Economic Projections

 Economic projections.

The following projections have been made considering only the construction of the first small pyramid with production of about 5MW. All the numbers and projections of course may vary depending in a lot of factors. We also have made projections as it is operate in the United States and the reason is to facilitate understanding by investors as the terms in another country are different and although similar in nature it may require a whole different structure of payments. However, we believe is does reflect the nature of how payments, earnings and expenses will occur.

1.6 Expansion Plan

The Founder expects that the business will aggressively expand during the first five years of operation. Mr. Germanico Vaca intends to aggressively solicit additional rounds of capital will concurrently reinvesting a significant portion of the Company’s after tax income into the developing plan as it builds the wind turbines, additional solar pyramids, the hydraulic power and the geothermal plant as well as acquisition land for new photovoltaic cell structures.

2.0 Company and Financing Summary

2.1 Registered Name and Corporate Structure

Sunlight Energy Enterprises Inc is a registered company in Houston, USA and LuzdelSol Compañía Limitada is its subsidiary  registered in Ibarra, Ecuador.

2.2 Required Funds

At this time, Sunlight Energy Enterprises will sell 45% of the company to acquire the required funds. Below is a breakdown of how these funds will be used: We have calculated the initial cost before all the plants begin to be built and machinery and equipment is purchased for the next six months.

2.3 Investor Equity

At this time,Sunlight Energy Enterprises is seeking to sell a 45% interest in the business in exchange for the capital sought in this business plan. The investors will also receive a seat on the board of directors as well as a recurring stream of dividends starting in the first year of operations. Sunlight Energy Enterprises Inc expects to conduct development, training, construction and management of all its plants.

2.4 Management Equity

Germanico Vaca owns 100% of Sunlight Energy Enterprises Inc. Once the requisite capital is raised, he will retain a 55% ownership interest in the business.

2.5 Exit Strategy

If the business is very successful, Mr. Germanico Vaca may seek to sell the business to a third party for a significant earnings multiple. Most likely, the Company will hire a qualified business broker to sell the business on behalf of the Sunlight Energy Enterprises Inc. Based on historical numbers, the business could fetch a sales premium of up to 4 to 6 times the previous year’s net earnings. However, it is important to state that Mr Vaca believes it to be his mission in life to build this unique project and expects and hope to retain property for his descendants.

3.0 Products and Services

As stated in the executive summary, the Company intends to acquire/lease 14 hectares of property which will house initially a pyramid of 700 photovoltaic cell structures for the production of electricity harnessed through the sun. It will also install between 30 to 50 Wind turbines; It will build a geothermal facility and it will have a hydraulic plant. These photovoltaic cells capture solar energy (photons) and then convert them to electricity. This process is known as the photovoltaic effect and it was first discovered by Albert Einstein in the early 20th century. The retail energy price of electricity is between $.09-14 KWh, which is what residential customers pay on average in Ecuador. Wholesale pricing is lower than that based on the utilities expenses and profits. Management believes $.045 - $.06 per KWh is possible price that the Company can sell its energy to the local utilities and municipalities of Ecuador.

4.0 Strategic and Market Analysis

4.1 Economic Outlook

The current geopolitical environment of Ecuador has led Management to believe that energy prices will continue to increase in the near future. The fact that the world has passed peak oil, faltering nuclear production and economic difficulties in Europe, the Middle East, The United States and South America, combined with general Middle Eastern instability has led many economists to believe that there is a fifteen to twenty percent risk premium now associated with the price of crude oil and related energy products. While these issues bring worry to the general economy, Management sees a significant opportunity to enter the market with a source of alternative energy. Many politicians and special interest groups have promoted the development of alternative energy solutions to combat the continually increasing energy prices in the United States and the rest of the world. Additionally, the fast growth of Asian nations (namely India and China) has prompted further increases in the global demand for energy. This trend is expected to continue in perpetuity. On top of that the inefficiency and loss of revenue of the sales of oil and reduced production in countries such as Venezuela, Mexico and Ecuador could increase the prices of energy and it becomes more important to have an aggressive strategy to provide electricity through renewable means.

4.2 Industry Analysis

There are several companies that provide non-nuclear and non-fossil fuel power generation to the general public in Ecuador. Each year, these businesses aggregately provide more energy to the open market. The trend among these alternative energy sources is expected to grow significantly as the need for alternative fuels and power grows. Currently, the price of oil and other fossil fuels has skyrocketed to the point where many consumers are looking for alternative methods of power. This specific location is unique in the world as a whole new city; The city of Knowledge Yachay is being promoted by the central government of Ecuador creating a unique opportunity in the world for the success of our company.

