Polar Works-Inlet Cooling Technology Overview-Economics and Financing-B/O/O Solution

Economics and Financing

The Polar Works B/O/O Solution

We are so convinced of the above understanding of power plant economics, that we are willing to provide a unique financial tool to make large inlet cooling projects a reality. We see these large projects as the financial equivalent of seasonal capacity additions. Therefore, they should be developed and financed the same way.

Polar Works' origins come from the power development community, not the refrigeration industry. Polar Works can develop a new inlet cooling project, just as new cogeneration plants were developed in the 1980's. Instead of selling steam and electricity, as those pioneering cogen plants did, we will sell a refrigeration service. There will be a contract, just as if the plant had contracted with a water treatment company to provide trailer-mounted water treatment systems. By undertaking this project as a third party refrigeration project, we can secure a long-term finance structure more nearly approaching the financial structure of a new power plant. This lower weighted average cost of capital (WACC) translates into a financial structure that spreads the capital cost of the project out over several years. The longer financial horizon increases the Return on Equity (ROE) and NPV of the project, allowing for a lower cost of refrigeration service to the Host site.

We call this structure "Build / Own / Operate." Not invented by Polar Works, "B/O/O" has been used for years in the development of infrastructure and power projects all over the world, and is thoroughly understood and accepted by commercial banks and large equity sources. This is not a lease or another form of off-balance-sheet financing.

In our structure, we will sell refrigeration under contract. We will have a purchase agreement with our host site, preferably in a format that mirrors the power site's own examining power purchase agreement. In that way, we make money when our host makes money, so that the cost of refrigeration can be attributed as a variable cost of production, much like fuel. Alternatively, we can sell dispatchable refrigeration capacity, so that the cost is assumed in a fixed format, versus the previously described variable format.

If the Host Site is able to sell excess power on a Merchant basis, above and beyond the requirements of its Power Purchase Agreement, the Polar Works B/O/O/ financial model can provide a new avenue for entering the high-profit summer peaking market.

By operating and maintaining our Polar Works systems, the power site need not add any new infrastructure or personnel. All the gas turbine owner needs to do is sell more high-revenue electrical power! For more discussion of our B/O/O service, see our Services page. If you don't like the idea of out-sourcing, keep reading.