EX-99.7 14 dex997.htm APPRAISAL REPORT OF MARSHALL & STEVENS INCORPORATED Appraisal Report of Marshall & Stevens Incorporated

Exhibit 99.7

 

 

 

 

 

 

 

 

 

 

 

 

LA CYGNE UNIT #2

Fair Market Value

June 17, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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June 17, 2005

 

Jennifer Daley

Comcast MO Financial Services, Inc.

1500 Market Street

Philadelphia, PA 19102-2148

File Reference 22-36-00468

 

Dear Ms. Daley:

 

As authorized by Comcast MO Financial Services, Inc., we have conducted an analysis of the La Cygne Unit 2 (herein also referred to as the “Facility”). The Facility began commercial operation in month May, 1977. A leveraged lease transaction (the “Lease”) was consummated between Kansas Gas & Electric (the “Lessee”) and Comcast MO Financial Services, Inc. (the “Lessor”). The term of the original lease commenced on March 29, 1988 (the “Basic Lease Commencement Date”) and was intended for an initial lease period terminating on March 29, 2016. In line with the restructuring of the Lease for financing purposes, the Lease is expected to continue for a period of 41.5 years (the “Basic Lease Term”), terminating on September 29, 2029 (“Basic Lease Term Expiration Date”). The purpose of this analysis is to render our opinion concerning the Fair Market Value of the 50.0% undivided interest of Comcast MO Financial Services, Inc. in the Facility at various key dates.

 

We understand that this report is to be used by the Lessor for financing purposes in connection with the restructuring of the existing leveraged lease as of June 17, 2005 (the “Refinancing Date”). This appraisal may be invalid if used for any other purpose.

 

Our appraisal analysis was conducted in accordance with generally accepted appraisal standards, as set forth by the American Society of Appraisers. This self-contained Report is prepared in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers. Accordingly, we performed such research and analyses as we considered appropriate under the circumstances.

 

Atlanta

Chicago

Houston

Los Angeles

New York

Philadelphia

San Francisco

St. Louis

Tampa

Jennifer Daley

    June 17, 2005

Comcast MO Financial Services, Inc.

    Page 2

 

 

Based on our analyses, we conclude:

 

1. That, as of the Refinancing Date, the Fair Market Value of the Facility and common facilities is $451,650,000 of which $428,840,000 corresponds to the Facility and common facilities which are part of the Lease transaction, and $22,810,000 correspond to common facilities which are not part of this transaction.

 

2. That, as of the Refinancing Date, the Fair Market Value of the Facility at the end of Basic Lease Term on a constant dollar (uninflated) basis is $187,100,000 of which $177,650,000 or 41.4% of the Fair Market Value as of the Refinancing Date, corresponds to the Facility and common facilities which are part of the Lease transaction, and $9,450,000 corresponds to common facilities which are not part of this transaction.

 

3. That, as of the Refinancing Date, the Fair Market Value of the Facility at the end of Basic Lease Term on a real dollar (inflated) basis is $360,850,000 of which $342,630,000 corresponds to the Facility and common facilities which are part of the Lease transaction, and $18,220,000 correspond to common facilities which are not part of this transaction.

 

4. That, as of the Refinancing Date, the remaining economic useful life (“REUL”) of the Facility is 37 years.

 

5. That, the Facility’s Remaining Economic Useful Life at the end of the Basic Lease Term is at least 20.0% of the Economic Useful Life of the Facility as of the original commercial operation date.

 

7. Upon expiration or earlier termination of the Lease, there is a reasonable likelihood that it would be commercially feasible for a party other than the Lessee to own and operate the Facility.

 

8. That, based on our estimate of the fair market value of the Facility and common facilities at the end of the Basic Lease Term of $177,650,000 and the terms of the Lease, there is no economic compulsion for the Lessee to exercise the Purchase Option because as of Lease Term Expiration Date, the Purchase Option Price is expected to equal the Fair Market Value of the Facility.

 

 

 

 

 

 

 

 

 

 

 

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Jennifer Daley

    June 17, 2005

Comcast MO Financial Services, Inc.

    Page 3

 

 

Our opinions of value are as of the issue date of this report. Our opinions are based on perceptions of the market reflecting economic conditions as they exist on the date of this report. We expect the property to be managed competently. Unforeseen events may affect the value, but these events inherently cannot be considered in our opinions. The basis for our conclusions is outlined in the attached Report and Exhibits.

 

The conclusions stated herein are subject to the assumptions and limiting conditions. All information used in these investigations and analyses has been documented and retained in our files and is available for review upon request. If you should have any questions concerning our conclusions, please contact Lawrence Danzig or George Varghese at 212-425-4300.

 

We are pleased to provide this service to you.

 

Very truly yours,

 

/S/    MARSHALL & STEVENS            
Marshall & Stevens

 

MARSHALL & STEVENS INCORPORATED

 

 

 

LA CYGNE UNIT 2 FACILITY

 

 

 

 

Appraisal Report

 

 

 

 

Prepared for

 

 

 

COMCAST CORPORATION

 

 

 

 

AS OF

 

 

June 17, 2005

 

 

 

 

MARSHALL & STEVENS INCORPORATED

VALUATION AND FINANCIAL CONSULTANTS

 

 

 

 

 

 

 

 

 

 

 

 

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TABLE OF CONTENTS

 

1.0   Introduction    1
    1.1    Purpose of the Appraisal    1
    1.2    Appraisal Definitions    2
    1.3    Background Data    3
    1.4    Executive Summary    4
2.0   Description of Facility    5
3.0   Economic and Industry Outlook    7
    3.1    Economic Outlook    7
    3.2    Industry Review and Outlook    8
4.0   Remaining Economic Useful Life    11
5.0   Valuation    13
    5.1    Fair Market Value    14
    5.2    Residual Value - Real Dollars    20
    5.3    Residual Value - Constant Dollars    21
    5.4    Compulsion Analysis Opinion    21

 

Assumptions and Limiting Conditions

 

ADDENDA

Attachment 1- Information Received and Relied Upon In Our Analysis

 

EXHIBITS

 

Exhibit A: Fair Market Value

Exhibit B: Residual Value - Real Dollars

Exhibit C: Residual Value - Constant Dollars

 

 

 

 

 

 

 

 

 

 

 

 

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1.0 Introduction
1.1 Purpose of the Appraisal

 

Marshall & Stevens was retained by Comcast Corporation (“Comcast” or “Lessor”) to conduct an investigation and analysis of the La Cygne Unit 2, a power generation facility near Linn County, Kansas.

 

The appraisal provides our opinion of the following:

 

1. The Fair Market Value of the Facility as of the Refinancing Date.

 

2. The Fair Market Value of the Facility at the end of Basic Lease Term on a constant dollar (uninflated) basis as of the Refinancing Date.

 

3. The Fair Market Value of the Facility at the end of Basic Lease Term on a real dollar (inflated) basis as of the Refinancing Date.

 

4. The remaining economic useful life (“REUL”) of the Facility as of the Refinancing Date.

 

5. That, the Facility’s Remaining Economic Useful Life at the end of the Basic Lease Term is at least 20.0% of the Economic Useful Life of the Facility as of the original commercial operation date.

 

7. Upon expiration or earlier termination of the Lease, there is a reasonable likelihood that it would be commercially feasible for a party other than the Lessee to own and operate the Facility;

 

8. Whether the Lessee is under Economic Compulsion to exercise any purchase Option under the Lease.

 

 

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1.2 Appraisal Definitions

 

The following definitions pertain to this report:

 

Fair market value is defined as the estimated amount at which a property might be expected to exchange between a willing buyer and a willing seller, neither being under compulsion, each having reasonable knowledge of all relevant facts.

 

When fair market value is established on the premise of continued use, it is assumed that the buyer and seller would be contemplating retention of the property at its present location as part of the current operations. An estimate of fair market value arrived at on the premise of continued use does not represent the amount that might be realized from piecemeal disposition of the property in the marketplace or from an alternative use of the property.

 

The premise of continued use is generally appropriate when:

 

  •   The property is fulfilling an economic demand for the service it provides or which it houses.

 

  •   The property has a significant remaining useful life expectancy.

 

  •   Responsible ownership and competent management may be expected.

 

  •   Diversion of the property to an alternative use would not be economically feasible or legally permitted.

 

  •   Continuation of the existing use by present or similar users is practical.

 

  •   Functional utility of the property for its present use is given due consideration.

 

  •   Economic utility of the property is given due consideration.

 

Depreciation is defined as the loss in value from any cause in comparison with a new item of property of like kind, resulting from physical deterioration, functional obsolescence, and external, or economic, obsolescence.

 

Economic useful life is defined as the estimated period of time over which it is anticipated an asset may be profitably used for the purpose for which it was intended. This time span may be limited by changing economic conditions, factors of obsolescence; or physical life.

 

 

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Remaining economic useful life is defined as the estimated remaining period of time over which it is anticipated an asset may be profitably used for the purpose for which it was intended. This time span may be limited by changing economic conditions, factors of obsolescence, or physical life.

 

1.3 Background Data

 

In the course of this study, we interviewed Kansas Gas & Electric’s management and considered financial and operating statistics regarding the Facility provided by Kansas Gas & Electric. Marshall & Stevens appraisal engineering staff visited the Facility and met with the Lessee’s engineering and maintenance personnel to determine the status and condition of the Facility and its future operating prospects. In addition we relied upon various financial sources such as “Trends & Projections” in Standard & Poor’s Industry Surveys; The Value Line Investment Survey; Moody’s Company Data and Capital IQ databases. We also used various other miscellaneous published financial and economic data in our estimates of market value.

