Parametric estimation of capital costs for establishing a coal mine: South Africa case study

Mohutsiwa, Moshe; Musingwini, C.

doi:10.17159/2411-9717/2015/v115n8a17

Cited by 21 publications

(11 citation statements)

References 1 publication

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“…None of the quoted sources deals with the subject of the in-depth structure of the discount rate "adjusted to the risk"-an answer to the question to what extent the risk of key parameters of investment projects implemented in the coal sector affects the level of the cost of equity. It is worth noting that investors from the power generation industry, particularly in the coal-using sector, are generally well versed in terms of sources and risks [11][12][13][14][15]. However, their opinions, expressed in terms of the cost of equity, differ.…”

Section: Introductionmentioning

confidence: 99%

Cost of Equity of Coal-Fired Power Generation Projects in Poland: Its Importance for the Management of Decision-Making Process

Saługa

Szczepańska-Woszczyna

Miśkiewicz

et al. 2020

Energies

108

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Our knowledge of discount rates plays an important role both in the discounted cash flow decision-making process and in the later phases of a project’s lifetime. It is useful than both for management and cash-flow monitoring purposes at operating stages. Investors putting money into power generation projects expect an appropriate rate of return to compensate them for a minimum acceptable real return available in the market (risk-free rate of interest) and the project’s specific risk. Due to its essential nature in the financial and economic evaluation of projects (it is the only parameter that reflects the risk), it is reasonable to assume that investors would also be interested in constituent components of that indicator. The discount rate is one parameter in the discounted cash flow analysis that takes into account the risk of a venture. Further, the previous research in this area has focused mainly on the dimension of this variable, and the structure of this parameter has not been dealt with any other studies. The proposed idea of this study met the expectations of the industry—it aimed to present a typical project implemented in the energy industry, a relatively simple methodology that allowed estimating the components within the cost of equity capital of the enterprise. In the power generation sector, one can find various types of discount rates—assessed for multiple technologies, at different development stages, and expressed differently. Owing to the know-how and decades-long experience, coal-fired power projects’ remarks may be a good benchmark for alternative low carbon technologies. That is why, in this work, a discount rate for valuing investment in new coal-fired power projects was evaluated. This assessment was made on the “bare-bones” assumption, meaning evaluations at 100% equity, after-tax, in constant (real) currency units. The analysis of the discount rate structure was performed by applying the procedure of the classical sensitivity analysis having the accuracy of key input parameters. Finally, the risk factors within the risk-adjusted discount rate were calculated. The obtained results showed the importance of individual risk factors within the risk-adjusted discount rate used in coal energy projects, which would enable a more pragmatic approach to controlling this parameter by decision-makers and understanding the risk.

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Section: Introductionmentioning

confidence: 99%

Cost of Equity of Coal-Fired Power Generation Projects in Poland: Its Importance for the Management of Decision-Making Process

Saługa

Szczepańska-Woszczyna

Miśkiewicz

et al. 2020

Energies

108

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“…varies between 2 and 6 (Mohutsiwa 2015, Moolman 2000. The impact of these activities on air quality in adjacent communities has become a matter of concern (see for instance Huertas et al 2012Huertas et al , 2014; for Mpumalanga, this has been quantified by the Highveld Priority Area baseline study (DEA 2012).…”

Section: Atmospheric Particulate Mattermentioning

confidence: 99%

Characterisation of Atmospheric Particulate Matter from Opencast Coal Mining Activities and Adjacent Communities

et al. 2020

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Standard source apportionment techniques for atmospheric particulate (PM) collected near opencast coal mines provide less accurate results, as the inorganic mineral components in the overburden and at adjacent residential locations are similar. This study explores the use of the stable carbon (C) and nitrogen (N) isotope ratios (13C/12C and 15N/14N) and thermal optical methods to differentiate sources of carbonaceous material in the atmospheric PM samples from the opencast coal mines and adjacent communities. Both techniques allow a clear distinction between atmospheric PM samples from the opencast coal mines and communities to be made, although distinguishing between the contributions of coal combustion, liquid fuel combustion and the domestic use of biomass for requires further analysis.

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“…Dopuszczalny stopień dokładności oceny efektywności ekonomicznej poszczególnych faz rozwojowych projektów (technical studies) podawany w zależności od kraju, branży, autora oraz skali przedsięwzięcia: ª studium ewaluacyjne (scoping study): -5-+15% (Mohutsiwa 2015). Pomimo, że ww.…”

Section: Stopy Dyskontowe W Działalności Geologiczno-górniczejunclassified

Discount rate selection for long-term sequential mineral projects

Saługa¹

2017

Gospodarka Surowcami Mineralnymi

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Dobór stopy dyskontowej dla długoterminowych projektów sekwencyjnych z branży surowców mineralnychWprowadzenie inwestycje w aktywa geologiczno-górnicze charakteryzują się szeregiem wyjąt-kowych cech wyróżniających je na tle alternatywnych przedsięwzięć podejmowanych w innych branżach. Wśród tych cech wymienia się zwykle unikatowe atrybuty złoża jako przedmiotu pracy (niepowtarzalność zalegania, budowy geologicznej i lokalizacji, wielkość, nieodnawialność i sczerpywalność bazy zasobowej), długi okres inwestycyjny i produkcyjny, wysoką kapitałochłonność, zmienność cen surowców mineralnych, nieelastyczność i zróżnicowane warunki procesu produkcyjnego i in. Wyjątkowość ta skutkuje występowaniem wysokiego ryzyka towarzyszącego podejmowaniu tych przedsięwzięć. Jest ono wynikiem oddziaływania różnorakich czynników technicznych, ekonomicznych i politycznych.Ze względu na angażowanie ogromnych nakładów kapitałowych i troskę inwestorów o uzyskanie zwrotu tych środków występowanie dużego zakresu ryzyka w projektach geologiczno-górniczych musi znaleźć wyraz w ocenie ekonomicznej tych przedsięwzięć. W najczęściej stosowanej w tych procesach analizie zdyskontowanych przepływów pieniężnych (discounted cash flow analysis, DCF) ryzyko to odzwierciedlone jest w poziomie przyjmowanej stopy dyskontowej, stanowiącej dolną granicę kosztu zaangażowanego kapitału.

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Parametric estimation of capital costs for establishing a coal mine: South Africa case study

Cited by 21 publications

References 1 publication

Cost of Equity of Coal-Fired Power Generation Projects in Poland: Its Importance for the Management of Decision-Making Process

Cost of Equity of Coal-Fired Power Generation Projects in Poland: Its Importance for the Management of Decision-Making Process

Characterisation of Atmospheric Particulate Matter from Opencast Coal Mining Activities and Adjacent Communities

Discount rate selection for long-term sequential mineral projects

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