Investment Coefficient Method For Economic Evaluation Of Small And Medium Hydropower Projects

On account of the change of global climate and environment, numerous countries have accelerated their pace of energy structure adjustment. The development of new technologies and new products (including electric cars, etc.) need more electric energy. In China’s energy structure, coal-fired power accounts for 80%, while other clean energy which mainly are hydropower occupies only 20%. There is no denying fact that electricity energy structure is absurd nowadays. Incontrovertibly, for fulfilling the responsibilities and obligations of the global climate and environment changes, under the condition of existing resource and technologies, endeavoring to accelerate the development of hydropower construction is a realistic way of electric energy structure adjustments now in our country.Owing to some hydropower development enterprises (projects)’s operating loss, the owners of hydropower development industry in mounting numbers more and more focus on the new development (M & A) projects’ economy evaluation index and looking for an effective way to improve its economic indicators actively. Currently, there are two deficiencies in medium and small sized hydropower projects’ financial economic evaluation index method. One is such method is established on the basis of a multitude of data calculation and analysis. The other is for considering too many factors, so drawing intuitive assessment on impact of project investment, electricity quantities, electricity price and other factors on the economic evaluation index of can be a complex issue. It put an enormous pressure upon those enterprises who want to formulate the corresponding strategy to turnaround.This dissertation starts with the current standard of medium and small hydropower projects’ economic evaluation index and the correlation of each influence factor, introduced the concept of investment coefficient, and uses the investment coefficient as a primary and rapid indicator of the economic indicators of the project. Meanwhile, the paper analyzes the correlation between the investment coefficient and the various factors, in order to improve the economic benefit of the hydropower development enterprises according to their specific circumstances. The main research contents and achievements are summarized as follows:(1) This paper expounds the theory of the calculation and analysis model on investment coefficients of medium and small hydropower project. Starting from the analysis of correlation, it analyzes the correlation between the economic evaluation index(capital internal rate of return, term of debt service) in existing national standard methods and electricity quantities, electricity price and other 9 factors(except the construction period influencing factors),and then leads to the concept of investment coefficient. On this basis, according to their correlation and influence degree, the investment coefficient calculation model of medium and small hydropower projects can be established.(2) The contact and difference between the investment coefficient method and the current national standard method are compared and studied. In this paper, the calculation process and results of the current standard method (capital financial internal rate of return method and term of debt service method) are analyzed and compared with the investment coefficient method. It is undeniable that the investment coefficient method is a much simple and comprehensive method for capital financial internal rate of return method and term of debt service method, and it enriches and improves the concept of "benefit coefficient" in the standard.(3) The evaluation criteria of economic quality investment coefficient of medium and small hydropower projects are established. According to the evaluation standard of economic indicators of current standard methods in China, analyzing the relation and difference of investment coefficient method and standard method, the corresponding evaluation criteria of investment coefficient method can be given.(4) The result is analyzed by theory and example calculation. In order to specify the effect of the investment coefficient method to determine the economic index in various types of medium and small hydropower stations, the paper exemplified by the case of Hunan Anjiang Hydropower Station (medium, investment and construction), Hunan Wuxi Hydropower Station (medium, new M & A), Yunnan Guquanhe Hydropower Station (small, M & A), Shaanxi Huangjiawan Hydropower Station (small, to be built), using standard method and investment coefficient method to evaluate its financial situation and economic indicators. Results show that:the investment coefficient is much simple, fast than the standard method, and it can intuitively reflect the determinants of financial economic index which can be conducive to the decision-making and improvement of the project.In summary, after multiple statistics, analysis, calculation and comparison, it is proved that the investment coefficient method can be used as a scientific, simple and effective method to evaluate the quality of economic benefits of medium and small hydropower projects. Either decision makers of medium and small sized hydropower projects or economic, engineering and technical professionals can use this method to make rapid scientific judgments on economic indicators of the project. Besides that, according to the possible changes of the project influence factors, they can put forward the strategy to improve the financial quality of the project, and to guard against the risk of the project financial operation.