 

 

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1.4 Executive Summary

 

Lessee:

   Kansas Gas & Electric

Lessor:

   Comcast MO Financial Services

Type of Asset:

   Coal Electric Power Facility

 

Significant Dates:

Report Date

   June 17, 2005

Basic Lease Expiration Date

   September 29, 2029

Remaining Economic Useful Life:

   37 Years
Fair Market Sales Value of the Facility and common facilities as of June 17, 2005   $428,840,000
Residual Value of the Facility and common facilities at the Lease Expiration Date as of June 17, 2005 (Real Dollars)   $342,630,000
Residual Value of the Facility and common facilities at the Lease Expiration Date as of June 17, 2005 (Constant Dollars)   $177,650,000
Inflation Rate:   2.5%

 

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2.0 Description of Facility

 

The La Cygne Unit 2 is a coal-fired installation in Linn County, approximately 50 miles south of Kansas City. The Facility has a current net capacity of 674 MW, originally approximately 640 MW, and consists of a steam generator supplying high pressure- temperature steam to its associated turbine-generator and includes: condenser, feed water heating and pumping system, electrostatic precipitator, circulating water system, and necessary unit specific auxiliary systems.

 

The Babcock & Wilcox steam generator is a pulverized coal fired, sub-critical pressure, reheat and a balanced draft unit. Auxiliary equipment includes: seven coal pulverizers, gravimetric coal feeders, coal/oil burners, regenerative air heaters, air and combustion gas fans, stack, turbine driven feed water pump, and control systems.

 

The General Electric turbine-generator unit is a tandem compound four flow reheat steam turbine, with seven steam extractions for feedwater heating, 24,000 volt hydrogen cooled synchronous generator; and excitation system.

 

Steam exhausting from the low pressure turbine stages flows into a two shell, single pass surface condenser. The boiler feed water system consists of four low pressure heaters, a de-aerating system, and two high pressure heaters.

 

The boiler exhaust gases pass through a pair of Lodge Cottrell electrostatic precipitators to collect fly ash for compliance with applicable environmental regulations controlling particulate emissions. Collection efficiency is above 99%.

 

The Facility burns predominantly Powder River Basin, Wyoming low sulphur coal. Coal is received at the plant by railroad in 100 ton/car unit trains, and is unloaded by a rotary car dumper into a 350 ton capacity hopper. Belt conveyors transfer it to a 15,000 ton capacity yard storage silo, from which a system of feeders and conveyors transport the coal directly to the steam generator seven storage bunkers, or transfer coal to the plant stacker-declaimer for stock piling in the storage yard. Coal is reclaimed from the active storage pile when necessary by the reclaimer or by means emergency reclaim hoppers and feeders. The system includes a dual conveyor system for reliability, crushers, weigh scales, a sampling system and magnetic separators.

 

 

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Boiler furnace bottom ash is quenched by water in three water impounded collection hoppers. A hydraulic sluice system conveys the ash to two dewatering bins. The dewatered granular ash is loaded into trucks, by discharge gates, for disposal to the plant ash pond. Fly ash from precipitator and air heater hoppers is collected by a dry pneumatic system and transported to a storage silo for disposal by truck.

 

Electric generator power is transformed to 345KV in the main generator step-up transformer and transmitted to the plant electrical switch yard. The main auxiliary transformer steps down generated power to 6.9KV for plant equipment usage.

 

Common Facilities: The Lease includes the equipment and facilities specifically installed for La Cygne Unit 2: turbine generator, steam generator, condenser, feed water system, precipitator, ash system and all auxiliary equipment and systems which are unit specific. As the second unit installed on a site designed for two units, Unit No. 2 shares facilities which were developed and installed with Unit No. 1.

 

The following common facilities are included in the Lease: Plant security, fences, lighting, Railroad tracks, yard coal handling, auxiliary fuel oil storage tanks, auxiliary oil fired boilers, circulating water intake and discharge structures and crane, auxiliary generators, common repair and administration facilities, water makeup pretreatment system, sanitary waste drainage and treating systems, cathodic protection system, service gas systems and plant water systems. The common and support facilities not included in the Lease are site preparation, improvements, roads and drainage, cooling water pond, ash storage ponds, waste water treatment ponds, plant electrical switchyard, transmission line system and coal unit train equipment.

 

The major changes that have occurred since original construction are the increase in capacity to 674 MW, the addition of two 8,000 ton coal storage silos in the mid 1990s and the installation of a distributed control system (“DCS”) in the late 1990s. In addition to this, several pieces of equipment have been replaced. For example, the entire coal loading system has been replaced within the last five years. Other major components replaced within the last five years include the condenser and half of the feed water heaters. There have been few changes to the site itself which, with its favorable geographical location and access to water supply, is well suited to use as the site of a power generation facility.

 

 

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3.0 Economic and Industry Outlook
3.1 Economic Outlook

 

The current and future outlook of the national economy affects the value of a business and its assets in many ways. The value of a facility is directly related to the state of the general economy by virtue of factors such as inflation, interest rates and consumer confidence levels. Below is a brief economic overview and description of some of the factors that will have a marked affect on the Facility going forward.

 

Overview: Despite a powerful late year rally, the stock market turned in an indifferent performance during 2004, with key equity averages typically scoring modest single-digits gains. This performance came on the heels of the double-digit gains of 2003. In some respects, the 2004 market performance was in keeping with an economy that showed little notable strength or any large-scale weakness, but rather struggled along for much of the year at modest rates of growth. Inflation, which stayed subdued last year, save for oil, which rose sharply, matched the modest gains posted by the general economy. Interest rates also remained low, although the Federal Reserve did tighten its monetary stance. The one area that did turn heads was corporate earnings, which showed the eye-catching gains that so typified the late 1990s.

 

Overall, as we look into 2005, the economic indicators are modestly positive, with gross domestic product growth likely to average about 3 1/2% to 4.0%. Oil prices will hold in a $40 to $50-a-barrell range (barring some exogenous shocks) and the Federal Reserve (“Fed”) is likely to raise interest rates up to a still non-disruptive 3.0% to 3 1/2%. Finally, earnings are likely to rise again, on the strength of modest growth in demand, additional cost-cutting initiatives, and further gains in productivity. Things remain less settled globally, though, with the conflict in Iraq continuing to escalate, the situation in the rest of the Middle East still in flux, and the threat on the terrorist front still years from abating.

 

Economic Growth: It is expected that real GDP growth will be approximately 3 1/2% to 4% in 2005, following up on growth of 4.5% and 3.75% in 2003 and 2004, respectively. Underpinning this forecast is the expectation that consumer and industrial markets will press forward at a steady pace. The fundamental factors that drove the economy in 2004 should carry forward into 2005 and beyond, promoting both healthy expansion of activity and low inflation. Profits have been rising briskly, and corporate borrowing costs are still low. Household net worth has increased with the continued sharp rise in the value of real estate assets as well as gains in equity prices, and this will likely help support consumer

 

 

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demand in the future. Absent a significant run-up in oil prices from current levels, the drag from last year’s gains in output should wane this year. Finally, economic growth will likely be sufficient to generate notable increases in employment in 2005. After falling from 6.0% in late 2003 to 5.5% in late 2004, the unemployment rate is widely expected to decrease to around 5.25% in 2005.

 

Inflation: Inflation is likely to remain relatively tame as well. The Federal Open Market Committee (FOMC) projects that the chain-type price index for personal consumption expenditures excluding food and energy (core PCE) will increase between 1.5% and 1.75% both this year and next, after a 1.6% increase in 2004. Inflation last year was, in large part, due to rising energy prices, and the FOMC’s projections are assuming that oil prices do not escalate wildly above their current historically high levels. This is not considered very likely, and even in the event of further increases in oil or base metal prices, the effect should not be so great as to be a threat to the economy.

 

Interest Rates: The Federal Reserve Board has raised interest rates a number of times in the past six months, with the latest increase raising the Federal Funds rate from 2.0% to 2.24%. We believe that the Fed will stick with its goal of tightening the monetary reigns in a measured way for 2005. The Fed stated its intent to raise rates at a gradual enough pace so as not to disrupt the current sustained business upturn. Reports showing that inflation remains modest are providing support for the Fed’s resolve to raise rates very gradually.

 

Conclusion: Obviously, risks and uncertainties are present, and these clearly will have an impact on both the equity markets and general U.S. economy in the months ahead. However, we feel that the prevailing economic conditions will lead to favorable economic growth with moderate inflation for 2005. The Fed will play an important role in determining just how favorable the economic growth will be, and we expect monetary policy to continue to be a slow and steady process.

 

3.2 Industry Review and Outlook

 

We have reviewed conditions and trends in the U.S. electric utility industry, which directly affect the Facility and its future prospects. The aspects of the industry directly affecting the Facility include, but are not limited to: supply and demand forces; environmental and regulatory issues; and competition. The following outlook, based primarily on the Energy Information Association’s (EIA) Annual Energy Outlook for 2005 describes these and other factors that will shape the power generating industry in the years ahead.

 

 

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U.S. Outlook: Consistent with population growth rates and household formation, delivered residential energy consumption is projected to grow from 11.6 quadrillion British thermal units (Btu) to 14.3 quadrillion Btu in 2025, at an average rate of 0.9% per year between 2003 and 2025. The most rapid growth in energy demand is projected to be for electricity used to power computers, electronic equipment, and appliances.

