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FINANCIAL MODELS FOR ALTERNATIVE SOURCES OF ENERGY UNDER BETTER TOMORROW PLAN

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SUMMER INTERNSHIP REPORT ROHAN KARDILE P1121

SYDENHAM INSTITUTE OF MANAGEMENT STUDIES, RESEARCH AND ENTREPRENEURSHIP EDUCATION

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ACKNOWLEDGEMENT
I would like to take this opportunity to thank everyone who has been instrumental towards the completion of this project. I would like to thank my mentor from Sodexo, Mr. Ninad Chikhalikar head of QM & HSE. Without his patient advice, guidance and encouragement, this project would not have been possible. Also, I would like to thank Ms. Rupali, who has been extremely helpful. I am also extremely grateful to all my colleagues at Sodexo Ltd for all their support, guidance and assistance. This project would have been incomplete without their inputs. I would also like to thank Dr. M.A. Khan and all the faculty of Sydenham Institute of Management Studies, Research and Entrepreneurship Education (SIMSREE) for giving me the opportunity to work on this project of Sodexo. Last, but not the least, Id like to thank my family and friends for their continuous support and also everyone else who has contributed directly or indirectly to the completion of this project.

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Contents
OBJECTIVE ..................................................................................................................................................... 5 Executive Summary....................................................................................................................................... 6 Introduction .................................................................................................................................................. 7 About BTP plan.......................................................................................................................................... 7 About MNRE.............................................................................................................................................. 7 About Renewable sources of energy ........................................................................................................ 9 Understanding the Requirement ................................................................................................................ 26 From SODEXO point of view ................................................................................................................... 26 About the Hospital sector ....................................................................................................................... 28 Governments supporting program ........................................................................................................ 30 Solar Water Heater ..................................................................................................................................... 33 FINANCIAL MODELS .................................................................................................................................... 43 Technical Specification............................................................................................................................ 43 Supplier Details: ...................................................................................................................................... 43 Terms and conditions.............................................................................................................................. 44 Cost Details ............................................................................................................................................. 45 Means of Financing ................................................................................................................................. 46 How to calculate best financial model? ...................................................................................................... 54 Net Present Value ............................................................................................................................... 54 Calculations ................................................................................................................................................. 56 BEST MODEL................................................................................................................................................ 62 FUTURE PROJECTION USING THE BEST MODEL .......................................................................................... 63 CONCLUSION............................................................................................................................................... 69 RECOMMENDATIONS ................................................................................................................................. 70 REFERENCES ................................................................................................................................................ 71

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OBJECTIVE
As a part of SODEXO- QHSE team (Quality, Health, Safety and Environment), this project will basically concentrate on non-conventional sources of energy to promote GO GREEN motto. Hence this project will assist BTP (Better Tomorrow Plan) by performing the following action To understand the requirement of the industry Identify the best alternative source of energy Design different financial models Choose the best financial model

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Executive Summary
Protection of the Environment and Climate, and their preservation for the generations to come is a demanding social, scientific and economical task. Utilization of renewable energy, efficient conversions of fossil fuel are not only environmentally and climatically beneficial, they also preserve the finite energy sources. SODEXO has identified this gap and SODEXO will try to bridge this gap by implementing BETTER TOMORROW PLAN, which also forms the base of this project.

With an overall idea of improving energy efficiency, this project studies different Alternative Sources of Energy, listed under MNRE that is, and MINISTRY OF NEW AND RENEWABLE ENERGY. Project also identifies SOLAR WATER HEATER as the most feasible Alternative Source of Energy for SODEXO and its clients. To conclude sustainability, project proposes different financial models supporting the use of Solar Water Heater. Selection of different financial models depend upon some important parameters like Availability of fund, Future perspective, Loans available, Life of Solar water Heater, Depreciation.

To incorporate detailed figures, specific example has to be taken. Here example of Hospital is taken. Hospitals are one of the important clients for SODEXO. SODEXO has its own canteen in Jogeshwari too. And as known, hot water is required by SODEXO canteen on daily basis too. Hence financial models stated at the end of this project can also be adapted by SODEXO in order to go green by adapting SOLAR technology. Main form of energy required by Hospitals, to obtain hot water is electricity or LPG. Solar water heater will allow hospitals to cut their cost in electricity or LPG, thus making them financially and environmentally viable in long run.

This project will be subjected to Capital subsidy by MNRE (Ministry of New and Renewable Energy) which is the nodal Ministry of the Government of India for all matters relating to new and renewable energy.

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Introduction
About BTP plan
Sodexo, world leader in Quality of Life solutions has announced the creation of the "Better Tomorrow Plan," designed to better respond to the challenges of proper Nutrition, Health and Wellness, Local communities and Environment. The Plans objective is to take a new step by consolidating Sodexos sustainability performance and measuring the impact of its actions. The "Better Tomorrow Plan" comes from a long process of upstream work during which Sodexo consulted experts and all of its stakeholders, both internal and external, over a twelve-month period. "This Plan includes three original elements," said Sodexos Damien Verdier, Group Chief Marketing Officer. He added, "It formalizes our goals across our three focus areas (Nutrition, Health and Wellness; Local communities; Environment) with 14 specific commitments. In addition, because we work every day directly on our clients sites, our approach is collaborative, encompassing our own employees as well as our clients and suppliers in carrying out our commitments. Finally, the Better Tomorrow Plan is a long term process, which provides tools for measuring our progress and sets dates for progress assessments in 2012, 2015 and 2020. Through this Plan, we are engaged in a process of continuous improvement that commits us, and our stakeholders, to improve Quality of Life for present and future generations." Pierre Bellon, Sodexos Chairman, founded the company in 1966, setting out the companys beliefs, mission, values and ethical principles, which continue to serve as a unifying force for the Groups 380,000 employees around the world today. Sodexos mission, which has remained the same for 43 years, is two-fold: "To improve the Quality of Daily Life for all those who we serve and to contribute to the economic, social and
environmental development of the cities, regions and countries in which we operate."

About MNRE
The Ministry of New and Renewable Energy (MNRE) is the nodal Ministry of the Government of India for all matters relating to new and renewable energy. The broad aim of the Ministry is to develop and deploy new and renewable energy for supplementing the energy requirements of the country. Creation CASE and Ministry: Commission for Additional Sources of Energy (CASE) in 1981.
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Department of Non-Conventional Energy Sources (DNES) in 1982. Ministry of Non-Conventional Energy Sources (MNES) in 1992. Ministry of Non-Conventional Energy Sources (MNES) renamed as Ministry of New and Renewable Energy (MNRE) in 2006. The role of new and renewable energy has been assuming increasing significance in recent times with the growing concern for the country's energy security. Energy self-sufficiency was identified as the major driver for new and renewable energy in the country in the wake of the two oil shocks of the 1970s. The sudden increase in the price of oil, uncertainties associated with its supply and the adverse impact on the balance of payments position led to the establishment of the Commission for Additional Sources of Energy in the Department of Science & Technology in March 1981. The Commission was charged with the responsibility of formulating policies and their implementation, programs for development of new and renewable energy apart from coordinating and intensifying R&D in the sector. In 1982, a new department, i.e., Department of Non-conventional Energy Sources (DNES), that incorporated CASE, was created in the then Ministry of Energy. In 1992, DNES became the Ministry of Nonconventional Energy Sources. In October 2006, the Ministry was re-christened as the Ministry of New and Renewable Energy.

