Table of Contents 1. Introduction: ............................................................................................................................ 2 2. 3. 4. 5. 6. 7. 8. Financing Initiative: ................................................................................................................. 2 Financing Arrangements: ........................................................................................................ 3 Estimation of the Required Capital: ........................................................................................

3 Financial Forecast: ................................................................................................................... 5 Cost and Useage: ....................................................................Error! Bookmark not defined. Climate Change Initiatives of Government: ............................................................................ 9 Project Risks: ........................................................................................................................... 9 8.1 Financial:............................................................................................................................... 9 8.2 Environmental ....................................................................................................................... 9 8.3 Technical ............................................................................................................................. 10 Recommendation and Conclusion: ............................................................................................... 10 References: .................................................................................................................................... 10

1. Introduction: Flinders Island is an island in Bass Strait. Thousands of tourists visit this place every year. It is 20 kilometres (12 miles) from Cape Portland, the north-eastern tip of Tasmania.
(www.visitflindersisland.com.au/)

A wind project that is a community-owned asset, used for the society as a whole. Wind turbines convert kinetic energy into moving energy which is commonly known as rational energy, which in turn is converted to electricity. Here it is important to note that since wind has different speed, therefore the amount of electricity produced from varies from month to month, day to day, and it can go from minute to minute. It is however totally dependent on weather conditions. Flinders Island s energy power is produced by fossil fuels, diesel transport fuel costs etc which is about 2.75 MW, which does not fulfil the capacity of power needed, therefore some of the local population has got their own small power generation plants. 2. Financial/Economic Initiatives to be taken for Wind Generation Project: Community wind projects are owned by a variety of parties and individuals including investors like: local small business owners, farmers, local organisations including schools and universities, NGOs, rural and urban electric cooperation, municipal parties and utilities and religious institutions, as well as native tribes which has nothing to do with the central government of that particular country of area. Now a days, most investors and landowners who participate in community based wind development project and enters into an easement agreement or a lease to fulfil their financial needs. This is benefiting them, their business and investments. In a case like this, the investor has to sign an agreement granting the right to developer of the wind power community to use their investment for wind development, and what he gets in return. These leases and easements are often done on long periods of time that can be 30 to 60 years is a common practice, and they can go up to 150 years in some cases. After the power purchaser agrees to purchase all of the produced power from a plant at a fixed price for a certain period of time, by the binding agreement will require a wellfunctioning market in order to hedge its exposure.

The best part is that this can be fulfilled The power producer can utilise the future cash flow from the agreement as additional security for the bank financing by assigning the cash flow to the bank by way of security. Furthermore, the assignment of the cash flow will increase the bank's interest in upholding the cash flow generated from the power production. In order to further secure the bank's interests, the direct agreement regularly contains provisions that give the bank a right to suspend any termination by the power purchaser of the agreement for an interim period. This gives the bank the possibility to review possible future scenarios, while maintaining operation of the power-producing facility and sale of power. 3. Financing Arrangements: Numerous methods are being used for financing the wind based power projects; however the traditional means by which a power producer finances power projects is by taking out bank loans against security in its fixed tangible assets. Since the secondary market for these types of assets from land investors, farmers and wind farms is limited, a bank usually requires additional collateral. Types of Financing Models: Project Finance Holding Company Investments Type of Projects: Greenfield project/expansion of existing facilities Privatization/expansion Concession-based/BOT/Sponsor-owned Local sponsors/foreign sponsors/join ventures Public-Private partnerships

4. Estimation of the Required Capital: The Tasmanian Government and Hydro Tasmania have a declared community service obligation to provide concessional arrangements to electricity consumers living in Bass Strait, and provide assistance of up to $7m per annum in funding support to meet this obligation (diesel transport fuel costs etc). More can be done by the local government in way of providing funds to the local people of the area and by providing interest free leasing to the investors plus zero rated taxes for imports of machinery, plant and equipment, to those which are showing their interest, in projects like these. It will give a trilogy effects.

Wind industry has developed a series of resources designed to help landowners and investors and local communities to make their investments fruitful. Debt and equity are fundamentally different forms of capital. To protect themselves, there should be balanced used of both debt and equity investments in a project like this (Kahn & Stoft, 1989).

Table No.1

Model 750kw 1MW 1.25MW 1.5MW 2MW SE2MW 2.75MW 3MW

Capacity(MW) 0.75 1 1.25 1.5 2 2 2.75 3

estimated Installed cost USD $1,564,300 $2,523,810 $2,616,343 $2,750,000 $4,800,571 $3,929,714 $4,148,250 $5,460,571

cost per MW $2,085,733 $2,523,810 $2,093,074 $1,833,333 $2,400,286 $1,964,857 $1,508,455 $1,820,190

(waterindustry.com/costinggeneration) 5. Financial Planning: The function of power system operators is to supply electricity to customers in a reliable manner at a sustainable cost. This includes the generation meets the demand at all times and that any short term intervals between load and generation are bridged quickly and precisely to maintain the integrity of the power system. Since the output of some generators, in particular generators connected with wind, cannot be actively controlled and are dicult to predict accurately, this balancing of generation and load can become more challenging as renewable increase. Thus, the cost of operating the power system can increase. The wind power plants varies in sizes and cost associated to them, form project to project, and region to regions, due to differences in markets, taxes, wind resources and economies of scales. Modern wind turbine generators cost between $1500 and $2000 per kilowatt for multiturbine wind farms. Smaller individual units cost up to $3,000 per kilowatt. The Wolfe Island Wind Project (referred to above) will put down 86, 2.3 megawatt turbines at a total estimated cost of $410 million or very slightly over $2,000 per kilowatt.