 

Total electricity consumption, including both purchases from electric power producers and on-site generation, is projected to grow from 3,657 billion kwh in 2003 to 5,467 billion kwh in 2025, increasing at an average rate of 1.8% per year. Rapid growth in electricity demand to power computers, office equipment, and a variety of electrical appliances in the end-use sectors is partially offset in the forecast by improved efficiency in these and other, more traditional electrical applications and by slower growth in electricity demand in the industrial sector.

 

Total coal consumption is projected to increase from 1,095 million short tons in 2003 to 1,508 million short tons in 2025, an average growth rate of 1.5% over the forecasted period. The growth rate has been lowered slightly from previous forecasts due to an update of assumptions made about relative capital costs of new coal and natural gas-fired power plants. Total coal consumption for electricity generation is projected to increase by an average of 1.6% per year, from 1,004 million short tons in 2003 to 1,425 million short tons in 2025; again, slightly down from previous forecasts.

 

The natural gas share of electricity generation is projected to increase from 16% in 2003 to 24% in 2025. The share from coal is projected to decrease marginally, from 51% in 2003 to 50% in 2025. It is projected that 87 gigawatts of new coal-fired generating capacity will be constructed between 2004 and 2025. While nuclear, renewable and petroleum generating capacity are all projected to show marginal growth between 2004 and 2025.

 

Regional Outlook: The La Cygne Unit 2 facility, services the Mid-Continent Area Power Pool (MAPP) U.S region. MAPP membership includes 108 utility and nonutility systems. The MAPP Region covers all or portions of Iowa, Illinois, Minnesota, Nebraska, North and South Dakota, Michigan, Montana, Wisconsin, and the provinces of Manitoba and Saskatchewan. The total geographic area is 900,000 square miles with a population of 18 million.

 

 

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The electricity sales are projected to grow between 1.3 and 1.8 percent per year from 1996 through 2015. All of the increases in coal based electric generation occur as a result of greater utilization of existing coal-fired power plants (60 percent in 1996 compared with 77 to 79 percent in 2005). There is little additional change between 2005 and 2015, and no new coal-fired plants are projected to be built. The amount of additional generation required will depend on the level of demand for electricity and the assumed early retirement of two nuclear power plants.

 

For the period 2004-2011, currently projected capacity reported in the Mid-Continent Area Power Pool (MAPP) U.S. region is below MAPP requirements for reserve capacity obligations, but MAPP does not expect any capacity deficits to occur during the next ten years.

 

 

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4.0 Remaining Economic Useful Life

 

The standard method for estimating the remaining economic useful life (“REUL”) of a property is to determine the total expected economic useful life (“EUL”) of the property on a component-by-component basis, and then adjust the estimate for anticipated or actual physical, functional, and external depreciation. For new property, depreciation is not taken into consideration since the components are new, employ state-of-the-art technology, and have not been used in production. Consideration must also be given to the maintenance and repair policies of a potential user. Factoring these considerations into an analysis helps to determine the physical useful life of a property. If it can be demonstrated that it is economical and in the owner’s interest to continue operations throughout the estimated physical or functional useful life of a facility, then the physical or functional useful life equals the estimated EUL.

 

The first step in the valuation of a facility is to determine its estimated EUL. This sets time horizons for calculating Fair Market and Residual Values. The standard method for calculating the EUL is to establish the total life of a new project based on historical data, industry sources and professional experience. This model is then adjusted for anticipated physical, functional and external depreciation.

 

As of the unit commissioning date of May 1977, the EUL of the Facility was estimated to be over 50 years. Approximately 28 yrs have elapsed since the commissioning date. Based on our observations from the on-site plant visit and talks with plant personnel, in addition to evincing a very high level of maintenance various major components of the Facility have been replaced within the last five years. The availability and efficiency of the older facilities is maintained at optimum by a combination of increased use of preventive maintenance techniques to prevent equipment fatigue, improved pollution control equipment and up to date instrumentation control systems. The major changes that have occurred since original construction are primarily the total control system updating to automated mode with installation of a distributed control system (“DCS”), replacement of entire coal loading system, the installation of new condenser and half of the feed water heaters. The major components of the plant such as the turbine, generator and boiler are frequently inspected and undergo regular scheduled overhauls. However, furthermore, we would expect that the level and quality of maintenance will remain high and that major components will continue to be replaced in the same manner as in the past. The Facility plans to meet Clean Air Act of NOX, and SO2 emission

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standards, through a combination of low sulfur coal, installation of low NOx burners and emerging technologies; like limestone injection multistage burners.

 

The changing nature of the utility sector has led to many natural gas based facilities either being shutdown or run as peaking plants due to high expected natural gas costs in the foreseeable future; and additional coal and nuclear green field projects need 20-25 years including permits, environmental clearances and construction lead time. To meet this shortfall in electric demand caused by mothballing of new natural gas facilities, well maintained and efficient existing coal and nuclear facilities are being used on extended useful lives along with strides toward unbundling other non-conventional energy sources. This trend is in line with the EIA database of coal based power facilities with generating capacity in range of 100-1300 MW. This database shows many facilities aged 50 years and over operating at optimal plant efficiency. Also, in addition to the fact that there is a 20-25 year lead time from the conceptualization of a power facility design to final hot run generation, the MAPP regional electric market outlook discussed earlier in this report indicates there are no new coal based generation plants projected for the plan period 1996-2015. Based on this information, the mothballing of new natural gas facilities, and the EIA database, it is our opinion that the Facility has an estimated REUL of 37 years. Therefore, in our opinion, the Facility has a total EUL of 65 years.

 

 

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5.0 Valuation

 

In any appraisal, consideration must be given to the three basic approaches to valuation. These are the income approach, the market approach, and the cost approach, outlined as follows:

 

The Income Approach

The income approach establishes the value of the property on the basis of capitalization of the net earnings or cash flow. The income approach is typically used in the valuation of assets which produce, or are capable of producing; an identifiable stream of income or cost savings that can be uniquely quantified.

 

The Market Approach

The sales comparison (market) approach is useful in the valuation of individual assets only when there have been sufficient recent sales of like assets to establish a market, and the details of those sales are known. A comparison of the market data requires knowledge of the condition of the property that was sold, the terms and conditions of the sale, including the amount paid, financing, related contracts and other considerations, and the state of the industry at the time of the sale. In many cases this information is not publicly available and the known sales are used only as a broad gauge of comparison.

 

The Cost Approach

The foundation of the cost approach is the proposition that an informed purchaser would pay no more for a property than the cost of producing a substitute property with the same utility. When the approach is applied, property facts are assembled in an appraisal inventory, and data regarding costs and price-governing factors are gathered. The accumulated data are then employed to develop the cost of reproduction new or the cost of replacement of the subject property.

 

From the cost to reproduce or replace the property as if new, an amount is deducted for accrued depreciation or physical deterioration, plus any functional and external obsolescence that might exist. The cost approach ordinarily supplies the most reliable indication of the fair market value of newly constructed special structures, systems, and special machinery and equipment.

 

In reviewing the three approaches for applicability, we determined that the appropriate valuation method for the Facility is the income approach. The sales comparison

 

 

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approach was not utilized in determining the fair market value in continued use of the Facility as an active secondary market for similar facilities was not identified. In our opinion, the cost approach is not relevant because the Facility is no longer new and its value depends on the expected future income streams.

 

5.1 Fair Market Value

 

Income Approach — The value indicated by the income approach was determined by performing a prospective financial analysis of the Facility to estimate future available debt-free net cash flows (“DFNCF”). DFNCF is determined as follows:

 

EBIT - Taxes + Depreciation and Amortization – Working Capital Additions – Capital Expenditures = DFNCF

 

To prepare forecasts of electricity prices and fuel costs, we examined historical wholesale pricing in the area where the Facility is located. We then reviewed various sources to find authoritative forecasts of future pricing. For our valuation models we used pricing and fuel cost forecasts from the Energy Information Administration (“EIA”). The Energy Information Administration, created by Congress in 1977, is an agency of the U.S. Department of Energy. It provides policy-independent data, forecasts and analyses used by analysts and policy makers.

 

Cash flows are discounted to present value at a rate that reflects both current market return requirements and the risks inherent in the specific investment. The cash flow stream is projected over the REUL of the Facility and discounted to present value.

 

The basic method of forecasting involves using past experience to forecast the future. This approach is based upon “causal” and “continuity” postulates. The causal postulate assumes that given numerical results were caused by some combination of supply and demand, managerial ability, sales ability, inventiveness, the possession of natural resources, the political climate, etc. The continuity postulate assumes that, barring evidence that the interrelated causes that gave rise to past effects have changed, the same causes will continue to produce the same effects. In general, the continuity postulate is particularly apposite for facilities such as La Cygne Unit 2.

 

 

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Review of Historical Performance — The Facility’s revenues and expenses were projected over its estimated REUL based on a review of historical operating data provided by Kansas Gas & Electric, as well as subsequent discussions with Kansas Gas & Electric personnel and the expected conditions of the economy and the industry. Marshall & Stevens relied on this information for the income analysis and it is identified in an appendix and, based upon our review; believe that the information provided is a reasonable basis for this valuation.

 

Forecast of Operations — The Facility is valued as a coal-fired steam electric generating facility. It is sometimes appropriate to adjust all other non-utility operating expenses to eliminate the scale efficiencies inherent in the allocated amounts. But this step was not taken in order to reflect the benefits of the overall economics of the Facility.

 

The major factors impacting the DFNCF are discussed in the following report sections.