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About Renewable sources of energy


Power plays a great role wherever man lives and works. The living standard and prosperity of a nation vary directly with the increase in the use of power. The electricity requirement of the world is increasing at an alarming rate due to industrial growth, increased and extensive use of electrical gadgets.

According to world energy report, we get around 80% of our energy from conventional fossil fuels like oil (36%), natural gas (21%) and coal (23%). It is well known that the time is not so far when all these sources will be completely exhausted. Nuclear energy is a comparatively clean source of energy. However, safe handling of nuclear energy reactor is a sophisticated task and only around 7% of the worlds total energy requirement is being satisfied by it today.

As human needs know no bounds, today most of the nations worldwide have been passing through a phase of power deficit. The crisis is more critical among the developing nations. In India, energy demand is increasing at the rate of 9% per annum and supply is not keeping pace. Present deficit of electrical energy is 8%.

The increased power demand, depleting fossil fuel resources and growing environmental pollution have led the world to think seriously for other alternative sources of energy. Basic concept of alternative energy relates to issues of sustainability, renewability and pollution reduction. In reality alternative energy means anything other than deriving energy via fossil fuel combustion.

Various forms of alternative energy sources are solar, wind, biogas/biomass, tidal, geothermal, fuel cell, hydrogen energy, small hydropower etc.

Solution to long-term energy problem will come only through Research and Development in the field of alternative energy sources.

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Many rural communities consume little electricity, and extending electricity grids to meet their energy needs may prove more costly and take longer than harnessing new and alternative sources of energy already available in these communities wind, solar, and biomass through Renewable Energy Technologies (RETs). The attraction of these sources lies primarily in their abundance and ready access. The RETs for exploiting these sources include biogas plants, solar lanterns, solar home lighting systems, improved cook stoves, improved kerosene lanterns, solar water pumping systems, solar water heating systems and water mills.

Solar energy panels are little costly considering our average economic standard. Studies indicate that cooking with biogas (a highly combustible fuel comprising methane, carbon dioxide, nitrogen, hydrogen and hydrogen sulphide produced through anaerobic fermentation of organic matter) can be cheaper than cooking with any commercial fuel.

Let us study 4 major Alternative sources of energy 1. 2. 3. 4.


Hydro Power Solar Energy Wind Energy Biomass energy

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1. Hydro Power

Let us first understand Indias general electricity consumption.

The hydroelectric power refers to the energy produced from water (rainfall flowing into rivers, etc).Consequently, rainfall can be a good indicator to investors looking for a location to implement or build a new hydroelectric power plant in India.

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It is, in fact, the case, if we compare the map of Annual Rainfall and the Energy Map of India, that hydropower plants are situated in regions of the major rainfall. The dominant annual rainfall is located on the north/eastern part of India: Arunachal Pradesh, Assam, Nagaland, Manipur and Mizoram, and also on the west coast between Mumbai (Bombay) and Mahe.

It is important to understand how does it work? The following diagram and explanation will throw some light on modern technology of Hydro power.

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The natural water cycle is driven directly by solar energy. When the sun heats up water in the sea and surface water, vaporization takes place and the water rises in the form of water vapor. The water vapor rises. When the water vapor reaches higher layers of air and is cooled down, the water falls down in the form of rain, hail or snow. The water runs naturally towards the lowest level and is transported on the earth surface in streams and rivers, and finally reaches the sea where it again evaporates. By letting the water flow through turbines on its way to the sea, we can harness the kinetic energy of the moving water to produce electricity.

Volume and head of water determine the potential energy of a waterfall. The head of water is the height difference between reservoir intake and power station outlet. Water is directed into pressure shafts leading down to a power station, where it strikes the turbine runner at high pressure. The kinetic energy of the water is transmitted via the propeller shaft to a generator, which converts it into electrical energy. Water power plants can be divided in two types based on the pressure height: low- and high-head power plants.

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Low-head power stations often utilize a large water volume but have a low head, as in a run-ofriver power station. Since regulating the flow of water is difficult, it is used when available. The amount of electricity generated therefore increases considerably when the river is carrying more water during the spring thaw or when precipitation is very high. The river is dammed up by the power plant to lead the water into one or more turbines. After having been exploited in the turbines, the water runs out in the river below the power station. High-head power stations are generally constructed to utilize a high head but smaller volume of water than run-of-river installations.

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2. Solar Energy

Solar energy, radiant light and heat from the sun, has been harnessed by humans since ancient times using a range of ever-evolving technologies. Solar energy technologies include solar heating, solar photovoltaic, solar thermal electricity and solar architecture, which can make considerable contributions to solving some of the most urgent problems the world now faces.

Solar technologies are broadly characterized as either passive solar or active solar depending on the way they capture, convert and distribute solar energy. Active solar techniques include the use of photovoltaic panels and solar thermal collectors to harness the energy. Passive solar techniques include orienting a building to the Sun, selecting materials with favorable thermal mass or light dispersing properties, and designing spaces that naturally circulate air.

In 2011, the International Energy Agency said that "the development of affordable, inexhaustible and clean solar energy technologies will have huge longer-term benefits. It will increase countries energy security through reliance on an indigenous, inexhaustible and mostly import-independent resource, enhance sustainability, reduce pollution, lower the costs of mitigating climate change, and keep fossil fuel prices lower than otherwise. These advantages are global. Hence the additional costs of the incentives for early deployment should be considered learning investments; they must be wisely spent and need to be widely shared"

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Now lets understand few applications of solar energy


Agriculture and horticulture Solar lighting Water heating Heating, cooling and ventilation Water treatment Cooking Solar power Solar chemical Solar vehicles

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1. Agriculture and horticulture

While sunlight is generally considered a plentiful resource, the exceptions highlight the importance of solar energy to agriculture. During the short growing seasons of the Little Ice Age, French and English farmers employed fruit walls to maximize the collection of solar energy. These walls acted as thermal masses and accelerated ripening by keeping plants warm. Applications of solar energy in agriculture aside from growing crops include pumping water, drying crops, brooding chicks and drying chicken manure. Greenhouses convert solar light to heat, enabling year-round production and the growth (in enclosed environments) of specialty crops and other plants not naturally suited to the local climate.

