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72ntdu' Ross [.,.CD VI. KEY ECONOMIC RESULTS The discussions and exhibits which follow make use of the ".following measures to evaluate the New Brighton project's financial viability: Market vs. required revenue differential, owner's cash flows, investment payback analysis, internal rates of return, cumulative renovation and replacement fund, and debt service coverage. The graphs presented in this section are based on the projected financial statements presented on pages 31 to 38. Market vs. Required Revenues The relative degree of risk inherent in a project can be illustrated by contrasting revenues derived under both the market- constrained and required revenue concepts (see Exhibit D). The gap between required and market revenue lines after 1987 represents potential profit that was not incorporated into this financial analysis. The area between market and required revenues between 1985 and 1986 represents capital financed operating losses. The rationale for the loss is that the facility cannot charge more for its products than market substitutes. Exhibit E graphically depicts the behavior of the components of the waste-to-energy facility's annual cash requirements. The ,- operations component includes ash disposal costs, auxiliary energy costs for the facility (natural gas, fuel oil and electricity), plant maintenance and labor. Plant maintenance and labor makes up approximately half of: the operations component. Overh ead i ncl ud es administrative and marketing costs, insurance and taxes, and professional fees. Other is made up of the required increase in working capital and the renovation and replacement fund requirement. Exhibit E also shows that revenues sufficient to cover all cash operating requirements can be achieved by 1987. Exhibit F illustrates how the total revenue requirement could be allocated among the three revenue producing activities. The curves in Exhibit F assume that each revenue producing activity would contribute the same proportion to total revenues as it would have if market-constrained prices had been secured for each activity. Exhibit G illustrates the unit prices that result if the annual revenues shown in Exhibit F are divided by the units processed. The importance of Exhibits F and G are that they illustrate how the economic benefits of the Waste-to-Energy facility could be shared among solid waste suppliers, stearn purchasers, and the I"~'" electric purchaser. For example, if the tipping fee were held at the market constraint, average unit stearn prices could be reduced . while still achieving the same total revenue. - 14 -