<<The question is what kind of returns projections did Rene show to these money people and what will reality be.>>
I'll take a cut at that.
To try and generate some constructive discussion on the thread, I have developed, with the help of people in the business of doing financial models, a financial model for a TMP, either 400 tpd or 600 tpd, built in Canada. This seems timely, especially if there is favorable news on the non-recourse financing, as some on this and the Yahoo thread are surmising.
I used the Dillon report, and checked against Thermo Tech Release of June 16th, to develop pre-tax earnings and royalties.
There are several input variables in the model as follows; (where I have given the values in [square brackets], they are used for all plants):
Capital Cost, % Debt, Term of Debt Financing [8 years], Interest Rate [8%], EBITA, Plant Life [assumed 10 years], Capital Cost Allowance (CCA) Rate [assumed 30%], Annual Royalties that each of the Newcos pay to Thermo Tech., % Ownership, and Canadian Federal and Provincial tax rates.
The model calculates the after-tax Net Profit and Cash Flow for each year over the life of the plant, that each Newco generates, and total after-tax revenue to Thermo Tech. There are 21 columns in the model so I can only post some summary results.
If we assume that Thermo Tech will have four TMPs operational at 90% of their permitted capacity by their 1998 fiscal year end (as per Dillon report numbers), i.e.
Hamilton @ 400 tpd, 100% owned, 100% equity financed;
Richmond @ 600 tpd, 100% owned and 75%/25% debt/equity financed (my assumption);
and Oshawa and Niagara at 400 tpd each, 50% owned and 100% debt financed:
then the results are as follows for Richmond, Hamilton, Oshawa and Niagara respectively:
Year 1 after-tax cash flow $ 000s (3,772; 2,761; 2,285; 2,285 totals 11,103)
Year 1 taxes $ 000s (1,456; 2,224; 0; 0 totals 3,680)
Year 2 after-tax cash flow $ 000s (3,362; 2,761; 1,948; 1,948 totals 10,019)
Year 2 taxes $ 000s (1,978; 2,224; 472; 472 totals 5,146)
Year 3 after-tax cash flow $ 000s (3,093; 2,761; 1,565; 1,565 totals 8,984)
Year 3 taxes $ 000s (2,359; 2,224; 990; 990 totals 6,563)
The remaining seven years go on in a similar fashion. The declining after-tax cash flow and the increasing taxes paid reflect the application of the declining balance capital cost allowance in the tax treatment.
The reason that I listed the taxes on this post is that from the 1996/1997 Annual Report, Thermo Tech lists potential tax benefits totaling $25,459,000 available in the period 1998 through to 2004. I presume that they will find a way to apply these to their full extent.
This is pretty substantial stuff. Of course it ignores revenues and cash flow from the two transfer stations and the Brampton De-Pack facility.
All comments welcome and I'll try to answer any reasonable <g> questions.
Casey
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