|Tuesday, 10 October 2006|
The cost of the project would comprise the capital set up costs (the cost of building the turbine and connecting it to the grid); the cost of financing (how the capital cost is repaid); and running costs (such as maintenance and insurance).
Income would come from selling the electricity generated to a supplier under a power purchase agreement (PPA).
The net profits would be paid to The Trust by gift aid as soon as it is commercially feasible.
Advice has been given by the Highlands and Island Community Energy Company (HICEC) on setting up such a project. A detailed financial model and cashflows have also been developed to establish whether it is financially sensible, taking into consideration the costs, borrowings and likely income. There are many variables and the markets for equipment and electricity are constantly changing. The model shows the impact if there are changes in turbine and installation costs; energy prices and regulations; interest rates; inflation; and the effect of loss of output from the turbine. It also compares different power agreements with electricity suppliers to show which would offer the best deal.
The set up costs have the greatest effect on the project’s financial viability. Once these are decided, the directors would aim to reduce uncertainty by agreeing fixed borrowing costs and long term power agreements.