 

Revenue — The Facility’s revenue is derived from net power sales. Power sales were calculated as follows:

 

Annual Net Generation x Market Price of Power = Power sales

 

Based on the historical performance of the Facility it is estimated that annual average generation will be approximately 5,100,000 MWhs at an 87.0% capacity factor. However, in recognition of the likelihood that capacity utilization will begin to deteriorate as the Facility ages, we have provided a decrease in the utilization factor beginning in 2026 from 87.0% down to 78.0% during the last three years of forecasted operations.

 

The price per MWh was based on EIA average forecast electricity prices in the North West Central Region. The price was escalated upward from 2005 to reflect inflation at 2.5%, based on Value Line’s annual inflation forecast. The first year average forecast wholesale market price amounted to $30.9 per megawatt hour (MWh).

 

Operating Expenses — Operating expenses include fuel costs as well as operating costs consisting of general, administrative, maintenance and miscellaneous expenses. The following provides the conclusions regarding the operating expense forecast.

 

 

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Fuel costs for the base year were based on the EIA forecast and the actual average delivered cost of $0.82 per MMBtu for Powder River Basin steam coal. The Facility heat rate factor based on historical operating data was determined to be 10,367 Btu/KWh. We have assumed approximately a 10.0% increase in the heat rate in the residual period; from 10,367 Btu/KWh in 2030 to 11,566 Btu/KWH in 2041; the terminal year of our forecast. Other Direct Costs and Indirect costs were projected based on review of historical levels and then inflating the base year over the REUL at the assumed inflation rate of 2.5%. It has been concluded that Other Direct Costs and Indirect Charges for the Facility’s Year 1 forecast is approximately $31,620,665.

 

Depreciation — Depreciation of the Facility’s capital expenditures were then deducted from pretax income to arrive at taxable income. The Facility’s depreciable assets can be classified as industrial steam and electric generation assets belonging to modified accelerated cost recovery system (“MACRS”) asset class 00.4. As such, the depreciable assets are treated under the General Depreciation System by the MACRS 20-year convention.

 

Income Taxes — Income tax was then deducted from the income in estimating future cash flows. We consider the marginal rate of tax of 40% to be appropriate since a hypothetical investor would incur this level of tax due to the incremental income, regardless of the investor’s actual tax situation.

 

Capital Expenditures — Projected capital expenditures were based on annual forecasts provided by Kansas Gas & Electric for 2005-2009 and from the year 2010 to the end of the Lease Term; equivalent to approximately 1.0-5.0% of annual revenues based on comparable company analysis. The capital expenditures assume sharp increases starting in 2013 to meet Clear Air phase II standards for NOx and SO2 emissions, through installation of low NOx burners and emerging technologies; like limestone injection multistage burners.

 

Working Capital — Working capital requirements are projected to be equal to zero percent of revenue since most independent power facilities operate at negative levels of working capital.

 

The projected depreciation amounts are added back to the net income amounts since it is a non-cash expense. Capital expenditures are then subtracted to derive the cash flows for the Facility. The cash flows derived using the assumptions above are presented in Exhibit A.

 

 

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Cash Flow Summary — Based upon the analysis discussed above, the fair market value of the Facility and common facilities, according to the income approach, is approximately $451,650,000. The appraised value of the Facility and common facilities included in the Lease transaction are taken to be 94.95% of the total appraised value. The 5.05% of total fair market value of the common facilities excluded from the Lease is expected to be similar to the original engineering valuation of the Facility by Burns and Roe dated September, 1987, assuming regular maintenance and optimal operational efficiency. Thus, the current fair market value of the Facility and common facilities included in the Lease is approximately $428,840,000, and the current fair market value of the common facilities, which are not included, is $22,810,000.

 

Discount Rate Analysis

One of the key elements of the income approach is the discount rate used to discount the projected cash flows to their present values. Determining an appropriate discount rate is one of the more difficult parts of the valuation process. The applicable rate of return or discount rate—the rate investor’s require as a condition of purchase—varies from time to time, depending on economic and other conditions.

 

The magnitude of the discount rate also varies with the investor’s degree of optimism or pessimism relative to the sales and income projections; increasingly optimistic projections will require a higher discount rate, and vice versa. Stated differently, as the degree of certainty with which the projections are believed attainable increases, the discount rate falls correspondingly, and vice versa.

 

The starting point for developing the appropriate discount rate is the alternative investment opportunities in risk-free or relatively risk-free investments. An indication of these market rates of interest near the appraisal date follows.

 

 

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Market Rates of Interest     

Security

    Yield

Treasury Securities–5-year

    3.81

Treasury Securities–Long-term (20-year)

    4.84

Moody’s Aaa Corporate Bonds

    5.30

Moody’s Baa Corporate Bonds

    5.66

Source: Federal Reserve Board as of May 6, 2005

     

 

 

All of these investments offer somewhat less risk than an investment in the subject Facility. In addition, these securities are readily marketable.

 

The rate of return expected from an investment by an investor relates to perceived risks. Risk factors relevant in our selection of an appropriate discount rate for the Facility include the following:

 

1. Interest rate risk measures variability of returns caused by changes in the general level of interest rates.

 

2. Purchasing power risk measures loss of purchasing power over time due to inflation.

 

3. Market risk measures the effects of the general market on the price behavior of securities.

 

4. Business risk measures the uncertainty inherent in projections of operating income.

 

Consideration of risk, burden of management, and other factors affect the rate of return acceptable to a given investor in a specific investment. An adjustment for risk is an increment added to a base or safe rate to compensate for the extent of risk believed involved in the use of the capital sum. The discount rate applied to the projected cash flows was weighted to incorporate the rates of return required by both debt and equity investors as of the valuation date.

 

To calculate the appropriate capital structure to be used in determining the Facility’s weighted cost of capital we examined the debt/equity ratios of the comparable guideline companies in the electric utility sector, based on ValueLine database. The guideline

 

 

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companies we identified include independent power producers operating power projects or public utilities primarily relying on fossil fuel sources.

 

In financial theory, the cost of equity is defined as the minimum rate of return that a company must earn on the equity-financed portion of its capital to leave its value unchanged. We calculate the required return on equity by using the capital asset pricing model (“CAPM”). The capital asset pricing model uses the beta (ß) coefficient to measure the extent to which the returns on a given investment track the stock market as a whole. Beta is a gauge of a security’s volatility in comparison with the market’s volatility.

 

The cost of debt capital was estimated based upon the rate on high-grade (Aaa-rated) corporate bonds, adjusted to account for the relative safety of the industry and the investment. The cost of equity capital was determined through the use of the Capital Asset Pricing Model.

 

The equity risk premium (ERP) is the return on the market in excess of the risk-free rate (Rf). The risk premium is based on the average premium over the risk-free rate that investors in common stocks have earned since 1926. The unsystematic or additional risk premium (ARP) may be necessary to reflect size, diversification, depth of management, lack of a public market, aggressiveness of forecast, or a variety of factors that may make the company more or less risky than the comparable companies.

 

Based on the information presented previously, we selected a discount rate of 8.0% as being reasonable for the La Cygne Unit 2, derived as shown below:

 

 

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Cost of Debt Capital (CDC)

          5.3 %

Debt Premium

          0.7 %
          
           6.0 %

Large Company Stock Return

    12.4 %      

Long-term Government Bond Return (Rf)

    4.8 %      
    
     

Equity Risk Premium (ERP)

          7.6 %

Additional Risk Premium (ARP)

          2.0 %

Beta Coefficient (ß)

          0.8  

Cost of Equity Capital [Rf+ß(ERP)+ARP]

          12.9 %
          

Debt as a Percentage of Capital (D)

          55.0 %

Equity as a Percentage of Capital (E)

          45.0 %

Tax Rate (T)

          40.0 %

Weighted Cost of Debt (D)(CDC)(l-T)

          2.0 %

Weighted Cost of Equity

          5.8 %
          

(E)[Rf+ß(ERP)+ARP]

             

Weighted Cost of Capital (Rounded)

          8.0 %
          

 

5.2 Residual Value – Real Dollars

 

The purpose of this section is to present our determination of the Residual Value of the Facility at the end of the Lease Term on September 29, 2029. We assume that the Facility will be operated and maintained in a manner which is consistent with the terms of the Lease. In essence the Lessee is obligated to operate and maintain the Facility in accordance with prudent industry practice as well as governmental laws and actions. They are required to insure that equipment warranties and insurance are not adversely affected by their methods. All records, logs, manuals and other materials are to be maintained in accordance with prudent industry practice.

 

Income Approach

To arrive at an indication of the value of the Facility at the end of the Lease Term via the income approach, we developed a pro forma cash flow for the period of time from the end of the Lease Term to the end of the Facility’s Economic Useful Life. We used essentially the same methodology outlined in the Fair Market Value income approach section of this report.

 

 

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Using real dollar (inflated) margins and expenses from the original cash flow projection; we determined the after-tax cash flow for the residual period. As discussed in the Fair Market Value income approach section, we applied a discount rate of 8.0% to the inflated after tax cash flows of the residual period.

 

As a result of the discounted cash flow analysis, it is our opinion that the indicated value of the Facility at the end of the Lease Term in real dollars, via the income approach, is $360,850,000. The appraised value of the Facility and common facilities included in the Lease are taken to be 94.95% of the total appraised value. Thus the residual fair market value of the Facility and common facilities in real dollars, included in the Lease is approximately $342,630,000 and the residual fair market value of the common facilities in real dollars which are not included is $18,220,000. The detailed real dollar discounted cash flow analysis is shown in Exhibit B.