4.3 Customer Profile

For the Company’s solar electricity production capabilities, Management expects two core groups of purchasers: government agencies and electricity wholesalers. Among the first group, Management expects that agencies such as counties, Provincial governments, and the Ecuadorian central government will acquire large scale electricity delivery contracts from the Company with the intent to use the energy within their large scale applications. At the onset of operations, the Company will immediately begin developing relationships with local county governments as well as the provincial government for ongoing divestiture and purchase agreements. We intend to pursue aggressively an strategy of growth and development to become a powerful entity in electric production.

4.4 Competitive Analysis

Energy production is one of the freest markets in the economy. These markets operate on a global scale, and as such, it is difficult to determine the exact competitors that the Company will face as it progresses through its business operations. Any business that produces electricity is a potential competitor for the business. However, our unique centers of electric production of renewable energy is unique and not only solar energy, wind energy and hydraulic energy is produced and we expect it will become an increasingly popular method of producing electricity, and the Company’s primary competitive advantage will be its low cost operating infrastructure, its completely renewable resources, and the demand among consumers for cleaner alternatives to traditional oil, natural gas, coal, and nuclear energy power plants.

5.0 Marketing Plan

As Sunlight Energy Enterprises Inc. intends to sell its produced energy directly into the electrical grid, the marketing required by the business will be minimal. However, Management is committed to increasing the awareness of solar energy usage. Below is a brief overview of the ways that Sunlight Energy Enterprises Inc. will market its operations and alternative energy production.

5.1 Marketing Objectives

• Develop an online presence by developing a website and placing the Company’s name and contact information with online directories to further increase awareness of solar energy.
• Establish relationships with energy wholesalers and government agencies within the Company’s targeted market.

5.2 Marketing Strategies

Currently, there are a number of organizations, including the Solar Energy Industries Association that are pushing initiatives, lobbying legislatures, and informing the general public about the benefits about alternative energy products. Management feels that it is important to invest some money in public relations campaigns, even though they will not affect direct sales. Additionally, the increased awareness of solar produced electricity, and all renewable energy and its zero emissions, and ability to wean Ecuador off of wasting oil to power electric gas plants and spending energy sources may prompt consumers and lawmakers to further expand the rebates, tax credits, and other incentive programs available for making solar produced electricity an economy viable energy product now and in the future. Approximately $10,000 to $20,000 per year will be spent to support these causes.

5.3 Pricing

The production of electricity should be pretty stable and we should be growing in the first five years and at this time the cost of each watt is between 9- 14 cents, we should be negotiating to sell at the best possible price each watt of energy and at the same time we shall strive to get tax incentives and we are hopeful to get at least the first five years to be exempt of taxes

6.0 Organizational Plan and Personnel Summary

6.1 Corporate Organization

6.2 Organizational Budget

6.3 Management Biographies

The president and founder of Sunlight Energy Enterprises Inc. was born in Ibarra Ecuador and moved to the United States where he graduated from an American University in Business Management with a minor and Computer Science and three years of architecture. He has worked for several projects from the start to finish of companies such as Coppola Properties and Dolby Development. He founded Sunlight Enterprises 18 years ago and had design, built and manages the construction of several homes in Fairfax County, Loundon County and Prince William County in the United States of America. He founded Sunligh Energy Enterprises Inc in Houston, Texas in 2006. He has ample knowledge in construction and as hands on manager he has worked together with his workers in the completion of several projects.  For several years he studied Eolic, solar and generating systems of electricity, through careful analysis and study of wind, solar, hydraulic and geothermal projects as well as the study of even tidal energy, nuclear energy and waste energy he devised the current plan. He has several patents pending and several copyrights for two novels published and several songs. Mr Germanico Patricio Vaca has raised his son and lives in Bristow, VA.

7.0 Financial Plan

7.1 Underlying Assumptions and Calculations for the wind farm part of the investment

According to EIA (Electricity Information Administration), the average wholesale cost to generate electricity for 2007 was 5.72 cents per kilowatt-hour (¢/kWh)  (2007 is their most recent data). And according to PacifiCorp annual reports (a Mid-American Subsidiary) the average revenue (cost to buyers) is 7.2 ¢/kWh. This value is necessary for calculations, not the wholesale value. The costs for transmission are extra and not addressed here under the assumption of cost-sharing with the government.

These figures vary by region, state, regulated versus non-regulated, and a number of other things. People in some areas of the country pay an average as high as 25 ¢/kWh for their power. However, for the calculations here, I will use 7.2 ¢/kWh because it is a good national average.