ESTIMATED TRADING AND PROFIT AND LOSS ACOUNT (PROJECTED) Long-term plan Sales Cost of Sales Gross Margin Gross Margin % Operating Expenses Operating Income Net Income Short-term Assets Long-term Assets Short-term Liabilities Long-term Liabilities Equity FY2012 FY2013 FY2014 FY2015 FY2016

$3,022,500 $5,785,000 $746,150 $1,459,800

$12,935,000 $24,000,000 $42,000,000 $2,423,600 $4,000,000 $6,500,000 $10,511,400 $20,000,000 $35,500,000 81.26% $5,763,472 $4,747,928 $3,133,632 83.33% 84.52%

$2,276,350 $4,325,200 75.31% 74.77%

$3,133,053 $4,205,268 ($856,703) $119,932 ($565,424) $79,155 $1,448,236 $2,208,932

$8,200,000 $10,100,000 $11,800,000 $25,400,000 $7,800,000 $19,400,000

$6,084,400 $14,300,000 $35,000,000 $1,000,000

($450,000) ($1,050,000) ($1,650,000) $450,000 $183,660 $0 $814,576 $265,201 $0 $893,731 $407,036 $0 $4,027,363

$2,000,000 $1,500,000 $5,000,000 $4,000,000 $7,750,000 $30,500,000

HENCE: Getting Breakeven in the second or the third year.

6. Costs and Usage: Some costs such as the turbine purchase price, will be straightforward but taxes implies differently in different regions, while other costs may be harder to estimate, such as the level of maintenance and repair it will require.

Approximate Wholesale Costs of Producing Electricity in New Projects

Technology Used Approximate Cost Range (cents per kilowatt hour) Current Average Production Costs New Projects New reservoirs Capacity increase in Reservoir Run-of-river hydro Nuclear Natural gas Oil-fired generation Conventional coal Clean coal with CO2 capture Biomass Energy Recovery Generation Geothermal power Wind power Solar PV Tidal power Wave power 5.5 to 12 2.5 to 4.5 3.0 to no limit 5.5 to 7.0 6.0 to 7.5 7.0 to 13 5 to 6.5 5 to 6.5 5.5 to 18 7.0 to 9.0 6.5 to 9.5 6.0 to 14 8.0 to 25 and more 8.0 to 12 8.0 to 11.5 4.7 to7

The general rule of thumb as of late 2007, is that commercial scale wind projects cost from $ 1.2 million to $ 2.6 million per MW of nameplate capacity instantly.

Annual estimation of emission (Year 1) 01/04/2012-31/03/2013 (Year 2) 01/04/2013-31/03/2014 (Year 3) 01/04/2014-31/03/2015 (Year 4) 01/04/2015-31/03/2016 (Year 5) 01/04/2016-31/03/2017 (Year 6) 01/04/2017-31/03/2018 (Year 7) 01/04/2018-31/03/2019 14,351 14,351 14,351 14,351 14,351 14,351 14,351

Total estimated reductions (tonnes of CO2e) 100,457 Total number of crediting years 7

7. Climate Change Initiatives of Government The focus of government on incorporating an environment friendly source of energy in the Flinders Island seems to be in alignment with the policies of environment protection agencies. Such a focus seems to offer an excellent opportunity for the establishment of such a project and its application in the Flinders Island. The government has also gained inspiration from the island closer to the vicinity of the said Flinders Island, thus facilitating the idea of bringing in the same energy source on the island as well. For instance, the government of Flinders Island has asserted that it planning of a system of wind energy and generating electricity from it is a complex matter and there are signicant challenges that has to be kept in mind that system operators when large amounts of variable generation are introduced (Bazilian et al., 2004). But however, it is highly safe for people and the environment. This technology can help in reducing increasing pollution and global warming. Wind generation development can also greatly aid local communities. The construction and operation of wind turbines creates local jobs, and estimates that the construction of a 75MW wind farm could create employment for upto 200 labourers. A great economically benefit can be created. 8. Project Risks: 8.1 Financial: Inadequate regulatory frameworks Large investment requirements costly Pricing regimes dont always cover service provision costs Implicit or explicit subsidies needed In a fully deregulated electricity market prevailing electricity prices too low to allow wind power projects to function effectively Investor risk perceptions lead to high return requirements, which may start giving breakeven very late in the coming years. 8.2 Environmental Wind energy is an intermittent resource. It depends completely on weather forecasts. Wind varies constantly. Sometimes a wind turbine will make no power at all. This in turn, becomes the highest risk in the project. Sand storms Sea (salt) air Hot climate

8.3 Technical Cannot function as base-load capacity. Wind projects are not competitive with least cost alternatives in most markets some price support mechanism required The number of experienced sponsors is very limited particularly in that part of the earth.

Recommendation and Conclusion: There should be zero rates import tax on material import to plant and machinery at Flinders Island. Any harmonization of different regulatory regimes would likely lower barriers to trade and make it easier to employ national quotas on emissions from energy production facilities. This national market would have more participants, resulting in higher market liquidity and lower aggregate development costs. Subsidies should be given on material needed for the operations of the wind industry in the area. Government should take serious steps in the research and development for the wind industry. References: Bazilian et al., (2004) Brealey and Myers (1991) Denny Eleanor(2007),Cost Benefit Analysis: A Cost Benefit Analysis of Wind Power; Kahn and Stoft (1989) Table No.1: www.waterindustry.com www.visitflindersisland.com.au/

10