 

5.3 Residual Value-Constant Dollars

 

Our final opinion of the Residual Value of the Facility without consideration of inflation or deflation, or in constant dollars is $187,100,000. The appraised value of the Facility and common facilities included in the Lease are taken to be 94.95% of the total appraised value. Thus the residual fair market value of the Facility and common facilities without consideration of inflation or deflation, or in constant dollars, included in the Lease is approximately $177,650,000 or 41.4% of the Fair Market Value as of the Refinancing Date, and the residual fair market value of the common facilities without consideration of inflation or deflation, or in constant dollars, which are not included is $9,450,000. The detailed constant dollar discounted cash flow analysis is shown in Exhibit C.

 

5.4 Compulsion Analysis Opinion

 

Our opinion that there is no compulsion associated with the terms of the Purchase Option Price is based on our analysis of Subsection 6(i) of the Lease which, in summary provides that the Purchase Option Price is the lesser of (1) the Fair Market Sales Value as of the Basic Lease Term Expiration Date and (2) Option Price equal to the sum of,

 

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  •   Expected End-of-Basic-Term Asset Value.

 

  •   Fair market value on such date of any Nonseverable Alterations completed after the date of the Marshall & Stevens Appraisal and financed by an additional investment of Owner Participant in accordance with paragraph (c) of subsection 11.6 of the Lease.

 

  •   The Lessee Loan Balance, if any, on such date, over the Lessor Loan Balance, if any, on such date.

 

Based on our analysis, the Fair Market Sales Value as of the Basic Lease Term Expiration Date is expected to be less than the Option Price and is, therefore, the expected Purchase Option Price according to the terms of the Lease. Accordingly, since the Purchase Option Price is equal to Fair Market Sales Value, there is, in our opinion, no compulsion to exercise the Purchase Option.

 

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ASSUMPTIONS AND LIMITING CONDITIONS

 

Date of Value

The reader is advised that this valuation is heavily dependent upon future events with respect to industry performance, economic conditions, and the ability or lack thereof for certain products or business divisions to meet certain performance levels. The operating projections used may be reasonable and valid at the date of this appraisal; however, there is no assurance or implied guarantee that the assumed facts and circumstances will actually occur. We reserve the right to make adjustments to our opinions as may be required by any modifications in the prospective outlook for the economy, the industry, and/or the Company.

 

Non-appraisal Expertise

We neither express nor imply any opinions for matters that require legal or specialized expertise, investigation, or knowledge, beyond that customarily employed by us. We made no investigation of legal title and we render no opinion as to ownership of the underlying assets used by entities involved in this analysis.

 

Information and Data

Information supplied by others that was considered in this appraisal is from sources believed to be reliable, and no further responsibility is assumed for its accuracy. We reserve the right to make such adjustments to the valuation herein reported based upon consideration of additional or more reliable data that may become available subsequent to the issuance of this report.

 

Confidentiality / Advertising

This report and supporting documentation are confidential. Neither all nor any part of the contents of this appraisal shall be copied or disclosed to any party or conveyed to the public orally or in writing through advertising, public relations, news sales, or in any other manner without the prior written consent and approval of both Marshall & Stevens and its client. However, Marshall & Stevens consents that this report may be provided to any government authority and/or legal and tax advisors of the client.

 

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Litigation Support

Depositions, expert testimony, attendance in court, and all preparations/support for same, arising from this appraisal shall not be required unless arrangements for such services have previously been made.

 

Management

The opinions of value expressed herein assume the continuation of prudent management policies over whatever period of time is deemed reasonable and necessary to maintain the character and integrity of the subject business enterprise.

 

Purpose

All opinions of market value are presented as Marshall & Stevens’ considered opinion based on the facts and data obtained during the course of our analysis. This report has been prepared for the sole purpose stated herein and shall not be used for any other purpose.

 

Unexpected Conditions

We assume there are no hidden or unexpected conditions associated with the subject property that might adversely affect value. Further, we assume no responsibility for changes in market conditions, which may require an adjustment in the appraisal.

 

Appraisal Fee

The fee established for the formulation and reporting of these conditions has not been contingent upon the conclusion of value or other opinions presented.

 

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ATTACHMENTS

 

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ATTACHMENT 1

 

INFORMATION RECEIVED AND RELIED UPON IN OUR ANALYSIS

 

1) Discussions during site visit on May 12, 2005.

 

2) Continuing Property Records (CPR) for La Cygne Unit 2 (“LC2”) and common units.

 

3) Listing of additions since 1988.

 

4) Detailed listing of Capital Expenditures from 2000 to 2004.

 

5) 5 yr GADS stats for La Cygne Unit 2

 

6) La Cygne Unit 2 maintenance outage schedules.

 

7) Piping and Instrumentation drawings for La Cygne Unit 2.

 

8) Aerial photographs provided by Chuck Hodson.

 

9) Report “LaCygne Station Budget 2005”.

 

10) The Facility historical operational FERC Form 1 data, historical annual capital expenditure data for 2000-2004 period and severable and non severable assets listing received via e-mail from Kansas Gas & Electric marked subject “Information request”, on 05/10/05.

 

11) O&M & Capex forecast for 2005-2009 received from Kansas Gas & Electric via e-mail marked subject “Budget & forecast information” on 05/12/05.

 

12) Engineering Appraisal by Burns & Roe Company, September 1987; received from Kansas Gas & Electric via e-mail marked subject “Original Appraisal of La Cygne2” on 05/12/05.

 

13) Lease Agreement received from Kansas Gas & Electric via e-mail marked subject “La Cygne 2 1987 Lease Docs” on 05/18/05.

 

14) Ground Lease, Participation Agreement and Facilities Agreement received via e-mail “Additional La Cygne docs” from Kansas Gas & Electric on 05/18/05.

 

 

 

 

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EXHIBIT A

LA CYGNE #2 POWER PLANT

DISCOUNTED NET CASH FLOW

 

Price
Inflators—
2.5%		   Year     Year     Year     Year     Year     Year     Year     Year     Year     Year     Year  
REUL—37
Years		   1     2     3     4     5     6     7     8     9     10     11  
Year   2005
     2006
     2007
     2008
     2009
     2010
     2011
     2012
     2013
     2014
     2015
  

Net operating capacity (MW)

     674       674       674       674       674       674       674       674       674       674       674  

Capacity factor

     87 %     87 %     87 %     87 %     87 %     87 %     87 %     87 %     87 %     87 %     87 %

Hours operating per year

     7600       7600       7600       7600       7600       7600       7600       7600       7600       7600       7600  

Total production (MWH)

     5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616  

Price ($/MWH)

     30.9       31.1       31.5       32.7       34.1       35.3       34.5       34.7       35.8       36.7       37.6  
   
 
 
 
 
 
 
 
 
 
 

Total revenues

   $ 158,103,325     $ 159,495,454     $ 161,280,225     $ 167,342,783     $ 174,429,737     $ 180,884,240     $ 176,608,980     $ 177,913,678     $ 183,433,018     $ 188,013,383     $ 192,440,810  

Fuel expenses: Coal

                                                                                        

Production (MWH)

     5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616  

Facility heat rate (Btu/KWH)

     10,367       10,367       10,367       10,367       10,367       10,367       10,367       10,367       10,367       10,367       10,367  
   
 
 
 
 
 
 
 
 
 
 
      53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157  

Price ($/MMBTU)

     0.82       0.84       0.86       0.88       0.91       0.93       0.95       0.97       1.00       1.02       1.05  
   
 
 
 
 
 
 
 
 
 
 

Total fuel expense

     43,547,049       44,635,725       45,751,618       46,895,408       48,067,794       49,269,488       50,501,226       51,763,756       53,057,850       54,384,296       55,743,904  

Total operating costs

     31,620,665       31,899,091       32,256,045       33,468,557       34,885,947       36,176,848       35,321,796       35,582,736       36,686,604       37,602,677       38,488,162  
   
 
 
 
 
 
 
 
 
 
 

Total expenses

     75,167,714       76,534,816       78,007,663       80,363,965       82,953,741       85,446,336       85,823,022       87,346,492       89,744,454       91,966,973       94,232,066  
   
 
 
 
 
 
 
 
 
 
 

EBITDA

     82,935,611       82,960,638       83,272,562       86,978,818       91,475,996       95,437,904       90,785,958       90,567,186       93,688,564       96,026,410       98,208,744  

Less: Depreciation

     33,762,409       65,190,527       60,538,136       56,072,301       51,952,036       46,195,215       44,711,795       41,496,736       41,170,856       41,492,443       41,839,467  
   
 
 
 
 
 
 
 
 
 
 

Pretax income

     49,173,202       17,770,112       22,734,427       30,905,517       39,523,960       47,239,689       46,074,163       49,070,450       52,517,709       54,533,967       56,369,278  

Income tax @40%

     19,669,281       7,108,0145       9,093,771       12,362,607       15,809,584       18,895,876       18,429,665       19,628,180       21,007,083       21,813,587       22,547,711  
   
 
 
 
 
 
 
 
 
 
 

Net income

     29,503,921       10,662,067       13,640,656       18,543,910       23,714,376       28,343,814       27,644,498       29,442,270       31,510,625       32,720,380       33,821,567  

Plus: Depreciation

     33,762,409       65,190,527       60,538,136       56,072,301       51,952,036       48,196,215       44,711,795       41,496,736       41,170,856       41,492,443       41,839,467  

Less: Capital expenditures

     936,000       5,217,000       1,238,000       564,000       1,880,000       1,808,842       1,766,090       1,779,137       5,502,991       5,640,401       5,773,224  
   
 
 
 
 
 
 
 
 
 
 

Cash flow

     62,330,331       70,635,594       72,940,792       74,052,212       73,786,412       74,733,186       70,590,203       69,159,869       67,178,490       68,572,422       69,867,809  

