Topic:"Return On Equity" in M03632

1 Q. WHAT HAVE YOU ASSUMED ABOUT PROJECT OWNERSHIP IN THE MODEL? 2 A. We have not made specific assumptions about project ownership in developing 3 proposed tariff rates. However, we have considered the extent to which project 4 ownership...

AI summary The model does not assume specific project ownership but considers how ownership affects costs via capital and tax treatment. Taxable projects typically have early tax benefits and later liabilities, with net impacts varying by resource type (e.g., -13% for tidal projects). Proposed COMFIT rates average taxable and non-taxable scenarios for most projects, except biomass CHP.

4 E. CAPITAL STRUCTURE AND THE COST OF EQUITY 5

AI summary The section on capital structure and the cost of equity is incomplete, with no substantive content provided in the text. The heading indicates the topic but lacks analysis or data.

6 Q. PLEASE DESCRIBE YOUR RESEARCH AND CONCLUSIONS ABOUT RETURN ON 7 EQUITY. 8 A. We received a range of comments from stakeholders regarding the return on equity 9 (ROE) that COMFIT projects would need. Some people suggested that communit...

AI summary The answer discusses varying stakeholder opinions on the appropriate return on equity (ROE) for COMFIT projects, ranging from 0% to 20%. It compares these to NSPI's 9.35% ROE and Heritage Gas's 13% ROE, noting the Board's past decisions on Heritage Gas's ROE.

16 Q. WHAT RETURN ON EQUITY ESTIMATES HAVE BEEN INCLUDED IN THE TARIFF 17 PROPOSALS FILED TODAY? 18 A. We have used a 13% target ROE for wind, hydro and biomass CHP projects, and a 15% 19 ROE for tidal projects. The ROE is defined in the m...

AI summary The tariff proposals filed today include a 13% target Return on Equity (ROE) for wind, hydro, and biomass CHP projects, and a 15% ROE for tidal projects. ROE is defined as the Internal Rate of Return (IRR) in the model.

Assumptions about Capital Structure and Costs in the Tariff Modeling W in d 0 k W 5 ≤ W in d 0 k W >5 Hy dr o B iom C H P as s T i da l Ca i l S ta tru tu p c re De b t % 5 0 % 5 0 % 6 0 % 6 0 % 0 Eq i ty u 5 0 % 5 0 % 4 0 % 4 0 % 1 0 0 %...

AI summary The text presents a table outlining assumptions about capital structure and costs in the tariff modeling for various energy sources, including wind, hydro, and biomass CHP. It includes details on debt and equity percentages, return on equity, interest rates, amortization periods, and other financial metrics.

The Effect of Steam Demand on the CHP Rate ($2012) S Ca i Fa te ty to am p ac c r 2 0 % 3 0 % 4 0 % 5 0 % 6 0 % Operating Inputs Notes. Net Generator Capacity (MW) 0.05 Energy Production: 0.03 Net Capacity Factor 220/ Net of plant availabi...

AI summary The table presents financial and operational inputs and outputs for a Combined Heat and Power (CHP) project, including net generator capacity, energy production, operating expenses, and revenue assumptions. It includes metrics such as the net capacity factor, annual fuel cost, and return metrics like the 20-year equity IRR and debt service coverage ratio.

Large Wind (Over 50 kW) Assumptions Notes: Other Revenues (increases with inflation) 0 Return Metrics 20-year Equity IRR Pre-Tax 14.33% After-Tax 12.98% Average Debt Service Coverage Ratio 2.22 Minimum Debt Service Coverage Ratio 2.17 Mini...

AI summary The text presents a financial and tax analysis of a large wind project, including assumptions about returns, tax rates, depreciation classifications, and maintenance costs. It outlines metrics such as the 20-year equity IRR, debt service coverage ratios, and tax liabilities.

Scenarios in $2012 Va lue fo r S On ly tea m- Gr s V alu e f CH P os or Ne t V alu e f CH P or Assessed Value Minimum % 0.00% Property Tax Rate 3.50% Revenue Assumptions 3.50% Levelized Energy Price ($/MWh) 156.10 % of Levelized Rate Escal...

AI summary The document outlines financial and tax-related scenarios from 2012, including property tax rates, revenue assumptions, return metrics, tax rates, depreciation classifications, and maintenance costs. It provides detailed figures on equity IRR, debt service coverage ratios, and depreciation schedules.

1 EXECUTIVE SUMMARY The purpose of this report is to evaluate the feasibility of installing an 8 MW gross (7 MW net) biomass cogeneration system in Antigonish. This system would supply electricity to the grid as well as steam to the existi...

AI summary This report evaluates the feasibility of installing an 8 MW biomass cogeneration system in Antigonish, Nova Scotia. It outlines technical and economic considerations, including a 13% return on equity if electricity is sold at 0.213$ per kWh. The report also highlights benefits such as local job creation and reduced dependence on fossil fuels, and references the use of high-efficiency boilers and sensitivity analyses around fuel costs and electricity prices.

Table 1 Capital Cost Summary – Cogeneration Plant 8 MW COGENERATION PLANT CAPITAL COST SUMMARY Boiler – B&W Bubbling Bed $ 12,720,000 Steam Turbine Generator $4,929,000 Condenser $ 1,060,000 Cooling Tower $ 424,000 Water Treatment $ 398,00...

AI summary The document presents a capital cost summary and financial results for a cogeneration plant. The total capital cost is $36.818 million, and the financial summary indicates that the cogeneration option could be feasible if electricity is sold at $0.213 per kWh.

6 FINANCIAL FEASIBILITY ANALYSIS – COGENERATION

AI summary This section of the document discusses the financial feasibility analysis of cogeneration, focusing on the economic viability and potential return on investment for cogeneration projects.

6.1 Introduction There are several aspects of a project that must be analysed in order to make a sound investment decision. - .1 The project must be technically feasible. In this case the technology is existing and proven. - .2 Funding for...

AI summary The introduction outlines key considerations for evaluating a project, including technical feasibility, funding availability, return on investment (ROI), threshold values, and associated risks such as cost overruns and fuel availability. ROI is explained as a financial metric used to assess profitability and resource utilization.

Table 8 Financial Summary FINANCIAL SUMMARY Annual Electricity Exported 52.552 106 kWh Annual Steam Exported 95,309 106 BTU Annual Fuel Imported 89,672 Tonne (Green) Total Investment 36,818 k CDN Electricity Sale Price 0.213 $/kWh Fuel Pri...

AI summary The financial summary outlines key metrics such as electricity and steam exports, fuel imports, investment, and pricing. It suggests that a cogeneration option may be feasible if electricity can be sold at 0.213"]/kWh.

6.4 Sensitivity Analysis The financial model was run by varying the fuel costs, electric sales cost and capital costs to see what impacts they had on Return on Equity. Return on Equity vs Delivered Fuel Price Figure 8 Sensitivity Analysis...

AI summary A sensitivity analysis was conducted to evaluate the impact of varying fuel costs, electric sales cost, and capital costs on Return on Equity (ROE). The analysis includes visual representations of how changes in delivered fuel price affect ROE and how electricity sales price interacts with fuel price for a 13% ROE.

