Financial Appraisal on a Hydropower Plant. A Case Study in Albania

Abstract

Albanian rapidly growing economy requires additional electricity to ensure the well functioning of many industrial operations. The current energy situation in Albania is high demand for electricity and low domestic supply. The limited supply is due to the scarce funds for utilizable natural resources such as oil and gas and undiversified supply sector. Due to the favorable environmental factors as well as the low cost factor, renewable energy has been a target of the Albanian government. Hydropower has been the major source of energy generation for Albania. A financial analysis was conducted in an 8 hydropower plant scheme project in Albania to look at the financial sustainability of the project. The analysis confirmed the viability of the project but pointed out some difficulties in the ability of servicing the debt. The risk rose from the variability of the interest rate, electricity tariff and degree of utilization and pointed out some important issues and gave an enormous help in spotting the possible problems that the project may face which in turn, have an adverse impact on the financial feasibility. Various measures must be taken to reduce the exposure to these risks and to help future projects into a better and more improved project design.