Discount factor @8%

     0.9623       0.8910       0.8250       0.7639       0.7073       0.6549       0.6064       0.5615       0.5199       0.4814       0.4457  
   
 
 
 
 
 
 
 
 
 
 

Present value of cash flows

   $ 59,977,389     $ 62,934,381     $ 60,174,305     $ 56,565,924     $ 52,187,860     $ 48,942,127     $ 42,804,559     $ 38,830,770     $ 34,924,349     $ 33,008,350     $ 31,149,565  
   
 
 
 
 
 
 
 
 
 
 

Present value—forecast period

   $ 899,394,920                                                                                  

Remaining book value

     167,137,166                                                                                  

Remaining book value recapture

     66,854,866                                                                                  

Discount factor 8% @ end of year 37

     0.058                                                                                  
   
                                                                               

After-tax present value of recapture

     3,877,582                                                                                  

Present value—forecast period

     899,394,920                                                                                  

Present value—book value recapture

     3,877,582                                                                                  
   
                                                                               

Present value—total

     903,272,502                                                                                  

Present value (rounded)

   $ 903,300,000                                                                                  

Comcast undivided interest

     50.0 %                                                                                
   
                                                                               

Value of Comcast undivided interest

   $ 451,650,000                                                                                  
   
                                                                               
      Assumptions:                                                                          
      1) Electricity prices as per EIA less transmition and distribution cost.          
      2) Fuel prices as per EIA projections.          
      3) Operating expense at 20-25% of revenues.          
      4) Depreciation—20 year MACRS.          
      5) Capacity factor and plant heat rate as per management.          

EXHIBIT A

LA CYGNE #2 POWER PLANT

DISCOUNTED NET CASH FLOW

 

Price
Inflators—
2.5%		   Year     Year     Year     Year     Year     Year     Year     Year     Year     Year     Year  
REUL—37
Years		   12     13     14     15     16     17     18     19     20     21     22  
Year   2016
     2017
     2018
     2019
     2020
     2021
     2022
     2023
     2024
     2025
     2026
  

Net operating capacity (MW)

     674       674       674       674       674       674       674       674       674       674       674  

Capacity factor

     87 %     87 %     87 %     87 %     87 %     87 %     87 %     87 %     87 %     87 %     86.5 %

Hours operating per year

     7600       7600       7600       7600       7600       7600       7600       7600       7600       7600       7557  

Total production (MWH)

     5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,093,175  

Price ($/MWH)

     39.4       41.0       42.3       43.4       44.5       45.5       46.8       48.1       49.6       50.5       51.7  
   
 
 
 
 
 
 
 
 
 
 

Total revenues

   $ 201,884,891     $ 210,213,777     $ 216,663,257     $ 222,412,657     $ 227,941,931     $ 233,178,727     $ 239,588,720     $ 246,278,319     $ 254,113,878     $ 258,476,986     $ 263,416,273  

Fuel expense: Coal

                                                                                        

Production (MWH)

     5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,122,616       5,093,175  

Facility heat rate (Btu/KWH)

     10,367       10,367       10,367       10,367       10,367       10,367       10,367       10,367       10,367       10,367       10,367  
   
 
 
 
 
 
 
 
 
 
 
      53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       53,106,157       52,800,949  

Price ($/MMBTU)

     1.08       1.10       1.13       1.16       1.19       1.22       1.25       1.28       1.31       1.34       1.38  
   
 
 
 
 
 
 
 
 
 
 

Total fuel expense

     57,137,501       58,565,939       60,030,087       61,530,840       63,069,111       64,645,838       66,261,984       67,918,534       69,616,497       71,356,910       72,720,483  

Total operating costs

     40,376,978       42,042,755       43,332,651       44,482,531       45,588,386       46,635,745       47,937,744       49,255,664       50,822,776       51,695,397       52,683,255  
   
 
 
 
 
 
 
 
 
 
 

Total expenses

     97,514,480       100,608,694       103,362,739       106,013,371       108,657,497       111,281,584       114,199,728       117,174,198       120,439,273       123,052,307       125,403,737  
   
 
 
 
 
 
 
 
 
 
 

EBITDA

     104,370,412       109,605,082       113,300,518       116,399,286       119,284,434       121,897,143       125,488,992       129,104,121       133,674,605       135,424,679       138,012,536  

Less: Depreciation

     42,178,511       42,517,679       42,854,090       43,184,903       43,509,558       43,838,319       44,183,286       44,519,064       44,883,219       25,187,105       5,352,567  
   
 
 
 
 
 
 
 
 
 
 

Pretax income

     62,191,901       67,087,404       70,446,428       73,214,383       75,774,876       78,058,824       81,305,706       84,585,058       88,791,386       110,237,574       132,659,969  

Income tax @40%

     24,876,760       26,834,961       28,178,571       29,285,753       30,309,950       31,223,530       32,522,282       33,834,023       35,516,554       44,095,030       53,063,988  
   
 
 
 
 
 
 
 
 
 
 

Net income

     37,315,141       40,252,442       42,267,857       43,928,630       45,464,926       46,835,295       48,783,423       50,751,035       53,274,832       66,142,545       79,595,982  

Plus: Depreciation

     42,178,511       42,517,679       42,854,090       43,184,903       43,509,558       43,838,319       44,183,286       44,519,064       44,883,219       25,187,105       5,352,567  

Less: Capital expenditures

     6,056,547       6,306,413       6,499,898       6,672,380       8,838,258       6,995,362       7,190,662       7,388,350       7,623,416       7,754,310       7,902,488  
   
 
 
 
 
 
 
 
 
 
 

Cash flow

     73,437,105       76,463,708       78,622,049       80,441,153       82,136,226       83,678,252       85,776,048       87,881,749       90,534,634       83,575,340       77,046,060  

Discount factor @8%

     0.4127       0.3621       0.3538       0.3276       0.3033       0.2809       0.2601       0.2408       0.2230       0.2064       0.1912  
   
 
 
 
 
 
 
 
 
 
 

Present value of cash flows

   $ 30,306,959     $ 29,218,533     $ 27,817,856     $ 26,353,229     $ 24,915,324     $ 23,502,856     $ 22,307,470     $ 21,162,122     $ 20,186,058     $ 17,254,054     $ 14,727,861  
   
 
 
 
 
 
 
 
 
 
 

Present value—forecast period

                                                                                        

Remaining book value

                                                                                        

Remaining book value recapture

                                                                                        

Discount factor 8% @ end of year 37

                                                                                        
                                                                                         

After-tax present value of recapture

                                                                                        

Present value—forecast period

                                                                                        

Present value—book value recapture

                                                                                        
                                                                                         

Present value—total

                                                                                        

Present value (rounded)

                                                                                        

Comcast undivided interest

                                                                                        
                                                                                         

Value of Comcast undivided interest

                                                                                        
                                                                                         

EXHIBIT A

LA CYGNE #2 POWER PLANT

DISCOUNTED NET CASH FLOW

 

Price
Inflators—
2.5%		   Year     Year     Year     Year     Year     Year     Year     Year     Year     Year     Year  
REUL—37
Years		   23     24     25     26     27     28     29     30     31     32     33  
Year   2027
     2028
     2029
     2030
     2031
     2032
     2033
     2034
     2035
     2036
     2037
  

Net operating capacity (MW)

     674       674       674       674       674       674       674       674       674       674       674  

Capacity factor

     86 %     85.5 %     85 %     84 %     83 %     82 %     81 %     80.5 %     80.0 %     79.5 %     79 %

Hours operating per year

     7513       7469       7426       7338       7251       7164       7076       7032       6989       6945       6901  

Total production (MWH)

     5,063,735       5,034,295       5,004,854       4,945,974       4,887,093       4,828,212       4,769,332       4,739,892       4,710,451       4,681,011       4,651,571  

Price ($/MWH)

     53.0       54.3       55.7       57.1       58.5       60.0       61.5       63.0       64.6       66.2       67.9  
   
 
 
 
 
 
 
 
 
 
 

Total revenues

   $ 268,440,977     $ 273,552,280     $ 278,751,373     $ 282,358,744     $ 285,972,264     $ 289,589,985     $ 293,209,860     $ 298,684,921     $ 304,250,478     $ 309,907,635     $ 315,657,494  

Fuel expense: Coal

                                                                                        

Production (MWH)

     5,063,735       5,034,295       5,004,854       4,945,974       4,887,093       4,828,212       4,769,332       4,739,892       4,710,451       4,681,011       4,651,571  

Facility heat rate (Btu/KWH)

     10,367       10,367       10,367       10,367       10,471       10,575       10,681       10,788       10,896       11,005       11,115  
   
 
 
 
 
 
 
 
 
 
 
      52,495,741       52,190,533       51,885,326       51,274,910       51,171,139       51,080,166       50,941,856       51,133,674       51,324,234       51,513,492       51,701,403  

Price ($/MMBTU)

     1.41       1.45       1.48       1.52       1.56       1.60       1.64       1.68       1.72       1.76       1.81  
   
 
 
 
 
 
 
 
 
 
 

Total fuel expense

     74,107,637       75,518,698       76,953,994       77,949,870       79,736,917       81,553,093       83,398,232       85,805,069       88,277,960       90,818,572       93,428,607  

Total operating costs

     56,372,605       57,445,979       61,325,302       67,766,099       71,493,066       72,397,496       73,302,465       74,671,230       76,062,620       77,476,909       78,914,374  
   
 
 
 
 
 
 
 
 
 
 

