Iceland utility Landsvirkjun has revised the profitability assessment of its 700-MW Karahnjukar hydroelectric project, predicting the new project’s profits will be higher than previously anticipated.
The utility said a combination of higher aluminum prices for its power customer, Alcoa of the United States, and a lower value of the dollar versus Iceland’s kronur were the primary factors for higher profitability.
Landsvirkjun said the project’s expected return on equity is now 13.4 percent, compared to the previous figure of 11.9 percent. It said the positive present value of the construction, beyond the owner’s profitability targets, is 15.5 billion kronur (US$234.6 million). That is an increase of 8.9 billion kronur (US$134.7 million) over the original estimate.
Karahnjukar’s annual profit before tax is estimated to be 4.22 billion kronur (US$63.8 million) on average at 2008 prices.
Landsvirkjun said the assessment is based on criteria regarding initial cost, electricity sales, the price of aluminum and subsequent developments, dollar exchange rates, operational costs, power plant lifetime, and investment costs.
The cost of Karahnjukar power plant alone is 133.3 billion kronur (US$2 billion), which Landsvirkjun said is 7 percent higher than the original budget, revalued in line with prices at the end of September 2007.
“Karahnjukar power plant has proved dearer than budgeted for, mainly because of the higher cost of constructing tunnels and resultant delays,” Landsvirkjun said.
Landsvirkjun began operating the first five units of Karahnjukar through the month of November, with the sixth and final unit, actually a backup unit, operating in January, in Fljotsdalur Valley of eastern Iceland. (HNN 11/15/07)
The six Francis turbine-generators in the power station were supplied by VA Tech Hydro. They are designed for the high head of 600 meters and equipped with high efficiency splitter blade runners.
Impounding of Halslon Reservoir began in September 2006. The 198-meter-tall concrete-faced rockfill Karahnjukar Dam, saddle dams on each side, and an overflow spillway on the west bank were completed in the summer of 2007. Work continues on the project, including an eastern side diversion with further tunneling and dam construction to be completed by late 2008.