7 CONCLUSIONS AND RECOMMENDATIONS Biomass cogeneration is a well established technology that is widely used in industrial applications such as pulp and paper mills and sawmills where an abundant and cheap source of biomass is available as...

AI summary The document discusses the feasibility of a biomass cogeneration plant, highlighting its economic and environmental benefits, including job creation and reduced dependence on fossil fuels. It outlines a preliminary business model and indicates that the project could be viable at a 13% Return on Equity with specific pricing assumptions for electricity and thermal energy.

100.0% Total annual revenue - amount in A/R at end of year 50 8.3% 4 Capital Costs Non depreciable Depreciable 0 36,818,040 Total 36,818,040 Depreciation Rates - Straight line - years 30.0 Capital Additions Year -Depreciation on capital ad...

AI summary The text presents a detailed breakdown of financial and capital-related data, including total annual revenue, capital costs, depreciation rates, financing structures, debt terms, and corporate tax rates. It outlines the distribution of capital costs between debt and equity, interest rates on loans, and the timeline for debt repayment.

7 VI. The Cost of Capital for Tidal Projects - 8 Q: What cost of capital did Synapse assume for tidal projects? - 9 A: Synapse assumed 100% equity financing at 15% return on equity. - 10 Q: Does this capital structure represent a community...

AI summary Synapse assumed a 15% return on equity for tidal projects, but this is viewed as a market-based commercial venture, not a community project. Tidal power is in the development phase, and early projects may not yield competitive returns, as seen with Verdant's demonstration project, which sells power at much lower rates than Synapse's estimate.

NOTE: Green Fields are the assumptions differences which we believe to bee more reasonable. TEMPLATE COMPARISON TO CBCL ST> FX BIOMASS REPORT CBCL MODEL CBEX MODEL EXHIBIT-B-5 Retained Earnings Equity ROE % $ $ 14,727,200 1,166,336 7.92% $...

AI summary The text compares retained earnings and return on equity (ROE) between the CBCL model and CBEX model, highlighting differences in assumptions, with green fields indicating more reasonable assumptions.

1. The text above is taken from an email of February 9, 2011 from Synapse to Jonathan Barry of Seaforth Energy which included a Word document attachment, the text of which appears exactly as above. Nova Scotia Utility & Review Board FIT Mo...

AI summary The document presents a financial model for a small wind project (50 kW and smaller) under the Nova Scotia Utility & Review Board FIT Model. It includes details on project costs, reserve account sizing, capital structure, revenue assumptions, and return metrics such as the 20-year equity IRR and debt service coverage ratio.

Electrical Loses and Availability Scotian WindFields Inc believes that Synapse has neglected availability and electrical loses in their calculations. While net capacity factors have been considered, the figures assumed are more in line wit...

AI summary Scotian WindFields Inc. argues that Synapse's calculations for wind projects have overlooked availability and electrical losses, which significantly impact revenue and ROE. They recommend reducing output by 6% for both large and small wind classes to account for these factors.

Q. WHAT ARE YOUR FINDINGS AND RECOMMENDATIONS? A. Synapse assumed 60% debt 1 , 9.5% cost of debt 2 , and 13% after-tax cost of equity 3 . In my opinion it is unrealistic to assume such a project will secure 60% of its financing through deb...

AI summary The expert recommends adjusting the capital structure and return on equity assumptions for a biomass CHP project, arguing that 60% debt financing is unrealistic and suggests 100% equity. A 17.5% return on equity is recommended without an effective fuel cost hedge, or 13% with one.

COST OF EQUITY

AI summary The section titled 'COST OF EQUITY' introduces the topic of determining the appropriate cost of equity for regulatory proceedings. It sets the stage for discussions on return on equity, capital expenditures, and other financial considerations relevant to utility regulation.

Q. HOW DID SYNAPSE ESTABLISH ITS RECOMMENDED COST OF EQUITY OF 13%? A. Synapse acknowledges difficulty in estimating the cost of equity capital. And although Synapse cites several NSUARB proceedings and decisions, including an allowed retu...

AI summary Synapse acknowledges the difficulty in estimating the cost of equity for biomass CHP projects and cites a range of stakeholder opinions on the required return on equity (ROE). It concludes with a recommended ROE of 13% for biomass CHP projects, considering perceived risks and the creditworthiness of project developers.

Q. DO YOU AGREE WITH SYNAPSE'S JUSTIFICATION FOR RECOMMENDING 13% RETURN ON EQUITY? A. No. There are flaws in the logic above. Although the bases for Synapse' assertions are not clear, asserting that either size or "financing off a balance...

AI summary The respondent disagrees with Synapse's recommendation of a 13% return on equity for CHP biomass projects, citing flaws in financial logic. They argue that the cost of equity should be based on project risks, not financing methods or balance sheet status. They also question the effectiveness of indexing and note that fuel risk significantly impacts lenders' returns.

Q. ON WHAT DO YOU BASE YOUR RECOMMENDATION FOR THE COST OF CAPITAL? A. My experience concerning the cost of capital for biomass CHP projects is presented below from two perspectives, (1) market data and (2) a widely-employed theoretical mo...

AI summary The response outlines the basis for the recommendation of the cost of capital for biomass CHP projects, considering both market data and a widely-used theoretical model.

Unsystematic risk premium, Ru: - A controversial additional risk premium associated with investment-specific factors that cannot be diversified or hedged away. - While power projects do involve many risks that are difficult to manage, B&Co...

AI summary The text discusses the unsystematic risk premium (Ru) in power projects, noting that it is a controversial additional risk premium not easily diversified or hedged. B&Co acknowledges the difficulty in estimating this premium and provides an estimated cost of equity using the CAPM model, which includes adjustments for development and construction risks, leading to a final estimate of 17.5%.

Q. WHAT IS THE BASIS FOR YOUR FINDING THAT 13.0% IS A REALISTIC AFTER TAX COST OF CAPITAL WITH A FUEL COST HEDGE? A. In addition to the analysis above, ANSS asked B&Co to evaluate the cost of capital for a biomass CHP project whose rate st...

AI summary The response explains that a 13.0% after-tax cost of capital is realistic for a 2 MW biomass CHP project with a fully effective fuel cost hedge. It references market data, risk adjustments, and Synapse's estimate. The analysis contrasts biomass projects with natural-gas fired projects and accounts for development and construction risks.

Q. WOULD YOU PLEASE SUMMARIZE YOUR FINDINGS? A. Yes. I disagree with Synapse' assumed 60% debt, 9.5% cost of debt, and 13% after-tax cost of equity. In my opinion, 100% equity is a realistic capital structure for 2.0 MW biomass CHP project...

AI summary The respondent disagrees with Synapse's assumptions about the capital structure and cost of capital for 2.0 MW biomass CHP projects, suggesting 100% equity is more realistic and a 17.5% after-tax average cost of capital is appropriate without an effective fuel cost hedge.

Q. What is the calculated steam usage of the facility? - The steam usage of the condensing / extracting facility will include the steam to the process host, the steam used in the deaerator, and the steam used in turbine blade cooling in th...