2. Solar Light

Hybrid solar lighting is an active solar method of providing interior illumination. HSL systems collect sunlight using focusing mirrors that track the Sun and use optical fibers to transmit it inside the building to supplement conventional lighting. In single-story applications these systems are able to transmit 50% of the direct sunlight received. Solar lights that charge during the day and light up at dusk are a common sight along walkways. Solar-charged lanterns have become popular in developing countries where they provide a safer and cheaper alternative to kerosene lamps.

3. Water heating

Solar hot water systems use sunlight to heat water. In low geographical latitudes (below 40 degrees) from 60 to 70% of the domestic hot water use with temperatures up to 60 C can be provided by solar heating systems. The most common types of solar water heaters are evacuated tube collectors (44%) and glazed flat plate collectors (34%) generally used for domestic hot water; and unglazed plastic collectors (21%) used mainly to heat swimming pools.

4. Heating, cooling and ventilation

A solar chimney (or thermal chimney, in this context) is a passive solar ventilation system composed of a vertical shaft connecting the interior and exterior of a building. As the chimney warms, the air inside is heated causing an updraft that pulls air through the building. Performance can be improved by using glazing and thermal mass materials.

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A solar air conditioner uses a solar panel (not electricity) to super heat the refrigerant (the hotter it is... the higher the energy saved) to deliver a super heated higher pressured gas to a condenser and then to the evaporator and then to the Solar Compressor. When the working fluid leaves the condenser, its temperature is colder and it has changed from a gas to a 100% liquid under high pressure. By the time the working fluid leaves the evaporator, it is a cool, low pressure gas. It then returns to the solar panel to begin its trip all over again

5. Water Treatment

Solar water disinfection (SODIS) involves exposing water-filled plastic polyethylene terephthalate (PET) bottles to sunlight for several hours. Exposure times vary depending on weather and climate from a minimum of six hours to two days during fully overcast conditions. It is recommended by the World Health Organization as a viable method for household water treatment and safe storage. Over two million people in developing countries use this method for their daily drinking water. Solar energy may be used in a water stabilization pond to treat waste water without chemicals or electricity. A further environmental advantage is that algae grow in such ponds and consume carbon dioxide in photosynthesis, although algae may produce toxic chemicals that make the water unusable

6. Cooking

Solar cookers use sunlight for cooking, drying and pasteurization. They can be grouped into three broad categories: box cookers, panel cookers and reflector cookers. The simplest solar cooker is the box cooker first built by Horace de Saussure in 1767. A basic box cooker consists of an insulated container with a transparent lid. It can be used effectively with partially overcast skies and will typically reach temperatures of 90150 C. Panel cookers use a reflective panel to direct sunlight onto an insulated container and reach temperatures comparable to box cookers. Reflector cookers use various concentrating geometries (dish, trough, Fresnel mirrors) to focus light on a cooking container. These cookers reach temperatures of 315 C and above but require direct light to function properly and must be repositioned to track the Sun. The solar bowl is a concentrating technology employed by the Solar Kitchen in Auroville, Pondicherry, India, where a stationary spherical reflector focuses light along a line perpendicular to the sphere's interior surface, and a computer control system moves the receiver to intersect this line. Steam is produced in the receiver at temperatures reaching 150 C and then used for process heat in the kitchen.

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7. Solar Power Solar power is the conversion of sunlight into electricity, either directly using photovoltaic (PV), or indirectly using concentrated solar power (CSP). CSP systems use lenses or mirrors and tracking systems to focus a large area of sunlight into a small beam. PV converts light into electric current using the photoelectric effect. Following are the current PV technologies making their way in market Crystalline silicon (c-Si) modules represent 85-90% of the global annual market today. C-Si modules are subdivided in two main categories: i) single crystalline (sc-Si) and ii) multicrystalline (mc-Si). Thin films currently account for 10% to 15% of global PV module sales. They are subdivided into three main families: i) amorphous (a-Si) and micro morph silicon (a-Si/c-Si), ii) CadmiumTelluride (CdTe), and iii) Copper-Indium-Diselenide (CIS) and Copper-Indium-Gallium-Diselenide (CIGS). Emerging technologies encompass advanced thin films and organic cells. The latter are about to enter the market via niche applications. Concentrator technologies (CPV) use an optical concentrator system which focuses solar radiation onto a small high-efficiency cell. CPV technology is currently being tested in pilot applications. Novel PV concepts aim at achieving ultra-high efficiency solar cells via advanced materials and new conversion concepts and processes. They are currently the subject of basic research.

8. Solar Chemical

Solar chemical processes use solar energy to drive chemical reactions. These processes offset energy that would otherwise come from a fossil fuel source and can also convert solar energy into storable and transportable fuels. Solar induced chemical reactions can be divided into thermo chemical or photochemical. A variety of fuels can be produced by artificial photosynthesis. The multi electron catalytic chemistry involved in making carbon-based fuels (such as methanol) from reduction of carbon dioxide is challenging; a feasible alternative is hydrogen production from protons, though use of water as the source of electrons (as plants do) requires mastering the multi electron oxidation of two water molecules to molecular oxygen. Some have envisaged working solar fuel plants in coastal metropolitan areas by 2050- the splitting of sea water providing hydrogen to be run through adjacent fuel-cell electric power plants and the pure water by-product going directly into the municipal water system.

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3. Wind Energy
India is surpassed only by Germany as one of the world's fastest growing markets for wind energy. By the mid 1990s, the subcontinent was installing more wind generating capacity than North America, Denmark, Britain, and the Netherlands. The ten machines near Okha in the province of Gujarat were some of the first wind turbines Installed in India. These 15-meter Vestas wind turbines overlook the Arabian Sea. In 2011, there is an installed capacity of 6,430 MW; however, 7 times that potential or 46,092 MW exists. Advantages
It is one of the most environment friendly, clean and safe energy resources. It has the lowest gestation period as compared to conventional energy. Equipment erection and commissioning involve only a few months. There is no fuel consumption, hence low operating costs. Maintenance costs are low. The capital cost is comparable with conventional power plants. For a wind farm, the capital cost ranges between 4.5 crores to 5.5 crores, depending on the site and the wind electric generator (WEG) selected for installation.

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Requirement for Wind Farm An area where a number of wind electric generators are installed is known as a wind farm. The essential requirements for establishment of a wind farm for optimal exploitation of the wind are the following: High wind resource at particular site. Adequate land availability Suitable terrain and good soil condition Maintenance access to site Suitable power grid nearby Techno-economic selection of specific turbines Scientifically prepared layout

Wind energy generation has limitations which will influence the extent and type of role it will ultimately play in overall generation of electricity in India.

