Prosjektanalyse og verdsettelse av Stardalen Kraft

Bjarte Eik-Nes

Student thesis: Master thesis


Investing in a hydropower project is usually not associated with many complex aspects. The technology is well known and knowledge in the area is extremely high. Nevertheless, investing in hydropower is associated with many uncertainties. Some of the uncertainties I have found out in the aspect of profitability is the energy price, interest, taxes, depreciation, investment costs, operating costs, production and government policy. All of these key drivers have different ways of affecting the project's profitability. I have through various sensitivity analyses found that the energy price, investment costs and production have the greatest impact on the project profitability. The development of the various key drivers is difficult to determine. I have used the Geometric Brownian Motion model to provide an estimate of the energy prices. It shows a neutral development from the current forward price of NOK 386 kr/MWh, although there is great uncertainty in the selected model. Regardless, it is certainly a sober choice of electric energy price development. The production I have chosen in this paper is constant. This is based on experiences from other hydropower projects, which shows that the production is relatively stable in the long term. The investment costs are associated with some uncertainty. To date, they had risen to 140 million. There is still some planning that remains, so it is doubtful whether it will end at 140 million or not. However, I have through a project risk analysis considered and made suggestions how the risk of an insufficient budget can be reduced. Stardalen Kraft will during this project work with various risk elements. I have exemplified many of them and will mention the construction risk and operating risk as the most significant. For these elements, I have made suggestions on various methods to reduce risk. In order to use this model, I had to make a budget. To make this budget, I used the development of the key drivers, so I could make a budget that covers the entire 40 years. Using this budget, I found the cash flows which were then discounted by the relevant discount rates. This gave a good result for the project. Net present value for the owners was NOK 21.2 million, while for the creditor/owner the net present value was a total NOK 174 million. So based on these good results and the thorough and conservative analysis I have made, I would recommend to the owners of Stardalen Kraft to invest in this project. This is because the project the way I see it is profitable.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2009
Number of pages92