Renewable Energy Business Plan Template

8/2/2019 Renewable Energy Business Plan Template

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NORTHERN

ARIZONA

UNIVERSITY

Sustainable Energy Solutions

College of Engineering, Forestry & Natural Sciences

College of Business Administration

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RENEWABLE ENERGY

BUSINESS PLAN TEMPLATE

composed by Anil DeSouza

NAME OF THE COMPANY

Company Address

Company Phone Number

[LOGO]

Name of Owner, Title of Owner

Address and Phone number of Owner

Plan Prepared Date

Plan Prepared by:

TABLE OF CONTENTS

Statement ofPurpose The Business

o Legal Structureo Description of the Businesso Services

Solar Wind

o Residential Off-Grid Systemso LocationManagemento Personnelo Methods of Record Keeping
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o Insuranceo Legal AspectsSecurity

Marketing(Summary)o Target Marketo Growth Potentialo Current Providerso Competitiono Methods of Distributiono Advertisingo Pricing

Training Financing Methods

o Start-Up Costso Funding

Disclaimer Financial Documents

o Saleso Cost of Goods Soldo Operating Expenseso Interest Expenseso Taxeso Balance Sheet

Assets Liabilities Owner's Equity

Appendiceso Appendix Ao Appendix Bo Appendix Co Appendix Do Appendix Eo Appendix F

PLAN FOR A SUSTAINABLE ENERGY

INSTALLATION BUSINESS

STATEMENT OF PURPOSE

The purpose of the business is to provide residents of the Navajo

Nation with an alternative source of electrical power. The business
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splan.shtml#Interest%20Expensehttp://ses.nau.edu/business/planning/busplan.shtml#Operating%20Expenseshttp://ses.nau.edu/business/planning/busplan.shtml#COGShttp://ses.nau.edu/business/planning/busplan.shtml#Saleshttp://ses.nau.edu/business/planning/busplan.shtml#fin%20docshttp://ses.nau.edu/business/planning/busplan.shtml#disclaimerhttp://ses.nau.edu/business/planning/busplan.shtml#Fundinghttp://ses.nau.edu/business/planning/busplan.shtml#Startup%20Costshttp://ses.nau.edu/business/planning/busplan.shtml#financinghttp://ses.nau.edu/business/planning/busplan.shtml#traininghttp://ses.nau.edu/business/planning/busplan.shtml#pricinghttp://ses.nau.edu/business/planning/busplan.shtml#Advhttp://ses.nau.edu/business/planning/busplan.shtml#distributionhttp://ses.nau.edu/business/planning/busplan.shtml#competitionhttp://ses.nau.edu/business/planning/busplan.shtml#Current%20Providershttp://ses.nau.edu/business/planning/busplan.shtml#Growth%20Potentialhttp://ses.nau.edu/business/planning/busplan.shtml#Marketinghttp://ses.nau.edu/business/planning/busplan.shtml#Marketinghttp://ses.nau.edu/business/planning/busplan.shtml#Securityhttp://ses.nau.edu/business/planning/busplan.shtml#Legal%20Aspectshttp://ses.nau.edu/business/planning/busplan.shtml#Insurance


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will accomplish this by installing, maintaining, and repairing solar

photovoltaic power systems. The business owner will need to add

his/her vision for the company and the company?s mission statement

to this section.

THE BUSINESS

Legal Structure:

The business will be a sole proprietorship run by a resident of the

Navajo Nation. The reason for this is to help keep money earned by

the Navajo people a part of the reservation?s economy. In order to

set up a sole proprietorship on the Navajo Nation, the owner must

apply to the Navajo Nation Division of Economic Development.

Description of the Business:

The business will install, maintain, and repair solar photovoltaic

power systems. The business will concentrate on providing solar

energy to the un-electrified homes on the Navajo Nation. The

business will be located on the reservation and be operated solely by

residents of the Navajo Nation.

The solar system components will be ordered in lots from a

manufacturer and installed in individual homes on the Navajo Nationby employees of the business. After installation, the business will

provide scheduled maintenance and necessary repairs on the systems.

The business will have installation crews that install new solar

photovoltaic energy systems and maintenance/repair crews that work

on the systems after they are installed. Each crew will consist of one

electrician and one journeyman. The business owner should try to

avoid being a crewmember because he/she will need to devote his/her

time to overseeing the general operations of the business as a whole.