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Limitations Wind machines must be located where strong, dependable winds are available most of the time. Because winds do not blow strongly enough to produce power all the time. Energy from wind machines is considered "intermittent," that is, it comes and goes. Therefore, electricity from wind farms must have a back-up supply from another source. As wind power is "intermittent," utility companies can use it for only part of their total energy needs. Wind towers and turbine blades are subject to damage from high winds and lighting. Rotating parts, which are located high off the ground can be difficult and expensive to repair. Electricity produced by wind power sometimes fluctuates in voltage and power factor, which can cause difficulties in linking its power to a utility system. The noise made by rotating wind machine blades can be annoying to nearby neighbors. Some environmental groups have complained about aesthetics and avian mortality from wind machines

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4. Biomass Energy

Biomass includes solid biomass (organic, non-fossil material of biological origins), biogas (principally methane and carbon dioxide produced by anaerobic digestion of biomass and combusted to produce heat and/or power), liquid biofuels (bio-based liquid fuel from biomass transformation, mainly used in transportation applications), and municipal waste (wastes produced by the residential, commercial and public services sectors and incinerated in specific installations to produce heat and/or power). The most successful forms of biomass are sugar cane bagasse in agriculture, pulp and paper residues in forestry and manure in livestock residues. It is argued that biomass can directly substitute fossil fuels, as more effective in decreasing atmospheric CO2 than carbon sequestration in trees. The Kyoto Protocol encourages further use of biomass energy. Biomass may be used in a number of ways to produce energy. The most common methods are: Combustion Gasification Fermentation Anaerobic digestion

India is very rich in biomass. It has a potential of 19,500 MW (3,500 MW from bagasse based cogeneration and 16,000 MW from surplus biomass). Currently, India has 537 MW commissioned and 536 MW under construction. The facts reinforce the idea of a commitment by India to develop these resources of power production. Following is a list of some States with most potential for biomass production: Andhra Pradesh (200 MW) Bihar (200 MW) Gujarat (200 MW) Karnataka (300 MW) Maharashtra (1,000 MW) Punjab (150 MW) Tamil Nadu (350 MW) Uttar Pradesh (1,000 MW)

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Understanding the Requirement


From SODEXO point of view
In India alone Sodexo employs 30,000 people, and serves 662,000 consumers every day. Currently, Sodexo has a colossal portfolio of prestigious clients and we as a company are the largest private purchaser of food on the Indian sub-continent. With this enormous reach we want to be more conscious about improving the quality of food we serve thus ensuring a sustainable future. The importance of Food Safety in Sodexo India:

Demonstrates commitment of serving safe food Reduces risk associated with food

Sodexo commit towards serving Safe Food to our Customers by rigorously implementing Food Safety Practices through: Use of Safe and Quality materials in food preparation Evaluate and Partner with our suppliers to secure and maintain quality of delivered products Maintain highest standards of hygiene and adherence to temperature norms for food Continuously Train and educate our employees to achieve high food safety and hygiene standards Conduct periodic audits to ensure adherence to Food safety standards Based on the above practices Sodexo have launched Food Safety policy that has been displayed at all sites and it demonstrates Sodexos commitment towards serving safe food. Sodexo ensure that non adherence to the Food Safety policy leads to reinforcing a zero tolerance policy. Failing to non compliance of the zero tolerance policy would lead to disciplinary actions and terminations of services for our employees.
Water is not always considered to be strictly a food in itself, but by its aid many foods and flavors

are put in forms more acceptable to the palate and more readily absorbed by the body than they could be in any other way. In order to get clean water one can boil the water in order to kill the impurities if any. Hence from point of Quality, it is advisable that one needs to heat the water before it is used.
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The other important aspect of Food Safety is clean vegetables and fruit. Farmers use insecticides, pesticides on them. Also these vegetables travel from farmer to middlemen, from middlemen to wholesalers, from wholesalers to retailers and finally to buyers. During this long journey there are chances that vegetables will fall on the unclean ground or catch dust. Hence when buyers receive it, he or she should make sure that vegetables or fruits are cleaned before consumption. As scientifically proven, hot water will be very useful in such cases. At Sodexo Jogeshwari canteen, it will be really helpful if the hot water is available for sanitization. This will make sure that Base of Food safety is achieved. Apart from Food Services, Sodexo Globally has its expertise in Facility Management too. Facility Management basically is divided into 2 parts which are Soft services and hard services. Soft services are

Reception Cleaning Pantry Grounds keeping Waste management Vendor management

Hard services are


Electrical system Energy efficiency system Water treatment Maintenance of Equipment

Under hard services, this project aims to improve Energy efficiency of clients. Hence understanding the requirements play an important role. To scrutinize the understanding specific example of Hospital sector has been taken.

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About the Hospital sector


The hospital sector is expanding in India to meet the medical needs of growing population. According to BEE (Bureau of Energy efficiency) there were approximately 512000 beds in private hospitals. This number is greater than that of public hospitals, which are 495000. In this way total number of beds in India equals to approximately 10, 00,000.

In hospitals, heat stream is used in the form of steam and hot water. Steam is used in the kitchens and for humidification in HVAC and sterilization process. In addition steam is used to transport heat over longer distances. In many cases heat is transported from the heat generating station in the form of steam and then converted locally into central heating or hot tap water. Oil/Gas-fired boilers are used to generate steam and hot water. The hot water requirement in hospitals, theoretically, stems from three purposes Patient room Laundry Kitchen

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The laundry and kitchen are features of large corporate or public hospitals and these hospitals contribute a tiny percentage of total hospital beds in India. The kitchen requirement is for cleaning and works out less than 5 liters per bed. For practical purpose, patient room or bathing constitutes the hot water requirement of hospitals. The arrangement, typically, is shower and/or bucket bath. There are patients who, for medical reasons, are required to abstain from bathing. The care-takers accompanying the patient, in many instances, do not bathe in the hospitals. These practices bring down the hot water consumption in a hospital.

The hospital owners/managers interviewed by us estimated hot water consumption per bed to be 25 lpd/bed for patients who are permitted to bath. The growth of beds in government hospitals is expected to be tardy- 2% per annum till 2022. We expect private hospital growth @7% per annum till 2013 and to taper to 5% over 2014-17 period and 3% per annum thereafter.

The total hot water requirement will escalate from 45.18 million lpd in 2011 to 75.11 million lpd in 2022. Let us understand the Hot water consumption in hospitals with the help of following chart.

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After understanding the requirement of hot water, means of financing it should be identified. Project then identified MNREs efforts to promote the clean energy sources. The next section will give the detailed view of MNREs JNN solar mission.