Total expenses

     130,480,242       132,964,876       138,279,297       145,715,968       151,229,983       153,950,590       156,700,697       160,476,299       164,340,580       168,295,481       172,342,980  
   
 
 
 
 
 
 
 
 
 
 

EBITDA

     137,960,735       140,587,604       140,472,077       136,642,776       134,742,281       135,639,396       136,509,163       138,208,621       139,909,898       141,612,154       143,314,514  

Less: Depreciation

     5,683,130       6,218,662       6,840,012       7,525,989       8,194,950       8,847,407       9,401,129       9,858,433       10,311,803       10,760,243       11,209,716  
   
 
 
 
 
 
 
 
 
 
 

Pretax income

     132,277,605       134,368,942       133,632,065       129,116,787       126,547,331       126,791,989       127,108,034       128,350,189       129,596,095       130,851,911       132,104,797  

Income tax @40%

     52,911,042       53,747,577       53,452,826       51,646,715       50,618,933       50,716,796       50,843,213       51,340,075       51,839,238       52,340,765       52,841,919  
   
 
 
 
 
 
 
 
 
 
 

Net income

     79,365,563       80,621,365       80,179,239       77,470,072       75,928,399       76,075,193       76,264,820       77,010,113       77,758,857       78,511,147       79,262,878  

Plus: Depreciation

     5,683,130       6,218,662       6,840,012       7,525,989       8,194,950       8,847,407       9,401,129       9,858,433       10,311,803       10,760,243       11,209,716  

Less: Capital expenditures

     10,737,639       10,942,091       13,937,569       14,117,937       14,298,613       14,479,499       14,660,493       14,934,246       15,212,524       15,495,382       15,782,875  
   
 
 
 
 
 
 
 
 
 
 

Cash flow

     74,312,054       75,897,936       73,081,682       70,878,124       69,824,735       70,443,101       71,005,456       71,934,300       72,858,136       73,776,008       74,689,720  

Discount factor @8%

     0.1770       0.1639       0.1517       0.1405       0.1301       0.1205       0.1115       0.1033       0.0956       0.0885       0.0820  
   
 
 
 
 
 
 
 
 
 
 

Present value of cash flows

   $ 13,152,998     $ 12,438,606     $ 11,089,872     $ 9,958,787     $ 9,084,055     $ 8,485,651     $ 7,919,809     $ 7,429,083    

$

 

6,967,124

 

   $ 6,532,311     $ 6,123,346  
   
 
 
 
 
 
 
 
 
 
 

Present value—forecast period

                                                                                        

Remaining book value

                                                                                        

Remaining book value recapture

                                                                                        

Discount factor 8% @ end of year 37

                                                                                        
                                                                                         

After-tax present value of recapture

                                                                                        

Present value—forecast period

                                                                                        

Present value—book value recapture

                                                                                        
                                                                                         

Present value—total

                                                                                        

Present value (rounded)

                                                                                        

Comcast undivided interest

                                                                                        
                                                                                         

Value of Comcast undivided interest

                                                                                        

EXHIBIT A

LA CYGNE #2 POWER PLANT

DISCOUNTED NET CASH FLOW

 

Price Inflators—2.5%   Year     Year     Year     Year  
REUL—37 Years   34     35     36     37  
Year   2038
     2039
     2040
     2041
  

Net operating capacity (MW)

     674       674       674       674  

Capacity factor

     78.5 %     78 %     78 %     78 %

Hours operating per year

     6858       6814       6814       6814  

Total production (MWH)

     4,622,130       4,592,690       4,592,690       4,592,690  

Price ($/MWH)

     69.6       71.3       73.1       74.9  
   
 
 
 

Total revenues

   $ 321,501,153     $ 327,439,710     $ 335,625,702     $ 344,016,345  

Fuel expense: Coal

                                

Production (MWH)

     4,622,130       4,592,690       4,592,690       4,592,690  

Facility heat rate (Btu/KWH)

     11,226       11,338       11,452       11,566  
   
 
 
 
      51,887,921       52,072,999       52,593,729       53,119,666  

Price ($/MMBTU)

     1.85       1.90       1.95       1.99  
   
 
 
 

Total fuel expense

     96,109,801       98,863,928       102,348,882       105,956,680  

Total operating costs

     80,375,288       81,859,927       83,906,426       86,004,086  
   
 
 
 

Total expenses

     176,485,089       180,723,856       186,255,307       191,960,766  
   
 
 
 

EBITDA

     145,016,064       146,715,854       149,370,395       152,055,579  

Less: Depreciation

     11,663,859       12,123,783       12,594,625       13,080,362  
   
 
 
 

Pretax income

     133,352,405       134,592,071       136,775,770       138,975,217  

Income tax @40%

     53,340,962       53,836,628       54,710,308       55,590,087  
   
 
 
 

Net income

     80,011,443       80,755,242       82,065,462       83,385,130  

Plus: Depreciation

     11,663,659       12,123,783       12,594,625       13,080,362  

Less: Capital expenditures

     16,075,058       16,371,985       16,781,285       17,200,817  
   
 
 
 

Cash flow

     75,600,044       76,507,040       77,878,802       79,264,675  

Discount factor @8%

     0.0759       0.0703       0.0651       0.0603  
   
 
 
 

Present value of cash flows

   $ 5,738,868     $ 5,377,518     $ 5,088,459     $ 4,776,531  
   
 
 
 

Present value—forecast period

                                

Remaining book value

                                

Remaining book value recapture

                                

Discount factor 8% @ end of year 37

                                
                                 

After-tax present value of recapture

                                

Present value—forecast period

                                

Present value—book value recapture

                                
                                 

Present value—total

                                

Present value (rounded)

                                

Comcast undivided interest

                                
                                 

Value of Comcast undivided interest

                                

EXHIBIT B

LA CYGNE #2 POWER PLANT

RESIDUAL VALUE—REAL DOLLARS

 

Price
Inflators—
2.5%		    Year     Year     Year     Year     Year     Year     Year     Year     Year     Year     Year     Year  
REUL—37
Years		    26     27     28     29     30     31     32     33     34     35     36     37  
Year    2030
     2031
     2032
     2033
     2034
     2035
     2036
     2037
     2038
     2039
     2040
     2041
  

Net operating

capacity

(MW)

      674       674       674       674       674       674       674       674       674       674       674       674  

Capacity

factor

      84 %     83 %     82 %     81 %     80.5 %     80.0 %     79.5 %     79 %     78.5 %     78 %     78 %     78 %

Hours

operating

per year

      7338       7251       7164       7076       7032       6989       6945       6901       6858       6814       6814       6814  

Total

production

(MWH)

      4,945,974       4,887,093       4,828,212       4,769,332       4,739,892       4,710,451       4,681,011       4,851,571       4,622,130       4,592,690       4,592,690       4,592,690  

Price

($/MWH)

      57.1       58.5       60.0       61.5       63.0       64.6       66.2       67.9       69.6       71.3       73.1       74.9  
    
 
 
 
 
 
 
 
 
 
 
 

Total

revenues

    $ 282,358,744     $ 285,972,264     $ 289,589,985     $ 293,209,860     $ 298,684,921     $ 304,250,478     $ 309,907,635     $ 315,657,494     $ 321,501,153     $ 327,439,710     $ 335,625,702     $ 344,016,345  

Fuel expense:

Coal

                                                                                                 

Production

(MWH)

      4,945,974       4,887,093       4,828,212       4,769,332       4,739,892       4,710,451       4,681,011       4,651,571       4,622,130       4,592,690       4,592,690       4,592,690  

Facility heat

rate

(Btu/KWH)

      10,367       10,471       10,575       10,681       10,788       10,896       11,005       11,115       11,226       11,338       11,452       11,566  
    
 
 
 
 
 
 
 
 
 
 
 
       51,274,910       51,171,139       51,060,166       50,941,856       51,133,674       51,324,234       51,513,492       51,701,403       51,887,921       52,072,999       52,593,729       53,119,666  

Price

($/MMBTU)

      1.52       1.56       1.60       1.64       1.68       1.72       1.76       1.81       1.85       1.90       1.95       1.99  
    
 
 
 
 
 
 
 
 
 
 
 

Total fuel

expense

      77,949,870       79,736,917       81,553,093       83,398,232       85,805,069       88,277,960       90,818,572       93,428,607       96,109,801       98,863,928       102,348,882       105,956,680  

Total

operating

costs

      67,766,099       71,483,066       72,397,496       73,302,465       74,671,230       76,062,620       77,476,909       78,914,374       80,375,288       81,859,927       83,906,426       86,004,086  
    
 
 
 
 
 
 
 
 
 
 
 

Total

expenses

      145,715,968       151,229,983       153,950,590       156,700,697       160,476,299       164,340,580       188,295,481       172,342,980       176,485,089       180,723,856       186,255,307       191,960,766  
    
 
 
 
 
 
 
 
 
 
 
 

EBITDA

      136,642,776       134,742,281       135,639,396       136,509,163       138,208,621       139,909,898       141,612,154       143,314,514       145,016,064       146,715,854       149,370,395       152,055,579  

Less:

Depreciation

      25,465,772       49,559,506       46,917,854       44,496,981       42,264,651       40,228,493       38,358,687       36,658,735       36,999,699       37,726,828       38,498,815       38,647,865  
    
 
 
 
 
 
 
 
 
 
 
 

Pretax income

      111,177,004       85,182,774       88,721,542       92,012,182       95,943,970       99,681,405       103,253,467       106,655,779       108,016,365       108,989,026       110,871,580       113,407,714  