According to NREL (National Renewable Energy Laboratories), the formula for calculating profitability or the cost to generate power (Pcost to gen ) with a wind turbine or farm is:

            Pcost to gen = [(FCR x IC) / AEP] + [(LRC + O&M + LLC) / AEP ]              (1)

where:

FCR = fixed charge rate.   For the interested reader, https://www.e-education.psu.edu/eme801/node/560 has a good discussion on the rate, and says this of the variable:  It’s the fraction of the Total Installed Cost that must be set aside each year to retire capital costs which include interest on debt, return on equity, and so forth.

For our purposes, we use 7% or 0.07.

IC = initial capital or CapEx, the capital expenditure, in $.

AEP = net annual energy production, kWh.

LRC = levelized replacement cost (yearly sinking fund for overhauls and replacements), $

O&M = cost for operations and maintenance (turbine maintenance, cost/yr), $

LLC = land lease cost, $/year

Finding values for the terms in Equation 1

FCR   Assume we are a utility company building a 1-MW wind power plant rather than building another coal-powered plant. Because we are a utility, we expect to sell power for 7.2 ¢/kWh (or $0.072 /kWh), as per above.

IC  The initial capital investment or Capex is the total cost of the entire installation, which according to AWEA (American Wind Energy Association) is about $1.3 million for a 1-MW (1,000 kW) turbine.

AEP  For the annual energy production, assume a 39% capacity factor. That is, a turbine will generate on average 39% of its nameplate rating. Hence:

AEP =1,000 kW x 24 hr/day x 365 day/yr x 0.39,

AEP = 3,416,400 kWh per year.

Note to those who are checking the math here: Always include units because they will hint at a correct or meaningful figure. If a unit such as $2 comes up, look for an error.

LRC  The Levelized Replacement cost is simple. Use:

LRC = Cost of turbine / Expected life

LRC = $1.3 million / 20 years

LRC = $65,000/yr

O&M  Operations and Maintenance cost simply runs about 8% of annual gross revenue. Hence:

O&M = AEP x average revenue/kWh x 0.08

O&M = 3,416,400 kWh x $0.072/kWh x 0.08

O&M = $19,678

LLC  The Land Lease Cost is a variable as well but according to AWEA statistics its runs 5% of annual revenue

about  $12,220

Results

With these few figures, we can calculate a value for Equation 1.

Pcost to gen  = [(0.07 x $1,300,000) / 3,416,400] + [($65,000 + $19,678 + $12,220) / 3,394,400

Pcost to gen = 0.0266 + 0.0284

Pcost to gen = 0.055

Pcost to gen = 5.50 ¢/kwh

Next, find a total annual expense (Tae) using

Tae = Pcost to gen  x AEP

Tae = $0.055 /kwh x 3,416,400 kwh

Tae = $187,902

This is the total annual expense.

From here, find annual Gross Income (Ig) using:

Ig  = $0.072 x 3,416,400

Ig = $245,980

Find annual profit (Pa) from the turbine using:

Pa = (Pselling price – Pcost to gen ) x AEP

Pa = ($0.072 − $0.055) x 3,416,400 kWh

Pa  =$0.017 x 3,416,400

Pa  = $58,079

Now that we know how much the wind farm (of one turbine) makes each year, we can calculate a return on investment or ROI using:

ROI = Pa / Total investment

ROI = $58,079 / $1.3 million

ROI = 0.0447 or 4.47%.

This seems a fairly low number for an ROI. Generally, companies require an ROI of 8% or higher if they are to invest in an idea or product.

Another important figure, the Break Even Point, tells how long until your investment is paid for. To find a BEP, use:

BEP = Cturbine / Pa

BEP = $1,300,000 / $58,079/yr

BEP = 22.38 years

Hence, with a product life of 20 years, the product will have to work for more than 22 years before it is paid for. We have applied these figures so the investor can realize either the true potential and full accountability from our part. 

• Sunlight Energy Enterprises Inc., Inc. will have an annual revenue growth rate of 15% per year.
• The Owner will solicit $98,000,000 of equity funds to develop the business to build 50 turbines in combination with the geothermal, hydraulci and solar energy. 
• The Company will invest 25% of its after-tax profits back into the Company’s operating infrastructure.

7.2 Sensitivity Analysis

The Company’s revenues are moderately sensitive to changes in the general economy. Renewable produced electricity is comparatively priced with their petroleum/coal based counterparts, and in the event that prices decline, the Company may see a reduction in its revenues. Only in the event of a steep drop in the price of petrol based energy products does Management anticipate that the Company will have issues regarding top line income.

7.3 Source of Funds

7.4 General Assumptions

7.5 Profit and Loss Statements 

7.6 Cash Flow Analysis

7.7 Balance Sheet

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7.8 General Assumptions

7.9 Business Ratios

Expanded Profit and Loss Statements

Expanded Cash Flow Analysis