Governments supporting program


Jawaharlal Nehru National Solar Mission - Towards Building SOLAR INDIA The National Solar Mission is a major initiative of the Government of India and State Governments to promote ecologically sustainable growth while addressing Indias energy security challenge. It will also constitute a major contribution by India to the global effort to meet the challenges of climate change

1. Objectives and Targets FINANCIAL MODELS- PAGE 30

The objective of the National Solar Mission is to establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country as quickly as possible. The Mission will adopt a 3-phase approach, spanning the remaining period of the 11 th Plan and first year of the 12th Plan (up to 2012-13) as Phase 1, the remaining 4 years of the 12th Plan (2013-17) as Phase 2 and the 13th Plan (2017-22) as Phase 3. To create an enabling policy framework for the deployment of 20,000 MW of solar power by 2022. To ramp up capacity of grid-connected solar power generation to 1000 MW within three years - by 2013; an additional 3000 MW by 2017 through the mandatory use of the renewable purchase obligation by utilities backed with a preferential tariff To create favorable conditions for solar manufacturing capability, particularly solar thermal for indigenous production and market leadership. To promote programs for off grid applications, reaching 1000 MW by 2017 and 2000 MW by 2022. To achieve 15 million sq. meters solar thermal collector area by 2017 and 20 million by 2022. To deploy 20 million solar lighting systems for rural areas by 2022.

2. The Proposed Roadmap

The aspiration is to ensure large-scale deployment of solar generated power for grid-connected as well as distributed and decentralized off-grid provision of commercial energy services. The deployment across the application segments is envisaged as follows:

3. Mission strategy for Solar water heater FINANCIAL MODELS- PAGE 31

The Mission in its first two phases will promote solar heating systems, which are already using proven technology and are commercially viable. The Mission is setting an ambitious target for ensuring that applications, domestic and industrial, below 80 C are solarised. The key strategy of the Mission will be to make necessary policy changes to meet this objective:

Firstly, make solar heaters mandatory, through building byelaws and incorporation in the National Building Code Secondly, ensure the introduction of effective mechanisms for certification and rating of manufacturers of solar thermal applications Thirdly, facilitate measurement and promotion of these individual devices through local agencies and power utilities Fourthly, support the upgrading of technologies and manufacturing capacities through soft loans, to achieve higher efficiencies and further cost reduction

4. Subsidies by MNRE

a) Capital Subsidy Capital subsidy equivalent to upfront interest subsidy Rs. 1850 per sq. m. to registered institutions and Rs 1400 per sq. m. of collector area to registered commercial establishments. For housing complexes Rs. 1900/ sq. m. of collector area b) Interest Loan Subsidy If solar water heater costs above 500,000 INR, then 80% of the cost of the project will be provided loans for 5 years from IREDA/Banks at 2% for domestic users,3% for institutional and 5% for commercial users. Banks too get an incentive of 1% of the loan.31 Banks are supporting the interest subsidies.

In this way, we understand that SOLAR WATER HEATERS will satisfy the growing needs of hospitals. And since solar investment is encouraged by government, there will be monetary incentives from the government as well. Apart from monetary incentives, hospitals will also achieve environmental and social benefits. After understanding the requirement of Solar Water Heater, there arises some important financial decisions to satisfy the need of Solar Water heater. Hence this project will eventually analyze and compare different financial decisions, followed by selecting the best model out of them. The best model will project Cash flows, Profit and loss statement and balance sheet.

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Solar Water Heater


In order to acquire any asset, it is necessary to study the asset.

Solar Water Heater is a device that helps in heating water by using the energy from the SUN. This energy is totally free. Solar energy (sun rays) is used for heating water. Water is easily heated to a temperature of 60-80o C. Solar Water Heaters (SWHs) of 100-300 liters capacity are suited for domestic use. Larger systems can be used in restaurants, canteens, guest houses, hotels, hospitals etc. A 100 liters capacity SWH can replace an electric geyser for residential use and may save up to 1500 units of electricity annually. The use of 1000 SWHs of 100 liters capacity each can contribute to a peak load saving of approximately 1 MW. A SWH of 100 liters capacity can prevent emission of 1.5 tonnes of carbon-dioxide per year.

MAIN COMPONENTS OF SOLAR WATER HEATER

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Main components of Solar Water Heater are: Solar Collector( to collect solar energy) Insulated Tank (to store hot water) Supporting Stand Connecting Pipes and Instrumentation, etc.

WORKING OF A SOLAR WATER HEATER

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The Suns rays fall on the Collector Panel (a component of Solar Water Heater). A black absorbing surface (absorber) inside the collectors absorbs solar radiation and transfers the heat energy to water flowing through it. Heated water is collected in a tank which is insulated to prevent heat loss. Circulation of water from the tank through the collectors and back to the tank continues automatically due to thermo siphon principle. A Solar Water Heater consists of a Collector panel to collect solar energy and an Insulated Storage Tank to store hot water.

TYPES OF SOLAR WATER HEATERS Generally two types of Solar Water Heaters are available in the market. Flat Plate Collector based Solar Water Heater This consists of flat plate collectors covered by an insulated metallic box with glass sheet on the top to receive sun rays. Evacuated Tube Collector based Solar Water Heater In this, the Collector is made up to double layer evacuated borosilicate glass tubes having selective coating on outer surfaces of inner tubes. Other Components Rest of the components is same in both type of Solar Water Heater.

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FLAT PLATE COLLECTOR BASED SOLAR WATER HEATER In this system the solar radiation is absorbed by flat plate collectors which consist of an insulated outer metallic box covered on the top with glass sheet. Inside it are blackened metallic absorber (selectively coated) sheets with built in channels or riser tubes to carry water. The absorber sheets absorb the solar radiation and transfer the heat to the flowing water. The flowing hot water is then collected in the storage tank.

These systems have long life (15-20 Years) and work efficiently especially in non-hilly regions and regions where water quality is good. For other regions Heat-exchangers are required. These systems are available in multiple of 100 LPD (Liters per day) i.e. 100, 200, 300 LPD etc. Bureau of Indian Standards has standardized the collectors for this type of Solar Water Heaters. IS 12933: 2003 gives the details of these standards.

EVACUATED TUBE COLLECTOR BASED SOLAR WATER HEATER In this system the collector is made of double layer borosilicate glass tubes evacuated for providing insulation. The outer wall of the inner tube is coated with selective absorbing material. This helps absorption of solar radiation and transfers the heat to the water which flows through the inner tube. The flowing hot water is then collected in the storage tank.

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The features of Evacuated Tube Collector are as under:- These systems are less expensive and can work efficiently in hilly regions and also in regions where water quality is not very good. - The life of the system may, however, be less than that of FPC system as their collectors are made of glass. - These systems are available in any size e.g. 50, 75, 100, 125, 150 LPD etc. Presently these systems do not have BIS Standards, though they have approval of Ministry of New and Renewable Energy, GOI.

