1. Jan H. Jansen E-mail: jan.jansen@han.nl
Finance Lecture # 1
Jan H. Jansen

2. Wind energy

3. Dropbox URL:

5. Minor Wind Energy Project Management
Finance
Law
Supply Chain Management
Construction
Mechanical Engineering
Energy

6. Minor Wind Energy Project Management
Finance
Law
Supply Chain Management
Construction
Mechanical Engineering
Energy
Commercial
Engineering

7. Educational unit: WEPM-C (7.5 ECTS)
Commercial
Educational unit: WEPM-C (7.5 ECTS)
WEPM-C-LW
Law
30%
≥ 5.5
WEPM-C-FC
Finance
40%
≥ 5,5
WEPM-C-SC
ISCM

8. What is our ambition? Recognizing trends in the Wind Energy market
Analyzing an annual report of a wind energy supplier;
Constructing an cash flow overview of wind energy project;
Establish risk awareness (project- , exchange -, interest rate- and political risks)
Decision criteria for an investment in a wind energy project (PBP, ROI, NPV, IRR and BET).
Financially sourcing a wind energy project.

9. Assessment WEPM-C-FC WEPM-P-FR Written exam of 120 minutes (PW8)
Finance will also be assed in the final report and presentation of the project of this minor

10. Programme Lecture Topic 1 Overview Energy Market 2 Annual Reports 3
Project Financials, Value Propositions & Business Model 4
Business plan I 5
Business plan II 6
Case study WEPM 7 8
Written Exam

11. Energy Market Oil Gas Coal Nuclear Wind Electricity Hydro Solar
Biomass
Geothermal

12. Electricity market Complex market The art of electricity
See slide before
The art of electricity
Not directly tangible
Storage problems
Capacity
Transformation of Wind (free good) into Electricity (economic good)

13. Overview Energy Market
Macro level
Energy prices (P)
Energy demand (Q)
Meso level / Industry level
Micro level / Firm level
Value chain & supply chain
Annual Reports

14. Macro level Energy prices (P) Energy demand (Q)
Prices of substitutes / Trends
Energy demand (Q)
Trends

15. Renewable energy in final energy consumption (2020 target) Source: www
Renewable energy in final energy consumption (2020 target) Source:
2006
2007
2008
2020 Target
% To cover:
United Kingdom
1.5 %
1.8 %
2.2 %
15 %
12.8 %
France
9.6 %
10.2 %
11 %
23 %
12 %
Denmark
16.8 %
18.1 %
18.7 %
30 %
11.3 %
Netherlands
2.5 %
3 %
3.2 %
14 %
10.8 %
Italy
5.3 %
5.2 %
6.6 %
17 %
10.4 %
Belgium
2.7 %
3.3 %
13 %
9.7 %
Spain
9.1 %
9.5 %
10.7 %
20 %
9.3 %
Germany
6.9 %
9 %
8.9 %
18 %
Austria
24.8 %
26.6 %
28.3 %
34 %
5.7 %
Sweden
42.7 %
44.2 %
44.4 %
49 %
4.6 %

16. Renewable electric energy in the EU
Resource:
2005:
2006:
2007:
2008:
Hydro energy
60.60 %
64.40 %
60.00 %
Wind energy
20.40 %
17.10 %
21.00 %
Biomass
17.00 %
16.70 %
Geothermal energy
1.20 %
1.00 %
Solar energy
0.80 %
0.50 %
Resource:

17. Meso level / Industry level
Wind Energy Farm
Distribution
Suppliers

18. Micro level / Firm level
Wind Energy Farm
Input > Throughput > Output
Procurement > Production > Sales

19. Annual reports Market & Strategy Corporate Governance
Corporate Social Responsibility (CSR)
Sustainability
Financial ratios
Profitability
Liquidity
Solvency
Activity

20. Structure of the balance sheet
Equity:
Issued Capital
Retained earnings / Reserves
Long Term Liabilities
Provisions
Loans
Bonds
Current liabilities:
Creditors / AP
Bank overdraft
Taxes
Dividend
Fixed assets:
Property, Plant & Equipment
Intangible assets
Financial noncurrent assets
Current assets:
Inventories
Debtors / AR
Cash & Cash equivalents

21. Structure of the income statement / profit & loss account
Costs
Costs of Sales:
Cost of raw materials
Cost of (manufacturing) labour
Costs of depreciation of equipment
Overhead costs:
Selling expenses
R&D expenses
General expenses
Administrative expenses
Other expenses
Incidentals
Financial charges
Operating income
Revenues / Sales

22. Profit definitions Gross Profit: Revenues - Cost of Sales
Operating Income / EBIT:
Gross Profit - Overhead costs
EBITDA:
EBIT + Depreciation + Amortization
EVA:
NOPAT - Capital Charges :
NOPAT = EBIT - Taxes
Capital Charges = Invested Capital * Cost of Capital

23. Performance of the company: Liquidity
The ability of an asset to be converted into cash
without a significant price concession
Current ratio:
Current Assets / Current Liabilities
Quick ratio:
{ Current Assets -/- Inventories } / Current Liabilities

24. Performance of the company: Solvency
Solvency shows how the extent to which the firm is
financed by debt
Debt Ratio:
Debt / Total Assets
Debt-To-Equity Ratio:
Debt / Shareholder’s Equity

25. Performance of the company: Profitability
Compares profit (output) with invested money
(input) of the firm
Gross Profit Margin:
Gross Profit / Sales
ROI (ROA) = Return on Investment (Assets)
Net Profit after taxes / Total Assets
ROE = Return on Equity
Net Profit after taxes / Shareholder’s Equity

26. Performance of the company: Economic activity
Provides performance information of the efficiency
of some internal processes
Asset turnover
Sales / Assets
Inventory turnover
Cost of goods sold / Inventory
Receivable turnover (collection period)
Sales / Receivables

27. Du Pont formule ROE = NPM * TAT * EM
NPM = Net Profit Margin (Market profit)
NPM = Net Profit / Sales
TAT = Total Assets Turnover (Utilisation)
TAT = Sales / Total Assets
EM = Equity Multiplier (Financial structure)
EM = Total Assets / Total Equity

28. Altman’s Z-score
Working Capital / Total Assets * 1.2
Retained Earnings / Total Assets * 1.4
EBIT / Total Assets * 3.3
Market Value Equity / Book Value Liabilities * 0.6
Sales / Total Assets * 0.999

29. Annual reports (2010) of Sustainable Energy Industry
Van Oord (case for the lectures)
Teams 
Eneco
Vestas
ABB
RWE GE
Siemens
Nordex BP
Shell

30. Organisation # Company URL Team members Van Oord www.vanoord.com
Van Oord
Mr Jan Jansen 1
Eneco 2
Vestas 3
ABB 4
RWE 5 GE 6
Siemens 7
Nordex 8 BP 9
Shell