AI summary The calculated steam usage of the facility includes steam for the process host, deaerator, and turbine blade cooling, totaling a 25,000 pph boiler design. The extraction steam flow to the host facility is assumed to be returned as condensate at 95% efficiency. Only one feedwater heater is used due to low ROI for additional heaters.

A. In part. - 1. Significant components of the capital cost estimate for the CHP plant appear to be missing from the Synapse estimate as identified in the ESI Study. - 2. Costs for producing the extraction steam in the Synapse model are fu...

AI summary The document outlines several discrepancies and recommendations regarding the capital cost estimate for a CHP plant. Key issues include missing components in the Synapse estimate, incorrect allocation of steam costs, absence of parasitic power losses, and overestimation of boiler efficiency. ANSS provides alternative figures and recommends adjustments to financing assumptions and equity cost based on expert testimony.

Evaluation of Criteria for FIT Rate Model In determining how the model should be developed to calculate the COMFIT rate for the various technologies, we believe the model should be developed with a reasonable level of detail to ensure that...

AI summary The document discusses the development of a FIT rate model for COMFIT technologies, emphasizing the need for detailed models that reflect actual costs and considering project size limitations. It argues for separate models for different technologies due to varying risks and financial considerations.

Rate of Return on Equity and Risk Assessment Nova Scotia is a jurisdiction whose electricity is supplied by a monopoly utility that is regulated by the NSUARB. The NSUARB has established a rate of return on equity of 9.35% for the electric...

AI summary Nova Scotia's electricity is supplied by a monopoly utility regulated by the NSUARB, which sets a 9.35% rate of return on equity. This ROE is used in electricity rate setting and is considered a fair rate to attract investment. The utility mitigates business risk through rate increase applications and the fuel cost adjustment mechanism, which helps manage fuel expense variability. This setup is seen as a low-risk model for other generators in the province.

Government Policy Risk The risk associated with the development of a biomass CHP plant is in large part greater than other technologies due to the significant influence that government policy has on biomass fuel prices. While all technolog...

AI summary The development of biomass CHP plants in Nova Scotia faces significant government policy risk, particularly due to biomass fuel price caps and land use policies. These policies limit biomass supply, increase market prices, and create uncertainty for developers. The NSUARB has approved a 60MW biomass project, but risks remain due to ongoing policy uncertainty.

ROE for biomass CHP projects is derived with the assumption that developers will undertake size risk, portfolio risk and development risk. (a) What mechanisms are available to account for fuel risk? Answer: At this point we are considering...

AI summary The document discusses mechanisms to account for fuel risk in biomass CHP projects, including escalating fuel costs in the model, indexing to CPI and diesel fuel prices, and retaining an independent third party to assess actual fuel costs. Each mechanism has its own advantages and disadvantages.

3. Cost of Equity – Start-up projects require rates of return >20% Equating the cost of equity for a single turbine, 1.5MW wind project backed by a community group to that of Heritage Gas is inappropriate. The latter has the scale and reso...

AI summary The text argues that equating the cost of equity for a small-scale wind project with that of a larger, well-established company like Heritage Gas is inappropriate, as the latter has greater scale and resources. Start-up projects, such as the 1.5MW wind project, require higher rates of return, up to 20-30%, as indicated by the Watt Section project in Nova Scotia.

s who do. The existence of these many (often overlapping) incentives in the U.S. makes comparisons between the availability of equity in the U.S. and Canadian renewable energy markets tenuous at best. This highlights the importance of ensu...

AI summary The text discusses the importance of ensuring COMFIT projects in Nova Scotia can achieve a reasonable return on investment, highlighting the challenges of securing debt financing post-financial crisis and the need for appropriate rates. It also notes that the 8% debt rate assumed by Synapse is reasonable, though some projects may achieve lower rates.

Biomass CHP (condensing turbine; new boiler in steam-only scenario in year 10) Assumptions Notes: , Annual O&M (expensed) Escalates at inflation. Site Maintenance 010,574 Escalates at inflation. General & Administrative 0 Escalates at infl...

AI summary The text outlines financial and operational assumptions for a biomass CHP project, including O&M costs, tax rates, depreciation classifications, and return metrics such as IRR and debt service coverage ratios. It details revenue assumptions, tax structures, and maintenance costs over a 20-year period.

Return and the Meaning of Community Perhaps the most important issue in this proceeding is the nature of the financing for Community FIT projects. For the wind and hydro projects: - Synapse assumed that returns would need to attract third-...

AI summary The proceeding discusses the financing of Community FIT projects, with differing assumptions about return rates and community involvement. Synapse assumes higher returns and minimal community support, while others argue for lower rates and active community participation. The Board is urged to set real COMFIT rates to encourage community involvement and achieve renewable energy goals.

Mr. Pynn's Evidence Mr. Pynn suggests that large wind requires 10-year loan amortization, 20% interest during construction, equity "returns in excess of 20-30%," and a capital costs of $4.2 million, rather than Synapse's $3.7 million, base...

AI summary Mr. Pynn presents evidence that large wind projects require specific financial parameters, including 10-year loan amortization and high equity returns, citing the Watts Section CEDIF-financed plant as an example. He compares the Watts Section's costs and contract prices to Synapse's estimates, suggesting lower returns.

Building Economic Opportunities in Rural Nova Scotia Byfocusing on renewable energy sources like wind and tidal, which are naturally abundant in Nova Scotia, this plan enhances opportunities to create good jobs and grow the economy in ever...

AI summary This document outlines a plan to build economic opportunities in rural Nova Scotia by leveraging renewable energy sources such as wind and tidal. Scotian Wind Fields opposes the Consumer Advocate's recommendations, supporting Synapse's Return on Equity targets instead.

6.2.1 Submissions [71] In developing proposed tariff rates under the COMFIT models, Synapse did not make any specific assumptions about the project ownership. As noted earlier in this Decision, the approach that was adopted was to determin...

AI summary Synapse developed COMFIT tariff rates using a 'typical cost' approach to ensure low tariffs while encouraging development. They considered the impact of ownership structures, particularly cost of capital and income tax treatment, but found the net impact on most resource classes to be small. For certain projects, rates were averaged between taxable and non-taxable assumptions.

6.3.1 Submissions [76] In developing the model to determine the COMFIT rates, Synapse considered financing. Financing has three main costing components, the debt to equity ratio ("DIE ratio"), cost of debt and a return on equity ("ROE"). S...

AI summary Synapse developed a model to determine COMFIT rates, considering financing components such as debt-to-equity ratios, cost of debt, and return on equity. Different ratios and costs were applied based on project type, and assumptions about loan amortization and reserve accounts were included in the model.

[85] The Board asked about the reduced ROE: Q: ... On page 25 on lines 17 through 19, you talk about operating at a known feedin tariff should reduce the risk of development comparing the proposal. Was this part of your analysis of why the...

AI summary The Board inquired about the reduced return on equity (ROE) of 11 percent compared to 13 percent, noting that a known feed-in tariff reduces development risk. The response explains that the lower ROE is due to the predictability of revenue under COMFIT compared to previous bids based on ecoenergy credits.