DESIRABLE CHARACTERISTICS OF A HOT WATER STORAGE TANK The Hot Water Storage Tank in Domestic Solar Water Heaters is a double walled tank. The space between the inner and the outer tank is filled with insulation to prevent heat losses. The inner tank is generally made of stainless steel to ensure long life. The outer tank could be made of a stainless steel sheet, painted steel sheet or aluminum. Thermostat controlled electrical heating elements can also be provided (optional) in the tank to take care of those days when the sun does not shine or demand of water goes up. The capacity of the tank should be in proportion to the collector area used in the system. A commonly used thumb rule is to provide 50 liters of storage for every one sq. m. of collector area.

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FEATURES OF A GOOD SOLAR WATER HEATER First and foremost requirement of a good Solar Water Heater is that it should have sufficient collector area for the capacity claimed. The collector area used in the system determines the capacity of water heating. For example, in typical North Indian weather conditions, on a sunny winter day, one sq. m. of flat plate collector area can be expected to heat approximately 50 liters of water by a temperature of 30-40 C. Typical flat plate collectors made in the country have an area of around 2 sq. m and are thus capable of heating around 100 liters of water in a day. An ETC based system of 14 tubes covering an area of 1.5 Sq. m. is able to provide 100 Liters of hot water in a day. This proportion serves as a benchmark. Further, the collectors should be of good material and the absorbers should carry good quality coating (BIS approved collectors are being provided by large number of established manufacturers). The system should be mounted on a rigid structure and should be firmly fixed with the roof to prevent damage during high winds.

ESTIMATED REQUIREMENTS OF HOT WATER Some important thumb rules are:

COST OF A SOLAR WATER HEATER As per guidelines of Ministry of New and Renewable Energy (MNRE), GOI the upper cost limits for Solar Water heaters are detailed below:

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SITE REQUIREMENTS FOR INSTALLATION OF SWH The basic requirement of site for installation of a Solar Water Heater depends on the following factors:For functioning of a Solar Water Heater the most important thing is the availability of unobstructed sunlight for the whole day. Typically, domestic Solar Water Heating Systems are installed on the roof of the house. The Collectors of the system have to face the sun and hence should be oriented towards the North-South axis for maximum interception of sunlight. Thus there should be no obstruction to sunlight in any directions (an arc of about 60 with the ground should ideally be shadow free). As a thumb rule, the requirement of shadow free area is around 3 sq. m for each 1 x 2 m Collector used. As far as possible, the area should be flat, away from rain water drains and close to the bathrooms where hot water is to be supplied. Cold water should be available at a height of around 2.5 m from the base of the system.

WORKING OF SOLAR WATER HEATER ON CLOUDY DAYS

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The heating of water by the solar system will obviously be affected. If it is so cloudy that energy received from the sun is almost zero, the output of solar collectors also will be nil. On partially cloudy days some output can be expected. But, the system can be designed with a suitable electrical back up heater to take care of hot water demand on cloudy days.

LIFE SPAN OF SOLAR WATER HEATER Typical Solar Water Heaters made by using materials as per BIS specifications could last for 15 20 years depending upon the general upkeep, maintenance.

SUPPLIERS OF DOMESTIC SOLAR WATER HEATERS There are 56 BIS approved Manufacturers of FPC based Solar Water Heaters and 23 MNRE approved suppliers of ETC based Solar Water Heaters. The list of these manufacturers is available on MNRE website (www.mnes.nic.in). Some of the providers are:

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OPERATIONAL REQUIREMENTS Domestic solar systems do not require any special operational skills. However, if the following tips are observed, the efficiency of the systems will be maintained at a high level: Try to consume most of the heated water at one time -either in the morning or in the evening. Frequent ON and OFF of the hot water tap would lead to reduced electricity savings. If an electrical back-up is provided in the tank, set the thermostat at the lowest acceptable temperature.

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In the North Indian climate, hot water may not be used for bathing in summers. If the system is to be put totally out of use, it should be drained of water and the collector should be covered. Alternatively, if the hot water requirement remains in summers also, though at a reduced level, cover the collector partially. Dust deposition on the collector would reduce its efficiency. Try to get it cleaned at least once in a week.

MAINTENANCE REQUIREMENTS Domestic Solar Water Heater does not need significant maintenance. Occasional leakages in plumbing could be easily repaired by common plumbers. In case quality of water is hard, scale deposition in the collectors may result over the years. This may require treatment with acids for which it is best to contact the suppliers. Broken glass may also have to be replaced by the suppliers.

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FINANCIAL MODELS

Let us consider a hospital whose daily need of hot water is 1000 Liters per day. Hospital is situated in non hilly region like Mumbai, where there is no hard water. For such water Flat Plate Collector SWH should be used.

Technical Specification
Particular Name of the equipment Company name Model Name Capacity Input temperature of water Output temperature of water Cost Subsidy available Size of SWH Total subsidy Net cost Detail Solar water Heater Tata BP solar VAJRA 1000 Liters per day 25 degree Celsius 60 degree Celsius 173000 1890/- per square meter 22.75 Sq meter 43000/130000/-

VAJRA 1000 LPD Non-Press, Non- HHC, Thermosyphon type Solar Water Heating system @ 60 deg. C consisting of: 1 nos. x 1000 liters insulated SS304 hot water storage tanks 8 nos. of TBP make solar flat plate collectors Mounting stand for tanks & collectors

Supplier Details:

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Terms and conditions

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Cost Details
Cost of equipment The total cost of equipment and machinery is estimated ` 1.55 lakh, the total cost includes for solar collectors, insulated hot water tanks of SS make, mounting stands for hot water tank & collectors besides the installation & commissioning cost. Other costs Other cost includes erection & commissioning cost which is 0.03 lakh and Construction cost which is 0.15 lakh. The total cost of implementation of the SWHS is estimated at 1.73 lakh.

Sr No 1 2 3 4

Details Equipment and machinery Erection & Commissioning Contingency cost Total

Cost in Lakh 1.55 0.15 3 1.73

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Means of Financing
When it comes to financing the equipment, following are the options that can be executed

1. One time cash payment from pocket 2. Loan 3. Lease

1. One time cash payment Onetime cash payment is simple to understand. If buyer has enough funds or cash in hand, buyer can pay instantly at the deal. This is very efficient as compared to loan. When loan is taken bank makes sure that profit is earned. That profit margin has to bear by buyer.

