question, page-4

Franky, more specifically on the power station economics, it's not possible to get close to the potential profit without knowing some of the parameters, but since ATQ appears to be adopting this as a general model, then the following calculation for a 150 MW power plant may be of interest:

Assuming,
1. The coal used is 6,000 kcal/kg (lower end of energy content from Alto report);
2. There are approx 4 kjoules/kcal;
3. There are 3.6 Mjoules/kWh or 3,600 Mjoules/MWh;
4. Power station cost is $2m/MW install capacity for a remote and possibly stand-alone generator;
5. Borrowing cost is 10% (possibly World Bank supported);
6. The plant operates at an average two thirds capacity (e.g. 150MW power station operates at an average 100MW);
7. Maintenance costs per annum are 2.5% of capital cost (I'm a bit unsure about this one);
8. Coal is purchased at $60/tonne;
9. Coal-fired power stations of this size are 35% efficient (thermal energy to electrical energy); and
10. Electricity can be sold at $100/MWh

Calculation:
1. Thermal energy = 24,000 Mjoules/tonne of coal
(6,000 kcal/kg x 4 kj/kcal x 1000kg/tonne)/(1000kj/Mjoules)

2. Electrical energy = 2.33 MWh/tonne of coal
(24,000 Mj/tonne x 0.35 plant efficiency)/(3,600 Mjoules/MWh)

3. Electrical energy produced per annum = 876,000 MWh
(100MW average power output x 8760 hours/year)

4. Revenue = 876,000 MWh x $100/MWh = $87.6 million/annum

5. Cost of coal = $22.5 million/annum
(876,000 MWh x $60/tonne)/(2.33 MWh/tonne)

6. Cost of capital = $30 million/annum
(150 MW x $2million/MW x 10% interest)

7. Maintenance cost = $7.5 million/annum
(150 MW x $2million/MW x 2.5%)

8. Profit = 87.6 - 22.5 - 30 - 7.5 = $17.6 million/annum

Given all the assumptions, you can see that this turns out to be little more than a guesstimate, and the profitability can vary widely depending on some of the parameters used. Also, other factors like assistance from the World Bank and the Tanzanian government can improve the profitability.

An alternative approach is to note that electicity sales are around $80 - $100 million per annum, and then judge what margin ATQ/IEC would be looking to achieve. Maybe 20%, or $15 million to $20 million per annum. This is on top of the profit from mining and selling the coal, and it is important to note that transport and handling costs are greatly reduced when the power plant is next to the coal mine.

It is also important to note that the amount of coal required here is around 400,000 tpa (876,000/2.33). So there is plenty of capacity to increase this to the 1.5 million for a 400MW plant that is mentioned in the quarterly.

Cheers,
Redfloyd