It is estimated that it will take each installation crew approximatelytwo and a half days to complete the installation of one solar energy

system. Some systems may take slightly longer to install because the

house needs to be retrofitted with electrical wiring. Maintenance and

repairs should take less than one day per system. The vast distances

present on the Navajo Nation also need to be accounted for when

scheduling projects. As the number of installed systems increases,

maintenance schedules need to take into account the geographic


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clustering of the systems.

Services:

The service rendered by the business will be the installation,

maintenance, and repair of solar photovoltaic power systems to un-electrified homes on the Navajo Nation. The business will work with

the system and its components. The components of these systems

include solar modules (to convert energy into electrical current),

batteries (to receive and store electrical current), a converter (to

convert DC energy captured from the solar modules to AC energy), a

charge regulator (to regulate the solar current into the battery) and

use loads (anything that runs on electricity, such as lights). In some

instances, existing houses may also need to be retrofitted with

electrical wiring and outlets.

Solar

The components of these systems include solar modules (to convertenergy into electrical current), batteries (to receive and store electricalcurrent), a charge regulator (to regulate the solar current into thebattery) and loads (anything that runs on electricity).

The business will mainly concentrate on installing three different sizesofphotovoltaic solar power units. The first is relatively small, 500watts.The daily output of this system 2.75 kWh, which can support the useof

two light bulbs, a radio or small clock, a range oven, color TV andVCRor DVD, and a washing machine (one load of laundry a day). Thesecondsystem is 1,000 watts and produces 5.51 kWh a day. This systemcan supportthe same things that the 500-watt system can support as wellas a smallstovetop burner and a freezer. The largest system is 1,500watts andproduces 8.26 kWh daily. This system can support all of theabove as wellas a space heater (used for four hours a day) or a computerand printer,and microwave. These are just examples of items that thesystem(s) willsupport. There isalso the possibility that large installationswill also be done. Theseinstallations will be for clusters of housing,where there is more thanone single dwelling (or other needs) at a

location. The needs will varydepending upon the size of the housingcluster. There may also be a needfor a meter at each housing unit.

Wind

Performance: 500 - 1,500 Kilowatt-hours (kWh's) per month (dependingon wind resource). This is recommended for: Large remote homes orfacilities, using at least 700 kWh per month. Locations where delivering


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or storing diesel fuel is a problem. Retrofit to existing diesel-only powersystem to provide 24-hour power availability Wind Class 2 or higher.This is suitable for larger remote homes, facilities, or communities thatneed more than 500 kWh's of alternating current (AC) energy permonth. These systems are often retrofitted to existing diesel-only systems

in order to save fuel and provide 24-hour power.

The system stores excess energy in batteries for use during low windperiods. It can also charge the batteries from a back-up generator. Witha back-up generator the remote system can provide reliable 24-hourpower with minimal attention from the operator. The towers areapproximately 100 ft. tall and suitable for enough for most locations.Shorter towers reduce performance.

Equipment costs typically include the following costs: shipping, salestax, permit costs, foundation and anchoring, wire run, turbine and tower

erection, battery racks or vault, electrical hook-up, and inspection fees.For budgeting purposes, these costs typically range from $4,000(customer installed, no sales tax, etc) to $20,000 (Certified Dealer, salestax, diesel generator, etc).

Residential Off-Grid Systems:

n order to meet the needs of different customers, highly versatile standalone solar electric power systems were designed for individual houses.The main feature of the systems are that they can be expanded in outputcapacity to meet the increase in energy requirements of customers.

There are two designs offered: System I meets the basic lighting andrefrigerator (2.9 cubic feet) loads of a one bedroom dwelling and SystemII meets the requirement of System I and the additional loads of apersonal computer, radio, and television. The two systems are designedto be stand alone power systems without a back-up power source. Forease of installation and to offer reliable and efficient operation, thesystem designs are standardized for all customers based upon localirradiation, weather data, and a generalized power consumption model(see Appendix A).

There is also the possibility that large installations will be done. These

installations would be for clusters of housing, where there is more thanone single dwelling (or other needs) at a location. The system needs willvary depending upon the size of the housing cluster. There may also bea need for a meter at each housing unit.