[86] This was explored by Keith Tawse, who in his reply argument stated: ...However, in cross-examination, (transcript of Hearings April 7th, 2011, pages 946-947), the Consumer Advocate was unable to provide any evidence as to the existenc...

AI summary Keith Tawse argues that without mechanisms to provide capital for large wind projects at less than market rates, Synapse's proposed rates should be accepted. Toby Couture suggests a return on equity of 13% is reasonable and that current tariffs are sufficient to attract investors.

9.4 Financing [173] Synapse in its evidence stated: ... In addition, the lenders we talked to who were familiar with biomass felt that CHP projects could be financed with 60% debt if the question of fuel cost risk were addressed in a satis...

AI summary Synapse and Jeffrey Bodington discuss financing for biomass CHP projects, noting that lenders require higher compensation for fuel cost risks. Synapse increased debt and equity rates, but Bodington argues that the adjustments are insufficient to protect lenders from significant losses.

[177] As for DIE ratios Mr. Bodington stated: I'm saying that Canadian investors without some of the benefits of the U.S. will have to raise more equity, and that will make the project more costly. But that doesn't make a project impossibl...

AI summary Mr. Bodington discusses the challenges of financing biomass projects in Nova Scotia, emphasizing the need for equity over debt due to high cost of capital and the reluctance of sawmills to invest in side businesses. He also notes that smaller projects (e.g., 2 MW) are not economically viable under current rate schemes.

9.4.1 Findings on Financing [183] The Board accepts the wide experience of Mr. Bodington in financing various electric generation projects, of which some are biomass. However, the Board finds it difficult to conclude a Nova Scotia sawmille...

AI summary The Board acknowledges Mr. Bodington's experience in financing electric generation projects but questions the feasibility of a Nova Scotia sawmiller financing a biomass CHP project solely through third-party equity. It concludes that a mix of debt and equity is more likely. The Board also accepts the use of a fuel escalator mechanism and Synapse's rate determination for a biomass CHP project.

Nova Scotia COMFIT Model Depreciation Worksheet: Bottom Synapse Compliance Large Wind, Taxable Owner Ope ratin Yea g r 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 % of Levelized Rate Escalating @ Infl. 0.0% Other Revenues (increas...

AI summary This document presents a depreciation worksheet for a large wind project under the Nova Scotia COMFIT model, including rate escalation, return metrics, and revenue projections over a 20-year period.

Biomass CHP Cost Scenarios Synapse Compliance 85% Availability No Fuel Capacity I act 013. Net Capacity Factor 60% of time at full extraction, another 30% at full co Net Output in MWhs 13,534 , Annual Operating Expenses Annual Fuel Cost Fu...

AI summary The document presents a biomass CHP cost scenario with 85% availability and no fuel costs. It includes details on net capacity factor, output, operating expenses, tax rates, and financial metrics like IRR and debt service coverage ratio. The analysis assumes no fuel costs and outlines depreciation and maintenance schedules.

4.0 Study Deliverables The cost of generating electricity can be categorized into 4 principal components; capital cost, non-fuel O&M, fuel cost and financing. The purpose of this study is to determine values for the capital cost, non-fuel...

AI summary This section outlines the study's deliverables, focusing on determining capital cost, non-fuel O&M, and operating parameters of the plant. Wood fuel cost and financing details will be sourced externally, including target return on equity, capital structure, amortization, and tax considerations.

6.2 Capital Structure and Cost ANSS recommends assuming 100% equity financing and a return on equity of 17.5%. We have analyzed the impact of this change in the Excel file "Synapse U-6 Capital Structure." To examine this, we removed debt f...

AI summary ANSS recommends 100% equity financing with a 17.5% return on equity, which impacts the fixed portion of the rate. Changes to assumptions such as debt service reserve account and interest during construction were made in the 'Synapse U-6 Capital Structure' Excel file, resulting in a fixed rate of $128 per MWh.

Table 1. The Impacts of the Changes Analyzed in U-2, U-6 and U-6(a) Change Analyzed Fixed Component ($/MWh) Variable Component ($/MWh) Full 2012 Rate ($/MWh) Total Sources of Funds 9,425,351 % of Levelized Rate Escalating @ Infl. 0.0% Amou...

AI summary Table 1 outlines the financial impacts of changes analyzed in U-2, U-6, and U-6(a), including fixed and variable components, debt and equity ratios, tax rates, and depreciation classifications. It provides details on sources of funds, return metrics, and financial incentives.

Scenarios in $2012 Val for Ste -On ly ue am Gro ss V alu e fo r C HP Net Va lue for CH P Capital Structure (Sources of Funds) Annual Decline in Assessed Value 1.00% Amount ($) Assessed Value Minimum % 0.00% Grants (net value) 0 Property Ta...

AI summary The document outlines financial scenarios from 2012, focusing on capital structure, revenue assumptions, and return metrics. It includes details on debt and equity distribution, tax rates, and financial incentives, with an emphasis on the debt service coverage ratio and equity internal rate of return.

Nova Scotia COMFIT Model Synapse U-6 Capital Structure Working Capital (months of Year 1 OPEX) 6 Assessed Value (%) Machinery and equipment is not assessed. Debt Service Reserve (months of P&I) 6 Assessed Value ($) 100,000 Capital Structur...

AI summary The text presents a table related to the Nova Scotia COMFIT Model, including details on capital structure, debt service reserves, equity, grants, and tax rates. It outlines financial assumptions, revenue projections, and metrics such as the debt service coverage ratio and internal rate of return.

Scenarios in $2012 fo r S On Va lue tea ly m- Gr e f CH s V alu P os or e f CH Ne t V alu P or Net Generator Capacity (MW) 2.05 1.55 MW at full extraction, 2.05 MW at full condensing Energy Production: Net Capacity Factor 60% of time at fu...

AI summary The text presents a 2012 scenario analyzing a power generation project, including net generator capacity, energy production, annual operating expenses, fuel costs, and financial metrics such as return on equity and debt service coverage ratios.

Produce a Synapse model using Neal Livingston's assumptions – payback in years 15-20 Mr. Livingston requested that Synapse examine what COMFIT electricity rate would be needed to provide CEDIF shareholders with a 13% return and outside inv...

AI summary Mr. Livingston requested a Synapse model using his assumptions to determine the COMFIT electricity rate required to provide a 13% return to CEDIF shareholders and a 20% return to outside investors. The model assumes a 50-50 equity split, leading to a weighted average return on equity of 16.5%, which corresponds to a COMFIT rate of $160 per MWh, $21 higher than the previously proposed rate.

Nova Scotia COMFIT Model Large Wind (Over 50 kW) Synapse U-7 Nova Scotia Comfit Model Large wind (Over 50 kw) 1 Synapse U-7 Upfront Maintenance (months of Year 1 O&M) 6 Project hard costs less interconnection 2,565,000 Working Capital (mon...

AI summary The text presents financial and operational data for a large wind energy project in Nova Scotia, including upfront maintenance, working capital, debt service reserve, capital structure, revenue assumptions, and return metrics. It outlines key financial figures such as the levelized energy price, debt service coverage ratio, and equity returns.

