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Assume that inflation is stable and all the figures are inflation-adjusted.

At €25/MWh you need 800 MWh to cover the €20k fixed costs. This is at most (assuming 2000 MWh/yr) 40% of the production. This leaves you with 60% of the production to sell to investors. Since the investors put in €1.5M, each €25k of investment buys them 1% of the output. How much is this worth?

1% of the output is between 20 and 30 MWh/yr, at 25 to 75 €/MWh, for 20 to 25 years. That is between €10k and €56k total. Over 20 years, though, variations will average out to between €19k and €22k total. This always loses money compared with 25k, but that is because you have offloaded the entire risk to the investors.

If instead you say that over 20 years the average price is unlikely to drop below €40/Mwh so you need only 500 MWh/yr to cover fixed costs; and arguing the 20-year average output is unlikely to drop below 2.4 Gwh/yr, you only need 21% of the production to cover costs and you can sell on 79%. Then each 19k of investment buys 1%, and returns 19k to 22k total at 95% confidence, for about 1.5% return above inflation with no downside.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sat Jan 19th, 2008 at 07:21:21 AM EST
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