2. Loan When buyer does not have enough money, buyer can seek the help of banks or lenders. Lender will lend the money at some interest rate. This Loan can be secured or unsecured. In secured loan some asset is used as pledge in the deal. When buyer is unable to pay back, lender will get ownership of underlying asset. For example, if bank has given a loan of 30 lakh with pledge worth 50 lakh. If borrower is unable to pay, bank will sell the pledge for 50 lakh. Bank will keep its 30 lakh and remaining 20 lakh will be given back to borrower.
In unsecured loan there is nothing as pledge. Hence lender carries extra risk. To cover for this risk, lender usually levies extra interest rate. Usually calculation of interest is confusing. In order to understand, let us study different methods of computation existing in this market.

The add-on method The discount method The remaining balance method

Add-on Method
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Under the add-on method, the lender calculates the total interest charge by multiplying the entire loan amount by the contractual interest rate, and then multiplying the total interest cost by the period (months, years) covered by the loan. The interest charge is added to the principal to determine the total amount to be repaid. This amount is then divided by the number of repayment periods to determine each payment. The total interest charge is thus:

I = A x i x N Where: I=total interest charge over the life of the loan A =amount of loan I = contractual interest rate per time period N=number of periods covered by the loan

The periodic payment is: B = (A + I) / N Where B=total payment n =repayment periods under consideration

For an example of add-on interest, assume a $3,000 loan to be repaid in two annual installments. The annual contractual interest rate is 6 percent. Then, the total interest charge is: I = $3,000 x .06 x 2 = $360 and the annual payments will be: B = ($3,000 + 360) / 2 = $1,680

Discount Method

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The discount method calculates total interest the same way as the add-on method, with one exception. The interest is subtracted from the loan amount and the borrower receives the balance. The total interest charge is: I=AxixN The amount the borrower receives is: L=AI Where: L=loan proceeds And the periodic payment is: B = A / N Using the same data as before ($3,000 loan amount, 6 percent annual interest rate, over 2 years), the total interest charge is again $360: I = $3,000 x .06 x 2 = $360 The borrower would receive $2,640: L = $3,000 - $360 = $2,640 And would repay two installments of $1,500 each: B = $3,000 / 2 = $1,500

Remaining Balance method

When the remaining balance method is used, the interest charge is computed in each period by multiplying the contractual interest rate by the principal balance remaining at the beginning of the period (the unpaid balance). The major difference between this method and the previous two, beyond the complexity of the mathematical calculations, is that interest is not charged on principal that has been repaid. The total interest charge, the periodic interest payment, and the periodic principal payment all depend on the method selected for repayment. Two methods are commonly used: the equal total payment plan (Standard plan) and the equal total principal plan (Springfield plan). To illustrate interest computation for these two repayment methods, assume a $10,000 loan at a 12 percent annual contractual rate to be repaid in eight annual payments.
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There are 2 types of remaining balance method Equal total payment method Equal principal payment method

Equal Total Payments - Under the equal total payment method, the annual payment for this loan is $2,013.03 for each of the 8 years. This was determined by multiplying the amortization factor (see Table 3) for 12 percent interest and 8 year payment period times the loan amount. The portion of each payment that is interest and the portion that is principal will vary with each payment. At the end of the first year, interest is charged on the full $10,000 principal outstanding: I1 = $10,000 x 0.12 = $1,200 Thus, the principal payment is the difference: C = $2,013.00 - $1,200 = $813.00 Where: C=the principal payment

The remaining principal balance after the first payment is: R = $10,000 - $813.00 = $9,187.00 Where: R=the principal balance

Interest in the second year is charged on the remaining balance: I2 = $9,187.00 x 0.12 = $1,102.44 And hence principal payment is: C2 = $2,013 - $1,102.44 = $910.59 And R2 = $9,187.00 - $910.59 = $8,276.41 A similar set of steps is followed each year thereafter. Equal Principal Payments - Under the equal principal payment plan, interest charges are calculated in a similar manner. The primary difference is that equal principal payments are
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made. In addition, the annual total repayments will decline each year due to a declining principal balance upon which interest is calculated. I1 = $10,000 x 0.12 = $1,200 But, the principal payment is: C1 = $10,000 / 8 = $1,250 Thus, the total payment for the first year is: B1 = $1,250 + $1,200 = $2,450 And the remaining principal balance is: R1 = $10,000 - $1,250 = $8,750

In the second year: I2 = $8,750 x 0.12 = $1,050 C2 = $1,250 B2 = $1,250 + $1,050 = $2,300 R2 = $8,750 - $1,250 = $7,500

3. Leasing

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How to calculate best financial model?


Different models stated above will have different payment structures and different payment periods. In this situation one cannot just sum up the total cash outflows to compare. Because as the years passes value of money changes because of various factors like inflation, global trends. Hence we need to first evaluate all the possible cash outflows and inflows. We need to then discount the cash flows to get present value of these cash flows. This concept is called as NPV (net present value). Whichever model has minimal of cash outflows will be best suited model.

Let us see how NPV works:

Net Present Value


In finance, the net present value (NPV) or net present worth (NPW)[1] of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows of the same entity. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely used throughout economics, finance, and accounting, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met. NPV can be described as the Difference Amount between the sums of discounted; cash inflows and cash outflows. It compares the present value of money today to the present value of money in future, taking inflation and returns into account The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or discount curve and outputs a price; the converse process in DCF analysis - taking a sequence of cash flows and a price as input and inferring as output a discount rate (the discount rate which would yield the given price as NPV) - is called the yield, and is more widely used in bond trading.
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Formula Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed. Therefore NPV is the sum of all terms,

Where t - The time of the cash flow i - The discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.); the opportunity cost of capital - The net cash flow (the amount of cash, inflow minus outflow) at time t. For educational purposes, investment. is commonly placed to the left of the sum to emphasize its role as (minus) the

The result of this formula if multiplied with the Annual Net cash in-flows and reduced by Initial Cash outlay the present value but in case where the cash flows are not equal in amount then the previous formula will be used to determine the present value of each cash flow separately. Any cash flow within 12 months will not be discounted for NPV purpose.[2]

Given the (period, cash flow) pairs ( , periods , the net present value

) where is a positive integer and the total number of is given by:

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Calculations
Now let us apply the NPV formula and find out the best mean of financing.

1. LOAN

As stated earlier 43,000 INR capital subsidy will be available for SWH. Bank can give loan of 130000 INR. IREDA will help regarding the loan. Loan tenure will be of 6 years. Interest rate will be 10%. Repayment scheme used by IREDA for promotion of SWH is The remaining balance method. IREDA has decided how Principal amount should be paid. Since SWH will be displayed on balance sheet of hospital, we should consider depreciation. Accelerated 80% depreciation is applicable. Depreciation is just a notional amount. Hence depreciation will not be considered in cash flows. But Depreciation is deducted as expense. Hence tax saving availed because of depreciation should be considered as cash inflow. Tax rate applicable is 30%. Interest paid is deducted as expense. But principal amount paid is not deducted as expense. Factor column below represents 1/ (1 + i) ^t. Where i : discount rate, t: year

Let us understand how Loan repayment works for SWH. In following table principal payment is as directed by IREDA. Amount given below is expressed in lakh.