Produce a Synapse model using Neal Livingston's assumptions – Pynn letter and payback in 10 years In the excel file titled, "Synapse U-8," and the attached hard copies of that model run, we have made the four changes to the input assumptio...

AI summary The text describes modifications made to the Synapse U-8 model based on Mr. Pynn's letter, including a 10-year loan amortization, 20% interest rate during construction, 25% return on equity, and total project costs of $4.2 million. The resulting COMFIT rate is $252 per MWh, which is $113 per MWh higher than the original Synapse proposal.

Biomass CHP (condensing turbine; new boiler in steam-only scenario in year 10) Assumptions Notes: , Total After-Tax Equity Return After-Tax Internal Rate of Return 12.939 Debt Loan Balance Interest 9.509 Principal Annual payment Debt Servi...

AI summary The document presents a financial analysis of a biomass CHP project with a condensing turbine and a new boiler in a steam-only scenario in year 10. It includes assumptions related to equity return, debt loan balance, interest, principal annual payment, and debt service coverage ratio.

Darren Hartlen P.Eng Direct: 902 421 7241 E-Mail: [email protected] Nova Scotia Utility & Review Board FIT Model Biomass CHP condensing turbine; Biomass CHP condensing turbine Total Project Cost 23,236,796 Net of steam-only scenario Land Lea...

AI summary The text presents financial and technical details of a biomass CHP condensing turbine project, including costs, capital structure, revenue assumptions, and return metrics. It outlines the project's total cost, funding sources, and financial performance indicators such as the debt service coverage ratio and equity IRR.

Pre-Tax Internal Rate of Return 13.13%

AI summary The document presents a Pre-Tax Internal Rate of Return of 13.13%, which is a financial metric used to evaluate the profitability of an investment or project.

The Model Developed in Vermont - • The model is a Microsoft Excel workbook with three main worksheets: worksheets: - Assumptions - Cash Flow - Tax Depreciation - • Main steps in using the model - Set target rate of return - Enter data abou...

AI summary The model developed in Vermont is a Microsoft Excel workbook with three worksheets: Assumptions, Cash Flow, and Tax Depreciation. It is used to set a target rate of return, input project data, and adjust revenue per kWh to achieve the desired Internal Rate of Return (IRR).

The Assumptions Worksheet Assumptions: General Inflation Factor (revenue and expenses) 2.50% % of Base Price Escalating @ Infl. 0% Uses of Funds Debt Reserve 109,500 Maint. Reserve 30,000 Working Capital 14,749 Total Working Capital & Reve...

AI summary The Assumptions Worksheet outlines key financial and operational assumptions for a project, including inflation factors, funding sources, tax rates, capital structure, and operating inputs. It provides details on project costs, revenue assumptions, and return metrics such as the internal rate of return and debt service coverage ratio.

- •Calculates the net present value and rate of return of an investment based on the projected revenues and expenses - •Pros: - •Can take into account time-sensitive events such as major equipment repairs or replacements - •Easily structur...

AI summary The text describes a method for calculating the net present value and rate of return of an investment, highlighting its ability to consider time-sensitive events and tax benefits, as well as its transparency.

MR. COADY: ...And the Synapse consultants at one of the earlier technical sessions indicated that to the best of their knowledge there were no universities interest in combined heat and power in Nova Scotia. I knew that was not the case. A...

AI summary Mr. Coady discusses his efforts to inform universities in Nova Scotia about combined heat and power (CHP) opportunities, citing past work and proposals. He also mentions that the university sector was initially unaware of the importance of CHP. Mr. Merrick asks whether a 13% return on equity is a requirement for universities considering CHP projects under COMFIT, to which Mr. Coady agrees.

6. Wind and Hydro Return on Equity Synapse defaulted to the ROE authorized by this Board in relation to Heritage Gas. However, as pointed out by Mr. Chernick, that is an inappropriate comparison and does not justify the ROE proposed. Herit...

AI summary The text discusses the return on equity (ROE) for wind and hydro projects, noting that Synapse used the Heritage Gas ROE as a reference, but this was criticized as inappropriate. The Consumer Advocate suggests a lower ROE for community organizations compared to commercial entities.

Re: Renewable Energy Community Feed-In Tariffs - BRD-E-R-10/Matter No: M03632 - 1. This is the submission of the Alliance of Nova Scotia Sawmillers ("ANSS"). It focuses on the Tariff to be established by the Nova Scotia Utility and Review...

AI summary The Alliance of Nova Scotia Sawmillers submits that the Tariff for a biomass CHP Facility should be based on cost-based rates rather than least-cost principles, emphasizing the need to consider capital costs, operating costs, debt-equity ratio, internal rate of return, and fuel cost reset mechanisms.

Internal Rate of Return 63. Synapse lacked an evidentiary basis or a specific methodology for recommending a 13% cost of equity for Biomass CHP. Reliance appears largely to be placed on the unnamed U.S. investment banker: & lt;sup>35 Trans...

AI summary Synapse's recommendation of a 13% cost of equity for Biomass CHP lacks an evidentiary basis or methodology, relying instead on an unnamed U.S. investment banker. The banker suggested 8% debt for projects with managed fuel cost risk but indicated higher rates for projects with less risk mitigation.

p. 1100 Mr. Couture: …I don't think it's a sound basis on which to build a policy. To assume hypothetically that that much capital enough to finance 300 gigawatt hours of or 50 to 300 gigawatt hours or renewable electricity per year will b...

AI summary Mr. Couture argues that assuming sufficient capital will be available to finance renewable electricity generation based on goodwill and lower-than-risk-adjusted rate of return is not a sound basis for policy design.

Mr.Couture, p. 1097-99 I don't think there's an average rate of return that a CEDIF project can assure or in any way guarantee… I think the concept that perhaps needs to be introduced here is of a risk adjusted rate of return. If I'm inves...

AI summary The speaker discusses the challenges of determining a risk-adjusted rate of return for CEDIF projects, emphasizing that renewable energy investments carry higher risks compared to low-risk investments like GICs. The speaker agrees with consultants' assessment that higher returns are necessary due to these risks.

6.3.1 Submissions [76] In developing the model to determine the COMFIT rates, Synapse considered financing. Financing has three main costing components, the debt to equity ratio ("DIE ratio"), cost of debt and a return on equity ("ROE"). S...

AI summary Synapse developed a model to determine COMFIT rates, considering financing components such as debt-to-equity ratios, cost of debt, and return on equity. Different ratios and rates were applied based on the type of project, and assumptions were made regarding loan amortization, fees, and reserve accounts.

[85] The Board asked about the reduced ROE: Q: ... On page 25 on lines 17 through 19, you talk about operating at a known feedin tariff should reduce the risk of development comparing the proposal. Was this part of your analysis of why the...

AI summary The Board questioned why a reduced return on equity (ROE) of 11% was chosen over 13%, with the response indicating that the known feed-in tariff under COMFIT reduces development risk compared to previous bids that relied on ecoenergy credits, leading to lower expected costs.