Location:

The business will be located at a site on the Navajo Nation. This will


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provide the business with easy access to the installation/maintenancelocations. The sole proprietor may choose to begin the business out ofhis/her home.

If the owner decides to operate the business using a store-front, a

business-site lease will have to be obtained from the Navajo Nation?sDivision of Economic Development. The Division of EconomicDevelopment will supply the owner with any and all documents requiredto complete the business-site lease application. The business?site leaseprocess can be a very protracted one.

Management:

In this section, the owner of the business must describe him/herself.He/she must describe his/her skills in relation to this business (howhe/she will bring value to the business). He/she must also describe

his/her weaknesses, and how he/she plans to improve him/herself inthose areas. If he/she is not planning on improving him/herself, he/shemust explain how he/she will hire other people to take care of thosetasks. The owner should take business courses either through a collegeor in a seminar in order to get complete training in running a smallbusiness. The courses that the owner plans to take should be describedin this section. The owner must include a resume in the supportingdocuments section of the business plan. It is also a good idea for theowner to include personal letters of reference from past associates.

The Center for American Indian Economic Development at NAU holds

workshops several times a year that may meet the needs of anentrepreneur who does not have the necessary business skills to run abusiness. The Center can be contacted for information on theseworkshops and other technical assistance.

Personnel:

This section is used to describe each job required by the business, theestimated number of employees, and the business? hiring procedures. Ajob description for all personnel is required, as well as the wage andhiring procedures for each position.

The business will employ liCEFNS ed electricians and journeymentrained in the installation, maintenance, and repair of solar photovoltaicsystems. The business will also have a manager, presumed to be theowner, and at least one support staff person. How the employees will betrained, what courses they must take, etc. should be described in thissection. This section may also be used to describe any employee benefitsthat the company will be offering and how the company will handle


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extremely busy and/or slow times with regard to personnel.

Methods of Record Keeping:

Record keeping methods will vary. Part of the business plan will be to

train either the business owner or an employee in appropriate businesspractices. An accounting software program such as Quickbooks canprovide the record keeper with a template of commonly used financialdocuments, such as invoices, receipts, income statements, etc. Thesetemplates can be customized to suit the needs of the business.

Insurance:

The business will be required to obtain full coverage motor vehicleinsurance for its work trucks under its automobile loan provisions.Under Navajo Nation rules, the business owner will not be required to

purchase liability bonding and insurance unless the departmentcontracting the business? work requires it.

Additionally, the business owner may choose to purchase employer?sliability or workmen?s compensation insurance to protect the businessowner from liabilities that may arise as a result of employee injury whileon the job. He or she may also wish to obtain public liability or generalliability insurance to protect himself/herself from liability to third partieswho may be injured during the operation of the business. However,neither of these types of insurance is strictly required for conductingbusiness on the Navajo Nation.

Legal Aspects:

Since the business will be owned and operated by Navajos on the NavajoNation, state laws and requirements do not apply to the business.However, the business and its employees must abide by the laws andregulations set forth by the Navajo Nation. The business will need toobtain liCEFNS ing and certification from the Navajo Nation?sBusiness Regulatory agency in order to perform electrical work on triballands. There is no fee associated with the liCEFNS e and certification.Additionally, if the business begins to operate outside of the Navajo

Nation, it will then have to follow the rules and regulations set forth byArizona law for electrical contractors.

In order to start a sole proprietorship on the Navajo Nation, anapplication must be filled out and presented to the Navajo Nation?sDivision of Economic Development. The Division of EconomicDevelopment will explain any and all supplemental laws that the


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business must follow.

Security:

Bonding and insurance are both appropriate.

MARKETINGSummary of Marketing Plan:

Target Market:

The target market that the business will want to focus on during itsstart-up stage is the un-electrified homes on the Navajo Nation.According to the United States Year 2000 CEFNS us data, there are atotal of 41,041 homes on the Navajo Nation. Historical data has shownthat approximately 37% of all homes on the reservation do not have

electricity. Therefore, the target market includes the approximately15,185 homes that are currently un-electrified. Note that this is anestimate projected from the CEFNS us data and current housingmarkets.