Table 1.1 Loan repayment

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Now let us calculate Depreciation. Table 1.2 Depreciation

Since we know Interest (not principal payment) and depreciation carry advantage of tax, we should add the interest saved as cash inflows. For example, if a firm is paying 100 INR as interest, then firm will save 30% tax that is 30 INR. Hence total payment made by that firm is 70 INR. These payments will be done over a course of few years. Hence we will need to calculate present values in order to compare with other financial models. Factor below represent, the value of 1 INR today with respect to that particular year.

Table 1.3 PRESENT VALUE OF DEPRECIATION TAX SHIELD

Table 1.4 PRESENT VALUE OF INTEREST TAX SHIELD

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Table 1.5 PRESENT VALUE OF LOAN PAID

Table 1.6 PRESENT VALUE OF RESALE VALUE

PRESENT VALUE OF CASH OUTFLOW = PV of LOAN PAID (PV of DEPRECIATION SHIELD + PV of INTEREST SHIELD + PV of RESALE) = 41760.82

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2. LEASE

Lease amount can be deducted as expense Hence there will be tax benefit that can be availed on it. Most of the times, asset is not shown on the books of lessee. Hence no depreciation tax shield is available. Lease is taken when you do not have enough funds or you need SWH for limited period.

A) FINANCIAL LEASE Table 2.1 PRESENT VALUE OF LEASE RENTAL- EQUAL ANNUAL PLAN

Table 2.2 PRESENT VALUE OF LEASE RENTAL- DEFERRED PAYMENT PLAN

Table 2.3 PRESENT VALUE OF LEASE RENTAL- STEPPED UP PLAN


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B) OPERATING LEASE Now suppose hospital has requirement of SWH for a limited period then it would go for Operating lease. In operating lease, lessee can withdraw from lease agreement at any time. Hence advantage lies with lessee. When lessor gives advantage to lessee, lessor charges extra rent.

Table 2.4 PRESENT VALUE OF LEASE RENTAL- OPERATING LEASE

C) SALES AND LEASE BACK Suppose hospital has two important expenditures ahead, but can afford only one of the expenditures, then hospital should go ahead with the Sales and lease back.

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Here Hospital buys SWH for 1.73 lakh and sells it to XYZ ltd for 1.88 lakh. But at the same time it leases back the SWH from XYZ ltd, with annual rent of 17000 for 8 years. Hence in the 0th year hospital has cash inflows of 15000 INR

Table 2.4 PRESENT VALUE OF LEASE RENTAL- OPERATING LEASE

Net present value = PV of lease - Gain during the transaction at zero year = 63485.62 - 15000 = 48485.62

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BEST MODEL
6 models have been stated above. In the financial lease models, it is possible for lessee to buy the SWH at the end of 8 th year. It depends upon the contract. Generally the resale value is more than the fees of transfer of asset at the end lease. Hence our assumption is asset is not transferred at the end of 8th year to lessee. To find out which is the best model we only need to compare the Present Value of cash outflow. The one with minimum cash outflow is the model that suits the need.

As the table indicates, LOAN remaining balance method is the best model to finance the solar water heater. The main reasons behind it are IREDA promoting the use of Solar Water Heater Accelerated depreciation available But if by any chance loan is not available and funds are not enough, one can always go for Sale and lease back method.

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FUTURE PROJECTION USING THE BEST MODEL


To understand the future projections, prediction of savings or revenues is must. Hence first let us try to understand what can be the future revenues.

Most of the hospitals these days use Diesel boiler in order to heat the water. Load shedding has been the main reason behind it. According to Bureau of Energy Efficiency 6.5 liters of diesel is needed to heat 1000 liters of water. At the same time hospital will not be able to claim the benefits of depreciation. The cost of machine is 160000, with depreciation of 10%. Hence 16000 is yearly depreciation. The tax saved is 30% of depreciation. Thus the total benefit is 4800. Hospital will miss this benefit once they switch to SWH. Cost of machines varies from 160000 to 170000. Hence for calculation purpose let us take the depreciation advantage as 5000. Other details are shown in the following chart. Following is the minimum revenue generated using SWH, since we have not taken into consideration Loan amount, if any.

Table 5.1: Revenue prediction

To demonstrate how solar water heater is beneficial in future, frame of 8 years is taken. During these 8 years we project the following: Profit and loss statement
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Balance Sheet Cash flow Above financial statements will help to evaluate important parameters like IRR (internal rate of return), NPV (Net present value) and ROI (Return on investment). Hence we will be able to evaluate overall project.

Table 5.2 LOAN CALCULATION

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Table 5.3 PROFIT & LOSS STATEMENT

TABLE 5.4 TAX COMPUTATIONS

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TABLE 5.5 BALANCE SHEETS

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TABLE 5.6 CASH FLOW STATEMENTS

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TABLE 5.7 IRR and NPV

TABLE 5.8 ROI

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CONCLUSION
Since Net Present value (275000) is greater than cost of equipment (130000), we can conclude that Solar water heater is financially viable solution. Similarly IRR (51%) is also greater than the cost of capital (10%), hence confirming the financially robust solution. Solar water heater proposed here has back-up heating ability to compensate for the days where solar energy is not sufficient. Hence this modern solar water heater proves efficient in performance. Environmentally it saves 15 tonnes of carbon dioxide. Following is the summary of fuel savings due to the use of solar water heater 1000 liters.

Considering the financial and environmental factors it has been proved that SOLAR WATER HEATER is profitable in the long run and can very well serve the purpose of BETTER TOMORROW PLAN of SODEXO.

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RECOMMENDATIONS
Wipro ltd has established the great example paper recycling plant. It can be followed by others to save the environment.

Aim of Paper recycling To handle paper waste efficiently and to avoid data security issues To recycle the paper within the campus

Plant specification Let us take the example of a plant capable of 200 KG/ day. It will need 400 sq feet. And on average would recycle 4800 kg of papers. It consists of Paper crusher motor Recycle water pump Paper slurry shifting pump Hydraulic press pump The plant consumes 12.5 units of electricity and 600 liters of water per day.

Cost benefits Average Pulp generated per day: 420 kg Cost of pulp : 2.25 per kg Revenue per day : 945 INR Savings per day : 529 INR Savings per annum : 165048 INR

Environmental Benefits Conservation of natural resources Emission reduction Water pollution control Waste disposal
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REFERENCES
MNRE site: www.mnre.gov.in Bureau of Energy Efficiency site: http://www.beeindia.in/ Financial management by Prasanna Chandra Environment Best practices by R.K. Narang ICON hospital Delhi energy efficiency & renewable energy management center

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