[86] This was explored by Keith Tawse, who in his reply argument stated: ...However, in cross-examination, (transcript of Hearings April 7th, 2011, pages 946-947), the Consumer Advocate was unable to provide any evidence as to the existenc...

AI summary Keith Tawse argues that without mechanisms to provide capital at below-market rates, Synapse's proposed rates should be accepted. Toby Couture suggests a return on equity of 13% is appropriate to attract investment in community-based and municipal projects.

[177] As for DIE ratios Mr. Bodington stated: I'm saying that Canadian investors without some of the benefits of the U.S. will have to raise more equity, and that will make the project more costly. But that doesn't make a project impossibl...

AI summary Mr. Bodington discusses the challenges of financing small biomass projects, emphasizing the need for equity over debt and noting that projects under 6.5 megawatts are not economically viable. He also mentions that sawmills may prefer not to use their capital for such projects, and that banks are reluctant to finance small-scale projects.

9.4.1 Findings on Financing [183] The Board accepts the wide experience of Mr. Bodington in financing various electric generation projects, of which some are biomass. However, the Board finds it difficult to conclude a Nova Scotia sawmille...

AI summary The Board accepts Mr. Bodington's expertise in financing electric generation projects, including biomass, but finds it unlikely that a Nova Scotia sawmiller would finance a Biomass CHP project solely with third-party equity. Instead, a mix of debt and equity is expected. The Board also accepts the use of a fuel escalator mechanism and a 13% ROE for the project, aligning with Synapse's calculations.

9.7 Fuel Escalator [224] Synapse proposed an index for fuel in recognition that biomass fuel costs will fluctuate over time. They based their adjustment mechanism on one already approved by the Board: We are proposing to treat biomass fuel...

AI summary Synapse proposed a fuel cost index for biomass, based on a previously approved mechanism. ANSS argued that the 75/25 CPI/Diesel index is not an effective hedge for fuel costs, which would increase the risk profile of biomass projects and justify a higher cost of capital.

Nova Scotia COMFIT Model Depreciation Worksheet: Bottom Synapse Compliance Large Wind, Taxable Owner Ope ratin Yea g r 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 % of Levelized Rate Escalating @ Infl. 0.0% Other Revenues (increas...

AI summary This document presents a depreciation worksheet from the Nova Scotia COMFIT Model, focusing on the Bottom Synapse Compliance Large Wind, Taxable Owner. It outlines return metrics including a 20-year equity IRR of 13.00% pre-tax and after-tax, along with other revenue factors that increase with inflation.

limitations to that and, you know, you'll get a chance to 1 examine such people later in the week, right? 2 MR. KEITH: Can I add a point there? 3 MR. MERRICK: Sure. 4 MR. KEITH: When we thought about our 5 cost of capital, we intentionally...

AI summary The discussion revolves around the cost of capital for community-based projects, specifically how the cost of capital for NSPI was adjusted to account for additional risks. The conversation also touches on potential biases in developer advice regarding tariff rates.

- all you can think of? Page 64 NSUARB-BRD-E-R.10 1 MR. RICKERSON: Well, related to what 2 the siting is just kind of local knowledge. 3 MR. MERRICK: Well, you might 4 MR. RICKERSON: There's a lot 5 MR. MERRICK: have a costing fact. 6 It m...

AI summary The discussion centers on the evaluation of an organization's ownership structure and its potential advantages, such as local job creation and economic benefits, in the context of a regulatory proceeding. The participants also reference the identification of negative features of ownership and their potential cost implications.

MR. KEITH: Can I speak to this? The testimony filed by the Alliance of Sawmillers suggests that only way their project is going to be financeable is with no debt, all equity, and a return of 17.5 percent. different ways, that fuel pricing...

AI summary Mr. Keith discusses concerns raised by the Alliance of Sawmillers regarding the financing of a project, which requires a 17.5% return with no debt. Fuel pricing risk is identified as a significant factor affecting lenders' perceptions of project risk and influencing cost of capital assumptions.

1 NSUARB-BRD-E-R.10 Page 93 starting point to where we have them now. So those are 2 our assessment of the minimum cost of capital it would 3 need to bring online biomass projects. 4 All right. MR. MERRICK: 5 Let me ask you about the rate...

AI summary The discussion focuses on the rate of return for wind and hydro projects, specifically referencing the Heritage Gas rate of return allowed in the province. The speaker questions whether Heritage Gas, a commercial entity, is a legitimate comparator to a community organization due to differing motivations.

- were qualified to give opinion evidence with respect to - the energy industry and consumption, so I didn't catch - your qualifications with respect to utility financing and - risk assessment. - Your discussion of the cost of equity - is...

AI summary The discussion centers on the cost of equity for a biomass CHP project, with the expert referencing reliance on external expertise in biomass project lending and the allowed return on equity for Nova Scotia Power. The debt/equity split is also addressed, assuming 60% debt and 40% equity financing.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS fact to inquire about? When size of the project is a risk 1 NSUARB-BRD-E-R.10 Page 201 factor, would you not inquire about the size of the 11 different parameters of the cost of capital in th...

AI summary The discussion revolves around how lenders assess project risk, particularly fuel cost risk, when evaluating financing for a project. Lenders consider multiple factors such as cost of debt, amortization period, debt/service coverage ratio, and debt/equity ratio as a package to evaluate risk. The conversation also touches on the financing of CHP projects with 60% debt if fuel cost risks are adequately addressed.

probably produce projects, or we could bump the rates up 1 NSUARB-BRD-E-R.10 Page 239 much higher in an effort to be certain that we produce a 16 the work you've done because I think it's fundamentally 17 important? 18 MR. RICKERSON: I don...

AI summary The discussion centers on the return on investment for wind projects in Nova Scotia, comparing them to feed-in tariff rates in Vermont and SDIF models. Concerns are raised about the SDIF model's effectiveness and investor satisfaction.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS it. SDIFs are great." They've been holding, you know, 1 public information sessions before this hearing, but 1 Page 254 NSUARB-BRD-E-R.10 that model work within the SDIF shareholders still ow...

AI summary The discussion revolves around the Small Developer Incentive Fund (SDIF) and its role in financing projects, with concerns raised about the assumed return on equity and the need for market testing to determine project viability and investor requirements.

their size. 1 Page 346 NSUARB-BRD-E-R.10 MR. RICKERSON: Well, I think Halifax 22 MR. RICKERSON: We are familiar with DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS 1 literature that states that it is more cost it is 2 lowers financial risk,...

AI summary The text includes a portion of a regulatory proceeding where stakeholders discuss the cost of capital, interest rates, and the design of wind tariffs. The discussion involves Mr. Rickerson, Mr. Keith, and Ms. Ashworth, and references the construction of a wind tariff in accordance with regulations.

I don't think they have the information you want but you - can ask your question. - MS. ASHWORTH: Okay. I'm just - wondering if, yeah, tidal technologies and the state of - development that they're in would lead you to believe that - they...