In addition to the un-electrified homes, the business should alsoconsider targeting homes that are going to be built on the reservation inthe near future. It is possible that some homes will be built with accessto electricity, and others may be cluster dwellings that may be servicedthrough larger solar systems. An economic development conferencesponsored by the Navajo Nation in 2000 reported a need for 30,000 new

homes on the Navajo Nation. It is estimated that approximately 10percent, or 3,000, of the newly built homes will be outside of the APSdistribution area (often referred to as off-grid). The business shouldhave a plan to market their services to the companies that are planningto build these new homes. This creates a demand potential of about18,185 homes that should be a part of the target market. Note that whileall of these homes may not use solar, (some may be close enough forconventional electrical lines to be run, or for other renewable energysources to be utilized) all of these homes are potential customers.

It must be pointed out that given the income demographics of the Navajo

Nation, few families will be able to independently afford to purchase thesystems outright. The recommendations in the main body of this reportinclude having the Navajo Nation finding alternative funding for theelectrification program. Unless the secondary funding is found, thedemand potential shrinks considerably. But if secondary funding isindeed found, then the pro forma statements in the later appendicesshow a good potential for a profitable business enterprise.


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Growth Potential:

Although the business will begin with only installation crews, it willbecome necessary to expand its operations to include maintenance andrepair crews within three months due to the photovoltaic system?s

quarterly maintenance schedule. Using the demand potential of 18,185homes, it will take 10 installation crews many years to fulfill the possibleneed for solar power. This creates a large potential for business growth.

As the business expands, its customer base should also grow. In thefuture, the business may plan to market its services to all homes on theNavajo Nation, including ones with access to electrical power. It maybegin servicing other remote regions of Arizona as well. Additionally,other uses for solar systems may develop such as water pumping foranimal tanks, remote signage, and water heating.

Current Providers:

The only existing providers of solar photovoltaic power on the NavajoNation are NTUA and Native American Photovoltaics(NAPV). NTUAhas a 200 home solar test program currently in process. SandiaLaboratories is collaborating with NTUA on the program and has plansto assist them in developing a maintenance program for the solarelectric systems.

There is also currently a program being run by NAPV in which NativeAmericans residing on reservations have the opportunity to own a solar

generator system after leasing it. The systems installed provide onekilowatt of power and are priced at approximately $10,000 each. TheNAPV is a non-profit organization that began this endeavor withfunding from a federal grant. NAPV?s program also includes a plan formaintaining the solar generator systems that it installs by trainingNavajo workers how to perform the required maintenance.

APS is the electrical provider for Arizona, including the Navajo Nation.It provides electric service to homes on the reservation by hooking themup to a grid. The cost of electricity itself is not higher on the reservationthan elsewhere in Arizona; however, the price to be hooked up to the

grid can become substantial for some homes on the reservation. This isdue to the home?s distance from the grid and the difficulty of getting theelectric lines to remote locations.

Competition:

Currently, the competition for this business is from the established


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powercompanies. However, in remote locations where accessibility to thepowergrid is difficult there competition diminishes. The cost ofelectricityitself is no higher in these remote locations will be no higherthananywhere else, however the price to be hooked up to grid canbecomeoutrageous for some homes. This is because of the homes

distance from thegrid and the difficulty of getting to the remotelocations.

Methods of Distribution:

This business will be working primarily from customer orders. Thebusiness will have to work with the supplier to set up a system where thesolar power systems are delivered to the business as quickly as possibleafter being ordered. Since sufficient time must be allowed for the unitsto be shipped, the business will have to keep an adequate inventory ofsolar system components on hand. The installation crews will drive

company vehicles to each customer?s location in order to install thesystems.

This method of distribution will require several things. First, it willrequire a good working relationship with a supplier of the solar powersystems. Second, it will require the service of a reliable shippingcompany, as well as a good working relationship with the shipper.Finally, it will require well maintained trucks, preferably with four-wheel drive, in order to get the systems to customers located in remoteplaces.

Advertising:

During the start-up phase of the business, little capital should be spenton advertising. In fact, the business should only advertise enough to letthe owners of un-electrified homes know about the business. This can bedone through the use of advertisements that are sent to homes throughthe mail or displayed in local market places or Chapter Houses. Theadvertisements should be brief, but include information about thebusiness, what the business does, how to contact the business, andpossibly a general price. This will effectively inform the target market ofthe business?s purpose.

