EFB210: Capital Budgeting Report and Analysis

EFB210: Capital Budgeting Report and Analysis

Outline
Holmes Alternative Investments (HAI) is a boutique fund manager that invests in ‘environmentally-
friendly/green’ projects. Based in Brisbane with approximately $1.2 billion of managed investments,
its main clientele are other fund managers seeking exposure to green investments as either an
investment strategy or to meet the green investment mandates of their investors.
Recently, the investment team, under the leadership of Dr Watson, has been considering a new wind
turbine project to be owned and operated by HAI. The project consists of five 1.7 megawatt (MW),
130 metre (m) high wind turbines to be installed around the Port of Brisbane. The impact of the
turbines should be minimal given the selected location, the fact that no neighbouring allotments are
within 1,500m of the proposed turbines and there are no nearby radio and television broadcasting
antennae. However, approval will be required from Civil Aviation Safety Authority (CASA) due to its
proximity to the Brisbane airport (height of turbines and possible radar disturbance).
The project is unlikely to be economically viable given the current market price of electricity and the
fact that Brisbane is not one of the windiest areas in Australia. In light of this, the investment team
will propose to the Port of Brisbane that they subsidise the project given its environmental benefits.
The proposal will contain a variety of sections, including an environment assessment and analysis of
required regulatory approvals, but your task is to complete the financial feasibility analysis and
associated report. The ‘PoB Wind Turbine Proposal’ file provides project details and your task is
outlined below.
Task
Provide a detailed financial analysis of the wind turbines and an accompanying report that explains
and justifies methodology, summarises findings and recommends an appropriate subsidy for Port of
Brisbane to contribute, and highlights limitations with the analysis and recommendations. To
complete this task, your manager has requested the following:
– The financial analysis is to be completed in Excel. The file is to be easily adjustable for different
scenarios and all inputs must be in the one sheet called ‘Assumptions’.
– The report is to be short (600 words + 20% tolerance) and written for a person with a basic
understanding of financial analytical tools as the investment team will provide the report to the
Port of Brisbane. The report should have the following sections:

o Summary: Brief outline of task, methodology and recommendation.
o Methodology: Explains and justifies the selected evaluation metric.
o Recommendations: Summarises the economic viability of the wind turbines without
the subsidy and recommends a minimum annual subsidy required
to ensure the project’s economic viability. The analysis is to be
completed for the project with a 20-year and 40-year life, where
the 40-year life includes an overhaul of the wind turbines after 20
years.

o Limitations: Highlights the key limitations with the analysis and recommends
additional analysis to alleviate these limitations where

appropriate.

Map

Source: https://www.whereis.com/ 25 August 2017.
Wind Turbine Information

Source: https://www.gerenewableenergy.com/wind-energy/turbines 25 August 2017.
Case Study Disclaimer
Please note that the proposal here is for educative purposes only. We do our best to ensure that all
numbers and all other aspects of the proposal have some basis in reality but recognise that errors
may occur. Finally, please note that the Port of Brisbane, CASA and all other relevant authorities

have provided no input into this proposal and are not aware of this proposal. Finally, for those
interested, some of the development aspects required for wind farms in Queensland is detailed
here: https://www.dilgp.qld.gov.au/resources/factsheet/planning/wind-farm-faqs.pdf.

Category:

Description

Outline
Holmes Alternative Investments (HAI) is a boutique fund manager that invests in ‘environmentally-
friendly/green’ projects. Based in Brisbane with approximately $1.2 billion of managed investments,
its main clientele are other fund managers seeking exposure to green investments as either an
investment strategy or to meet the green investment mandates of their investors.
Recently, the investment team, under the leadership of Dr Watson, has been considering a new wind
turbine project to be owned and operated by HAI. The project consists of five 1.7 megawatt (MW),
130 metre (m) high wind turbines to be installed around the Port of Brisbane. The impact of the
turbines should be minimal given the selected location, the fact that no neighbouring allotments are
within 1,500m of the proposed turbines and there are no nearby radio and television broadcasting
antennae. However, approval will be required from Civil Aviation Safety Authority (CASA) due to its
proximity to the Brisbane airport (height of turbines and possible radar disturbance).
The project is unlikely to be economically viable given the current market price of electricity and the
fact that Brisbane is not one of the windiest areas in Australia. In light of this, the investment team
will propose to the Port of Brisbane that they subsidise the project given its environmental benefits.
The proposal will contain a variety of sections, including an environment assessment and analysis of
required regulatory approvals, but your task is to complete the financial feasibility analysis and
associated report. The ‘PoB Wind Turbine Proposal’ file provides project details and your task is
outlined below. EFB210: Capital Budgeting Report and Analysis.
Task
Provide a detailed financial analysis of the wind turbines and an accompanying report that explains
and justifies methodology, summarises findings and recommends an appropriate subsidy for Port of
Brisbane to contribute, and highlights limitations with the analysis and recommendations. To
complete this task, your manager has requested the following:
– The financial analysis is to be completed in Excel. The file is to be easily adjustable for different
scenarios and all inputs must be in the one sheet called ‘Assumptions’.
– The report is to be short (600 words + 20% tolerance) and written for a person with a basic
understanding of financial analytical tools as the investment team will provide the report to the
Port of Brisbane. The report should have the following sections:

o Summary: Brief outline of task, methodology and recommendation.
o Methodology: Explains and justifies the selected evaluation metric.
o Recommendations: Summarises the economic viability of the wind turbines without
the subsidy and recommends a minimum annual subsidy required
to ensure the project’s economic viability. The analysis is to be
completed for the project with a 20-year and 40-year life, where
the 40-year life includes an overhaul of the wind turbines after 20
years. EFB210: Capital Budgeting Report and Analysis.

o Limitations: Highlights the key limitations with the analysis and recommends
additional analysis to alleviate these limitations where

appropriate.

Map

Source: https://www.whereis.com/ 25 August 2017.
Wind Turbine Information

Source: https://www.gerenewableenergy.com/wind-energy/turbines 25 August 2017.
Case Study Disclaimer
Please note that the proposal here is for educative purposes only. We do our best to ensure that all
numbers and all other aspects of the proposal have some basis in reality but recognise that errors
may occur. Finally, please note that the Port of Brisbane, CASA and all other relevant authorities

have provided no input into this proposal and are not aware of this proposal. Finally, for those
interested, some of the development aspects required for wind farms in Queensland is detailed
here: https://www.dilgp.qld.gov.au/resources/factsheet/planning/wind-farm-faqs.pdf. EFB210: Capital Budgeting Report and Analysis.