AI summary The discussion revolves around the lifespan of tidal technologies and the implications of proposed return on equity rates for community members investing in renewable energy projects, such as co-ops or CEDIFs.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS individual shareholder is there some projection of how 1 NSUARB-BRD-E-R.10 Page 353 much that might result in for that individual? DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS 1 Page 356 NSU...

AI summary The discussion revolves around the return on equity (ROE) in Vermont, initially set at 12.13% and later adjusted to 9.75%. The adjustment was influenced by the 30% Federal Investment Tax Credit available for renewable energy projects, which impacted the calculation of the final ROE.

- question if you wish. Page 436 NSUARB-BRD-E-R.10 8 indicated that the cost of capital could there was a 9 very wide range in which the cost of capital these cost 10 of capital parameters might fall. But they did indicate, 11 as I said, t...

AI summary The text discusses a regulatory proceeding involving discussions about the cost of capital and its assumptions, as well as a question about whether a biomass project conforms to combined heat and power definitions. The dialogue includes uncertainty about the impact of a diesel cost index on capital costs and references to a specific project.

- tariff. Page 490 NSUARB-BRD-E-R.10 1 MR. DEVEAU: Okay. A few questions 2 I don't want to jump around too much, but they're pretty 3 short. 4 Yesterday in questions, I think, from 5 Ms. Rubin I think it may have been Ms. Rubin she was 6 a...

AI summary The discussion revolves around return on equity (ROE) rates for combined heat and power (CHP) projects, with reference to examples from Ontario and Vermont. The testimony indicates that ROE rates are often standardized across technologies in certain jurisdictions, such as Ontario and Vermont, and that research was conducted on ROE rates in other regions, including Europe and the U.S.

Page 534 NSUARB-BRD-E-R.10 1 project financing assumptions. 2 Synapse has assumed that the project 3 can be financed based on 60 percent debt and 40 percent 4 equity at a cost of debt of 9.5 percent and equity at 13 5 percent. Mr. Bodingto...

AI summary The document discusses financing assumptions for a project, with Synapse assuming 60% debt and 40% equity, while Mr. Bodington argues for 100% equity due to the project's size and risk. He also highlights the risk of a fixed-price contract with a CPI diesel index and suggests a reopener mechanism to mitigate fuel price escalation risks.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS some cases you have to a million dollars on a system NSUARB-BRD-E-R.10 Page 615 impact study, you can identify these kinds of constraints 7 MR. BODINGTON: Go ahead, and then 8 I'll say some m...

AI summary The discussion highlights the challenges faced by developers in securing financing for biomass CHP projects, emphasizing the need for pre-financing evaluations and permits. It also contrasts the risk profiles of regulated utilities and biomass CHP projects, noting higher equity rates required for the latter.

MR. OUTHOUSE : Plus, I realize, a fuel protection mechanism, which we'll get to later. MR. TRAVIS : That's correct. That is including that's the purview that a fuel adjustment mechanism is in place to keep the cost of equity at 13 percent....

AI summary The discussion centers on the fuel adjustment mechanism and the assumption of a 13 percent return on equity in a model. The participants confirm that the model assumes a 13 percent return on equity and that an effective fuel protection mechanism is in place.

recourse financing. Page 638 NSUARB-BRD-E-R.10 22 to do that? DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS 1 NSUARB-BRD-E-R.10 Page 641 MR. BODINGTON: Correct. 2 MR. OUTHOUSE: Now, you've recommended 3 that the return on equity for these...

AI summary The discussion revolves around the recommended return on equity for biomass projects, with a focus on the effectiveness of fuel cost hedges. The witness indicates that a 17.5% return on equity is appropriate if there is no effective hedge, while a lower rate may be acceptable if an effective hedge is in place.

- MR. BODINGTON: I don't know anything - about JDI but let me give you another answer to that large company with many plants is a small to medium - particular question. - You'll see that in my example here I - used I provided you with some...

AI summary The conversation discusses the use of an enterprise ratio in evaluating the cost of capital for a large power company, AES, with the speaker emphasizing that the calculation used was favorable to cost of capital and not intended to bias the result.

need? 1 NSUARB-BRD-E-R.10 Page 681 minutes. 13 business, and if you're saying you would use it to compare 14 power companies to devise your rate of capitalization, 15 when the dominant entity here is a lumber company, why 16 would you do t...

AI summary The discussion revolves around the determination of the cost of capital for a power project, emphasizing that it is based on the risks of the project itself rather than the investor's other business ventures. The conversation highlights the importance of understanding financial principles in this context.

There is no theoretically correct way - to allocate costs for joint products. That principle - applies to Mr. Hayes' capital costs as well as it applies - to my cost of capital. - So it's a consideration. There is no - great answer. Maybe...

AI summary The discussion addresses the allocation of costs for joint products, emphasizing the need to reflect risks associated with generating electricity for export and using biomass fuel in the cost of capital. It also considers the implications of recourse financing on this allocation.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS done? What you've done is taken the rest of the business 1 and eaten away at its ability to raise capital for other 2 purposes. 3 So recourse financing could make the 4 if you just do the sim...

AI summary The discussion revolves around the concept of recourse financing and its impact on the cost of capital. It argues that recourse financing does not reduce the overall cost of capital but shifts risk to another party, which may affect their ability to invest or borrow for other projects.

1 Page 730 NSUARB-BRD-E-R.10 If the reopener includes material 2 discretion on the part of some party such as the Board, 3 that will not be an effective transfer of risk. It will 4 not be effective, therefore, in reducing the cost of 5 cap...

AI summary The text discusses the ineffectiveness of a reopener mechanism in transferring risk effectively, as it allows discretion by the decision maker, potentially leading to higher costs for investors. It also references incentives to control fuel costs and mentions a 13% cost of equity calculation that includes risk transfer.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS pressure and steam loads and those kind of things. If the 1 NSUARB-BRD-E-R.10 Page 759 Board would like, we have someone in the room who can 18 if it requires a 13 percent or 15 percent or do...

AI summary The testimony discusses the calculation of a required tariff level to achieve a 13% rate of return on investment, based on assumptions provided by Synapse and an analysis from CBCL. The discussion includes the capital costs and the necessary rate per kilowatt hour.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS lay of the land was that Antigonish District Heating 1 Limited owned and operated that facility and St. F.X. 16 MR. MERRICK: I take it you're not 17 able to tell the Board whether the univers...

AI summary The text discusses a question posed by Mr. Merrick regarding the feasibility of a project by the university, specifically whether it would proceed if it could not achieve certain financial returns, such as a return on debt or equity at specified rates.

it if you weren't able to get 13 percent return on equity - that wouldn't necessarily kill the interest in the - project? - MR. COADY : It's a large priority to - fix the problem at St. F.X., and in an ideal world, you - would want to be a...

AI summary The discussion revolves around the return on equity (ROE) required for a project at St. F.X., with a focus on whether a 13% ROE is a necessary condition for proceeding. The speaker acknowledges the importance of addressing the issue but notes that the final financial decision would be made by the university's financial team.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS all of these assumptions they're saying that a 13 percent 1 return on equity would be required to finance this. 2 That's their advice. 3 MR. MERRICK: Well 4 MR. COADY: Whether or not that's t...

