
HEP construction is planned with the following reservoir parameters: FRL = 500
m, MDDL = 460 m, live storage – 1857.9 million m3. Two alternatives of HEP daily operation
mode are considered in load curve: 6 hours a day with 400 MW installed capacity
and long-term average energy of 1299 GWh (alternative В16) and 16 hours a day
with installed capacity of 190 МW and long-term average energy of 1131 GWh (alternative
В116).
Main technical and economic indices of the considered project by operation
mode alternatives are given in table 10.1.