Study On The Related Issues Of Financial Evaluation Of Coal-electricity Integrative Construction Project

The coal-electricity integration is a form of industry vertical integration, is also a form which accords with market economy,incarnates specialization, and combines the big companies. The financial evaluation of coal-electricity integrative construction projects is necessary for determining the feasibility of the project, for loans from financial institutions, for government's approval and for involvement of private capital at home and abroad.The traditional evaluation is based on single project. Heretofore, integrative financial evaluation is not brought forward. In this paper, via the scientific,systemic, developed point of view, we bring forward the theory and method of integrative evaluation which is based on the internal transferring price. We can use this method to solve the problem of financial evaluation, which is meaningful for the actual economic evaluation of coal-electricity integrative construction projects.In this paper, we study on a number of important issues about financial evaluation of coal-electricity integrative construction projects, including financial evaluation indicators system, methods of evaluation, risk evaluation and the important impact on financial evaluation brought by depreciation policy and debt-paying policy. At first, we analyze the economic characteristics of coal-electricity integrative construction projects, situation and open questions of financial evaluation. On this basis, we demonstrated the necessity of financial evaluation, and lay the theoretical foundation of the coal-electricity integrative construction projects financial evaluation initially. Furthermore,on the basis of present theory, an evaluation indicators system is summarized which image the profitability, solvency and benefit ratio. In this paper, we bring forward the evaluation method which is based on internal transferring price. At first, the coal project's rate of return reaches the level required, and the internal transferring price is calculated. Then, by calculating the indicators of the electricity project such as IRR, NPV, we analyze the profit-getting ability, debt-paying ability and viability of the coal-electricity project. We also describe the financial evaluation risk, and improve the break-even analysis, sensitivity analysis in the integrative project evaluation so as to adapt integrative evaluation better. Thirdly, to Yuwang coal-electricity integrative project as an example, we make an empirical study and further demonstrate the practicality of the evaluation methods. Lastly, we make a supplement to the integrative evaluation. In the study,we found that the methods of depreciation and debt-paying are optional and impact the conclusion in the actual financial evaluation. On the basis of Yuwang financial evaluation, we analyze how the various methods of depreciation such as age depreciation method, double declining balance depreciation method, the total numbers of year depreciation method impact financial evaluation. We also analyze how the various methods of debt-paying, such as equal principal-interest paying, equal principal paying with actual interest paying , balloon paying and free cash flow paying, impact financial evaluation indicators. By the analysis, we provide the evaluators how to choose suitable methods of depreciation and debt-paying based on the purpose of evaluation.