AI summary The discussion revolves around a 13% return on equity required for a project, as advised by consultants. The conversation also touches on the use of waste heat from the project by the university and whether the university would be paying for it, with implications for the feed-in tariff program.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS million BTU, if I understand it Page 792 NSUARB-BRD-E-R.10 1 MR. COADY: Right. 2 MR. DOEHLER: is only to replace 3 the cost of fuel the plant now runs. It does not include 4 the operating cos...

AI summary The discussion revolves around the cost structure for a fuel plant, specifically the cost per million BTU, and the financial relationship between the university and the developer. There is a mention of return on equity and potential rate reductions if the return on equity is removed from calculations.

Page 812 NSUARB-BRD-E-R.10 NSUARB-BRD-E-R.10 Page 813 4 your money into a stock market index, you sometimes get 5 more than 13 and sometimes you get something negative. 6 When I'm making these kinds of 7 decisions, I'm looking at what I'd...

AI summary The discussion revolves around the return on equity for utilities and the risks involved in community projects. The speaker compares utility returns to investment options like mutual funds and GICs, noting that Heritage faces significant risks without revenue guarantees. The conversation also touches on the challenges of quantifying risks in project development.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS MR. MERRICK: to give an almost 1 Page 824 NSUARB-BRD-E-R.10 surprised me, I thought you were going to say you locked 2 the door at 8:30. 3 THE CHAIR: But shortly after that 4 people arrived a...

AI summary The speaker discusses the definition of a community project and its impact on return requirements, contrasting Synapse's interpretation with the argument that community projects should offer lower returns due to community support. The speaker also mentions varying equity and debt requirements from wind developers and suggests testing community support over time.

that the project accepted a contract from NSPI at about $127 a megawatt hour, which is considerably lower than - also higher than Synapse's assumption. - If you just plug those two numbers - into the Synapse model, I get a total pre-tax re...

AI summary The text discusses a project contract with NSPI at a rate of $127 per megawatt hour, which is lower than Synapse's assumptions. It estimates a pre-tax return on investment of about 8 percent, with potential higher returns after tax credits. Concerns are raised about the accuracy of reported wind capacity factors, which could impact investor confidence.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS whether these turbines last 20 years or less, five years, 1 the ones that would be installed in the next few years are 20 or demonstrated to have some opinion or knowledge with 21 regards to...

AI summary The discussion revolves around the cost of capital and development costs for renewable electricity projects in Nova Scotia, with a focus on community support and investment in renewable projects. The witness is questioned about consulting with Nova Scotian communities and stakeholders involved in renewable electricity production.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS large wind farm, if you've got 20 to 30 turbines, you're 1 going to have somebody nearby to take care of the routine 14 certainly don't want to digress into the value of the 15 economic value...

AI summary The discussion questions whether discounting the return on equity for community investors in renewable energy projects would conflict with the assumption of economic development benefits from community ownership. The argument suggests that such a policy might redistribute money within the province but may not result in overall gains for residents.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS difference, but there may be some, depending upon how you 2 MR. PYNN: Okay, that's all I have. 6 be raised for those projects at an average of 8.5 percent. 7 Is that what you're saying? 8 MR....

AI summary The discussion centers around the cost of capital for community projects, with a proposed average of 8.5 percent. The conversation questions whether this rate is reasonable, noting that it is similar to Nova Scotia Power's weighted average cost of capital. The participants express uncertainty about the feasibility and implications of this rate.

supply chain system. Page 1096 NSUARB-BRD-E-R.10 1 So in those countries, the typical 2 rate of return targeted under the feed-in tariff ranges 3 from 5 to 9 percent. 4 So there is some MR. MERRICK: 5 advantage. 6 MR. COUTURE: In mature we...

AI summary The discussion focuses on the expected rate of return for renewable energy projects in Nova Scotia, contrasting it with rates in more developed markets like Germany. The speakers note that Nova Scotia lacks the mature supplier chain and experience to achieve lower rates of return, and there is uncertainty about the profitability of CEDIF projects.

- Advocate's articulation of that reality. - What I was trying to bring attention - to is that it's not necessarily an advisable basis on - which to build public policy or renewable energy policy - for that matter. - The presence of an end...

AI summary The speaker argues that relying on goodwill and free money is not advisable for renewable energy policy. They suggest that renewable energy projects should aim to do better than break even to attract investment. They agree that a 13% return on equity is reasonable, though they acknowledge some debate around the exact figure. They also believe current tariffs are adequate to attract investors.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS I don't have any insight into that except to say that in 1 NSUARB-BRD-E-R.10 Page 1239 this region, which I believe is much more difficult to 2 obtain equity and financing than any other regi...

AI summary The discussion centers on the challenges of obtaining financing for energy projects in a specific region, with a focus on the cost of debt and return on equity. The speaker mentions that potential lenders are unwilling to consider rates lower than 7.5% for a 10-year term, which is seen as too risky for equity returns in the first decade.

have to understand that. 1 Page 1246 NSUARB-BRD-E-R.10 These are prospectuses for what's 22 doing that bid price, what did you calculate in that DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS 1 number as being your cost of debt? What was th...

AI summary The text discusses the calculation of a bid price and the cost of debt, with Mr. Livingston estimating the cost of debt to be between 7.5% and 8%. He references previous Power Purchase Agreements (PPAs) and mentions that the bid price was based on internal financial models and industry knowledge, though no written record of the calculations was available.

- investors wanted to get 20 or 30 percent. - I actually do a lot of stuff in my - head on this. I don't find it that complicated that if - we're going to have to get in the range of 20 to - 30 percent for an equity investor and I know how...

AI summary The discussion revolves around calculating a return on equity for a power project, with the speaker explaining how they estimate returns based on free cash flow and loan costs over 15 years, rather than using a fixed percentage rate.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS small businessperson in Hamilton, where I grew up, and I 1 NSUARB-BRD-E-R.10 Page 1259 can only say that Nova Scotia is one of the strangest 2 places I've ever encountered for equity. And we...

AI summary The testimony discusses Nova Scotia's approach to equity and economic support, highlighting the government's provision of hundreds of millions of dollars to industries, while questioning why CEDIF players should expect different returns compared to regulated utilities like NSPI.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS In particular, we'd also like to 1 address the comments that have been made by the Consumer 2 Advocate regarding returns and the nature of community 3 projects. And I mentioned this in cross-...

AI summary The testimony discusses the Consumer Advocate's comments on returns and community projects, emphasizing the importance of economic development as a policy objective. It supports Synapse's return on equity proposal over the Consumer Advocate's. The cross-examination also inquires about wind projects operated by the company.

- DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS Thunder Bay we were involved in the 1 NSUARB-BRD-E-R.10 Page 1323 development side of that. That was 100 megawatts. Digby 1 In assuming what rate may be set and 2 doing whatever business plan...

AI summary The discussion focuses on the rate of return expected by different types of investors, including personal investors under the CEDIF and outside investors. Personal investors under CEDIF are interested in returns of around 11-13%, while outside investors expect higher returns of around 20%.