IECM 12.0 beta User Manual > Modules Included with the IECM > Pulverized Coal (PC) Plant > SET PARAMETERS > Overall Plant >

Financing & Cost Year

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Inputs for the financing costs of the base plant itself are entered on the Financing & Cost Year parameter screen , which is currently shared by all plant types.

This screen describes the factors required to determine the carrying charge for all capital investments. The carrying charge is defined as the revenue required for the capital investment. The total charge can also be expressed as a levelized cost factor or fixed charge factor. The fixed charge factor is a function of many items. The fixed charge factor can be specified directly or calculated from the other input quantities below it on the financial input screen.

The following parameters are provided:

•Year Costs Reported: This is the year in which all costs are given or displayed, both in the input screens and the results. A cost index is used by the IECM to scale all costs to the cost year specified by this parameter. The cost year is reported in the Status Bar on every screen throughout the interface.

•Constant or Current Dollars: Constant dollar analysis does not include the effect of inflation, although real escalation is included. Current dollar analysis includes inflation and real escalation. This choice allows you to choose the mode of analysis for the entire IECM economics. The cost basis is reported in the Status Bar on every screen throughout the interface.

•Discount Rate (Before Taxes): This is also known as the cost of money. Discount rate (before taxes) is equal to the sum of return on debt plus return on equity and is the time value of money used in before-tax present worth arithmetic (i.e., levelization).

•Fixed Charge Factor (FCF): The fixed charge factor is one of the most important parameters in the IECM. It determines the revenue required to finance the power plant based on the capital expenditures. Put another way, it is a levelized factor which accounts for the revenue per dollar of total plant cost that must be collected from customers in order to pay the carrying charges on that capital investment.

One may specify a fixed charge factor, or fill in the following inputs and the model will calculate the FCF based on them:

•Inflation Rate: (Only visible when current dollars are selected) This is the rise in price levels caused by an increase in the available currency and credit without a proportionate increase in available goods or services. It does not include real escalation.

•Plant or Project Book Life: This is the years of service expected from a capital investment. It is also the period over which an investment is recovered through book depreciation.

•Real Bond Interest Rate: This is a debt security associated with a loan or mortgage. It is the most secure form of security but the lowest in its return.

•Real Preferred Stock Return: This equity security is the second most speculative type and pays the second highest rate of return. The holder of the stock is a part owner of the company.

•Real Common Stock Return: This is the most speculative type of equity security sold by a utility and pays the highest relative return. The holder of the stock is a part owner of the company.

•Percent Debt: This is the percent of the total capitalization that is associated with debt money. This includes loans and mortgage bonds.

•Percent Equity (Preferred Stock): This is the percent of the total capitalization that is associated with the sale of preferred stock.

•Percent Equity (Common Stock): This value is the remainder of the capitalization, calculated as 100% minus the percent debt, minus the percent equity in preferred stock.

•Federal Tax Rate: This is the federal tax rate. It is used to calculate the amount of taxes paid and deferred.

•State Tax Rate: This is the state tax rate. It is used to calculate the amount of taxes paid and deferred.

•Property Tax Rate: The property tax rate, or ad valorem, is used to calculate the carrying charge.

•Investment Tax Credit: This is an immediate reduction in income taxes equal to a percentage of the installed cost of a new capital investment. It is zero by default. It is used to set the initial balance and the book depreciation.

Additional information on financial parameters can be found in the technical manual IECM Technical Documentation: Financial Parameters in the Publications section of our website at https://www.iecm-online.com/.