In the future, the business may decide to expand its customer base. Inorder to do this, the business will need to increase advertising. Thebusiness should plan to advertise in local newspapers or newsletters andon local radio stations in order to access a larger customer base on thereservation and elsewhere. Partial day workshops for educationalpurposes may also be a viable advertising medium. Working with localChapter Houses will be a critical component in educating the Navajo


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people about the costs and benefits of solar energy systems. Workingwith NTUA will also provide the business owner with additionalinformation about the potential market.

The business may also advertise in statewide newspapers, on television,

and over the radio in order to increase their customer base throughoutthe state.

Pricing:

The business should price installations to include the cost of the systemcomponents, labor costs and overhead. It takes approximately two and ahalf days for a two person crew to install a solar system. Using anassumed labor rate of $35.00 an hour per crew, labor costs will bearound $700 per system. The cost of the system itself varies dependingon the size of the system and the manufacturer. The components for a

complete 720 watt system will cost about $7,200 and $12,400 for a 1,440watt system. Some houses will also need to be retrofitted with electricalwiring and the business could charge an additional $1,000 for thisservice. The financial implications of charging different prices areexplored in the financial documents section and shown in Appendix D.

The price ultimately paid by customers will decrease if they apply for autility credit buy down. One of the programs offered by APS is the EPSCredit Purchase Program. Customers in APS service territory that livein remote areas without access to electricity from APS's distributionsystem (the grid) and who purchase and have installed complete solar

systems to provide their electricity are eligible for the EPS CreditPurchase Program. Customers purchasing a new solar electric systemof 5 kW or less for their remote (off-grid) homes can receive an EPSEnergy Purchase rebate of $2.00 per photovoltaic watt of DC electricity.For example, a 1,000-watt solar system qualifies the customer to receive$2,000 from APS. In order to receive the credit, remote solar customersmust sign an EPS Credit Purchase Agreement assigning APS access tothe EPS credits for 12 years.

Estimates of customer?s monthly loan payments for purchasing either a720 watt or a 1.44 kW solar power system are presented in Appendix B.

This includes the APS EPS discount for the system, $2,880 for 1.44 kWand $1,440 for 720 watts, and shows possible monthly payments basedon different interest rates and different system costs.

TRAINING:

Training encompasses many aspects of the overall business. The


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business owner may need to learn more about entrepreneurship,operating a business, or using business software. The record keeper mayneed to be trained on the use of an accounting software system or othercomputer systems.

One member of each crew must be a trained electrician, meaning thathe/she must have some formal education and apprenticeship. Thejourneymen will also have had some formal training. All installationand maintenance/repair workers must be trained on solar photovoltaicenergy systems. Due to the nature of the job, the maintenance/repaircrews may require more training than the installation crews.

FINANCING METHODS

Start-up Costs:

The start-up costs associated with this business may be significantbecause a work truck and toolkits must be purchased for each crew. Thebusiness will need to have a sufficient inventory of solar systemcomponents in order to allow time for more to be ordered and deliveredfrom the manufacturer. Current estimates indicate that the lead time forcomponent delivery may be as much as six to eight weeks. Also, thebusiness should have enough cash on hand to pay for 100 days worth ofoperating expenses while waiting for customer payments to come in.This is essential because some customers may be slower to pay thanothers and the business must have enough funds available to continueoperating.

Funding:

There are two primary means of financing the business: loans andgrants. Loans must be repaid and generally accrue interest, whereas,grants do not have to be repaid. Loans and grants may be pursuedthrough a variety of venues including: the Small BusinessAdministration, the United States Department of Agriculture, theDepartment of Energy, the Department of Labor, the Bureau of IndianAffairs, and the Navajo Nation. The Center for American Indian

Economic Development provides technical assistance on loan and grantapplications.

DISCLAIMER

The College of Business Administration, Sustainable Energy Solutionsand Northern Arizona University do not warrant or assume any legalliability or responsibility for the accuracy, completeness, or usefulness


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of any information, or process disclosed in this plan.

This business plan template is meant to provide a guide for prospectiveentrepreneurs. The financial data presented in this plan are based ongeneral assumptions and the accuracy of said assumptions is in no way

promised or guaranteed. It is recommended that professional guidancebe sought prior to starting this or any business.