Income tax

@40%

      44,470,802       34,073,110       35,488,817       36,804,873       38,377,588       39,872,582       41,301,387       42,662,311       43,206,546       43,595,610       44,348,632       45,363,086  
    
 
 
 
 
 
 
 
 
 
 
 

Net income

      66,706,202       51,109,665       53,232,925       55,207,309       57,566,382       59,808,843       61,952,080       63,993,467       64,809,819       65,393,416       66,522,948       68,004,628  

Plus:

Depreciation

      25,465,772       49,559,506       46,917,854       44,496,981       42,264,651       40,228,493       36,356,687       36,658,735       36,999,699       37,726,628       38,498,815       38,647,865  

Less: Capital

expenditures

      14,117,937       14,298,613       14,479,499       14,660,493       14,934,246       15,212,524       15,495,382       15,782,875       16,075,058       16,371,985       16,781,285       17,200,817  
    
 
 
 
 
 
 
 
 
 
 
 

Cash flow

      78,054,037       86,370,558       85,671,280       85,043,797       84,896,787       84,824,812       84,815,386       84,869,328       85,734,461       86,748,258       88,240,478       89,491,676  

Discount factor @8%

      0.9623       0.8910       0.8250       0.7639       0.7073       0.6549       0.6064       0.5615       0.5199       0.4814       0.4457       0.4127  
    
 
 
 
 
 
 
 
 
 
 
 

Present value

of cash

flows

    $ 75,107,532     $ 76,953,804     $ 70,676,635     $ 64,962,017     $ 60,046,038     $ 55,551,047     $ 51,430,439     $ 47,651,063     $ 44,571,115     $ 41,757,557     $ 39,329,499     $ 36,932,564  
    
 
 
 
 
 
 
 
 
 
 
 

Present

value—

forecast

period

    $ 664,969,310                                                                                          

Remaining

book value

      357,055,376                                                                                          

Remaining

book value

recapture

      142,822,150                                                                                          

Discount factor

8% @ end of

year 37

      0.3971                                                                                          
    
                                                                                       

After-tax

present

value of

recapture

      56,714,676                                                                                          

Present

value—

forecast

period

      664,969,310                                                                                          

Present

value—

book value

recapture

      56,714,676                                                                                          
    
                                                                                       

Present

value—

total

      721,683,986                                                                                          

Present

value

(rounded)

    $ 721,700,000                                                                                          

Comcast

undivided

interest

      50.0 %                                                                                        
    
                                                                                       

Value of

Comcast

undivided

interest

    $ 360,850,000                                                                                          
    
                                                                                       
       Assumptions:                                                                                          
       1) Electricity prices as per EIA less transmission and distribution cost.                  
       2) Fuel prices as per EIA projections.                  
       3) Operating expense at 20-25% of revenues.                  
       4) Depreciation—20 year MACRS.                  
       5) Capacity factor and plant heat rate as per management.                  

EXHIBIT C

LA CYGNE #2 POWER PLANT

RESIDUAL VALUE—CONSTANT DOLLARS

 

Price
Inflators—		    Year     Year     Year     Year     Year     Year     Year     Year     Year     Year     Year     Year  

2.5%

REUL—37
Years

    26     27     28     29     30     31     32     33     34     35     36     37  
Year    2030
     2031
     2032
     2033
     2034
     2015
     2036
     2037
     2038
     2039
     2040
     2041
  

Net operating capacity (MW)

      674       674       674       674       674       674       674       674       674       674       674       674  

Capacity factor

      84 %     83 %     82 %     81 %     80.5 %     80.0 %     79.5 %     79 %     78.5 %     78 %     78 %     78 %

Hours operating per year

      7338       7251       7164       7076       7032       6989       6945       6901       6858       6814       8814       6814  

Total production (MWH)

      4,945,974       4,887,093       4,828,212       4,769,332       4,739,892       4,710,451       4,681,011       4,651,571       4,622,130       4,592,690       4,592,690       4,592,690  

Price ($/MWH)

      57.1       58.5       60.0       61.5       63.0       64.6       66.2       67.9       69.6       71.3       73.1       74.9  
    
 
 
 
 
 
 
 
 
 
 
 

Total revenues

    $ 282,358,744     $ 285,972,264     $ 289,589,985     $ 293,209,860     $ 298,684,921     $ 304,250,478     $ 309,907,635     $ 315,657,494     $ 321,501,153     $ 327,439,710     $ 335,625,702     $ 344,016,345  

Fuel expenses: Coal

                                                                                                 

Production (MWH)

      4,945,974       4,887,093       4,828,212       4,769,332       4,739,892       4,710,451       4,681,011       4,651,571       4,622,130       4,592,690       4,592,690       4,592,690  

Facility heat rate (Btu/KWH)

      10,367       10,471       10,575       10,681       10,788       10,896       11,005       11,115       11,226       11,338       11,452       11,566  
    
 
 
 
 
 
 
 
 
 
 
 
       51,274,910       51,171,139       51,060,166       50,941,856       51,133,674       51,324,234       51,513,492       51,701,403       51,887,921       52,072,999       52,593,729       53,119,666  

Price ($/MMBTU)

      1.52       1.56       1.60       1.64       1.68       1.72       1.76       1.81       1.85       1.90       1.95       1.99  
    
 
 
 
 
 
 
 
 
 
 
 

Total fuel expense

      77,949,870       79,736,917       81,553,093       83,398,232       85,805,069       88,277,960       90,818,572       93,428,607       96,109,801       98,863,928       102,348,882       105,958,680  

Total operating costs

      67,766,099       71,493,066       72,397,496       73,302,465       74,671,230       76,062,620       77,476,909       78,914,374       80,375,288       81,859,927       83,906,426       86,004,086  
    
 
 
 
 
 
 
 
 
 
 
 

Total expenses

      145,715,968       151,229,983       153,950,590       156,700,697       160,476,299       164,340,580       168,295,481       172,342,980       176,485,089       180,723,856       186,255,307       191,960,765  
    
 
 
 
 
 
 
 
 
 
 
 

EBITDA

      136,642,776       134,742,281       135,639,396       136,509,163       138,208,621       139,909,898       141,812,154       143,314,514       145,016,064       146,715,854       149,370,395       152,055,579  

Less: Depreciation

      12,759,232       25,098,570       24,293,436       23,566,769       22,906,662       22,320,744       21,796,136       21,336,342       21,880,611       22,621,294       23,393,281       23,542,331  
    
 
 
 
 
 
 
 
 
 
 
 

Pretax income

      123,883,544       109,643,710       111,345,959       112,942,394       115,301,960       117,589,155       119,816,018       121,978,171       123,135,453       124,094,560       125,977,114       128,513,248  

Income tax @40%

      49,553,417       43,857,484       44,538,384       45,176,958       46,120,784       47,035,662       47,926,407       48,791,268       49,254,181       49,637,824       50,390,846       51,405,299  
    
 
 
 
 
 
 
 
 
 
 
 

Net income

      74,330,126       65,786,226       66,807,576       67,765,436       69,181,176       70,553,493       71,889,611       73,186,903       73,881,272       74,456,736       75,586,269       77,107,949  

Plus: Depreciation

      12,759,232       25,098,570       24,293,436       23,566,769       22,906,662       22,320,744       21,796,136       21,336,342       21,880,611       22,621,294       23,393,281       23,542,331  

Less: Capital expenditures

      14,117,937       14,298,613       14,479,499       14,660,493       14,934,246       15,212,524       15,495,382       15,782,875       16,075,058       16,371,985       16,781,285       17,200,817  
    
 
 
 
 
 
 
 
 
 
 
 

Cash flow—inflated

      72,971,421       76,586,184       76,621,513       76,671,712       77,153,591       77,661,712       78,190,365       78,740,370       79,686,825       80,706,044       82,198,264       83,449,462  

Cash flow—uninflated

      38,877,134       39,807,783       38,854,777       37,931,935       37,239,352       36,570,346       35,921,253       35,291,639       34,844,724       34,429,658       34,210,973       33,884,607  

Discount factor @5.5%

      0.9736       0.9228       0.8747       0.8291       0.7859       0.7449       0.7061       0.6693       0.6344       0.6013       0.5700       0.5403  
    
 
 
 
 
 
 
 
 
 
 
 

Present value of cash flows

    $ 37,850,185     $ 36,735,783     $ 33,987,035     $ 31,450,054     $ 29,266,181     $ 27,242,097     $ 25,363,577     $ 23,619,918     $ 22,105,031     $ 20,703,050     $ 19,499,101     $ 18,306,241  
    
 
 
 
 
 
 
 
 
 
 
 

Present value—forecast period

    $ 326,128,253                                                                                          

Remaining book value

      228,644,780                                                                                          

Remaining book value recapture

      91,457,912                                                                                          

Discount factor 5.5% @ end of year 32

      0.526                                                                                          
    
                                                                                       

After-tax present value of recapture

      48,106,862                                                                                          

Present value—forecast period

      326,128,253                                                                                          

Present value—book value recapture

      48,106,862                                                                                          
    
                                                                                       

Present value—total

      374,235,114                                                                                          

Present value (rounded)

    $ 374,200,000                                                                                          

Comcast undivided interest

      50.0 %                                                                                        
    
                                                                                       

Value of Comcast undivided interest

    $ 187,100,000                                                                                          
    
                                                                                       
       Assumptions:                                                                                          
       1) Electricity prices as per EIA less transmition and distribution cost.                  
       2) Fuel prices as per EIA projections.                  
       3) Operating expense at 20-25% of revenues.                  
       4) Depreciation—20 year MACRS.                  
       5) Capacity factor and plant heat rate as per management.