FINANCIAL DOCUMENTS

For the purposes of this plan, it is recommended that the business ownerobtain funding in the amount of approximately $400,000 to finance thestart-up of the business. This will cover the costs of purchasing threeelectrician toolkits, three work trucks equipped with racks for storingtools and equipment, enough solar units for six weeks worth of work,100 days worth of wages and operating expenses, and office supplies.This recommendation is slightly inflated to ensure that the business willhave enough cash on hand to pay for expenses as they come due whilewaiting for customer payments to come in.

The income statement shows the revenues and expenses of the businessfor the first two years. The ?bottom line? of the income statement tellshow much total profit the business produced that year. The pro formaincome statement (see Appendix D) details the most common expensesassociated with this type of business. Undoubtedly, the business willincur other expenses that cannot be anticipated and are not included inthe income statement provided.

Sales:

Assuming that there are 40 weeks available for work in a year, givendisruptions due to weather, demand, and financial capabilities, eachcrew should be able to install 80 solar units per year. If the businessprices the systems using a percentage markup of cost including labor,revenue would be approximately $10,000, $11,000, $12,000, or $13,000on each 720 watt system sold at respective markups of 25%, 30%, 40%,and 50%. The revenue from sales would be $16,500, $17,000, $18,000,and $19,000 for the same markups for a 1.44 kW system. The incomestatements in Appendix D show the results of the different markupsassuming that 75% of the systems installed are 720 watts and 25% are1,440 watts. This revenue figure is reported as sales on the incomestatement.

Cost of Goods Sold:


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The cost of goods sold will depend on the size of the systems installed.For simplicity, it will be assumed that 75% of the ones installed are 720watt systems costing approximately $7,200 each and 25% are 1.44kilowatt systems costing $12,400 each. The cost of goods sold amountincludes only the price of the system components to the business. It does

not include the cost of labor or transportation associated with theinstallation, maintenance, and repair of the systems.

Operating Expenses:

Operating expenses include any costs necessary for the business tofunction. This category includes selling, general, and administrativecosts. It is assumed that the entrepreneur will begin the business out ofhis/her home and therefore not incur expenses associated with aseparate office or warehousing facility.

It is assumed that a small business such as this, operating with 2-personinstallation crews consisting of one electrician and one journeyman, willbegin with three crews. Electricians and journeymen earnapproximately $20/hour and $15/hour, respectively. The work crewsshould receive a raise in year two because they will be experienced. A5% raise would be the equivalent of approximately $1.00 per hour. Inaddition to the work crews, the business will need a business manager,assumed to be the entrepreneur, and support staff to work with clientsand suppliers. It is assumed that the business will begin with one part-time support staff person to perform general bookkeeping andsecretarial duties, who will be paid a wage of $9 per hour.

The business owner?s salary is equal to the amount of profit after taxesgenerated by the company in a year. As a sole proprietor, the businessowner is entitled to withdraw money out of the business throughout theyear as his/her salary. It is important to note that the business ownercannot withdraw more money from the business than the business hasavailable. Also, the business owner should try to keep the business? cashbalance at least equal to 100 days worth of operating expenses. It wouldbe appropriate in this scenario for the business owner to withdraw asalary of $35,000 from the business.

The business is required to pay certain federal taxes and benefitsassociated with payroll. The company is responsible for paying anamount equal to 6.2% of the employee?s first $84,900 (for 2002) of grosswages for Social Security, an additional 1.45% on all wages forMedicare, and 6.2% of the first $7,000 of gross wages for federalunemployment. Consequently, the figure that appears on the incomestatement is an estimate based on the assumptions already made. Thebusiness will not be required to pay any state unemployment tax if all


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employees are residents and members of the Navajo tribe.

If the business owner were to purchase three new work vans (FordEconoline or similar) they would cost approximately $81,000 or $27,000each. It is currently possible to finance many automobile loans with zero

percent interest. Assuming the business owner is able to obtain zeropercent financing, with a $1,000 down payment, the loan for each vanwill cost about $750 per month for 36 months.

Transportation costs are based on the average cost of maintenance andrepairs to own such a work van on a per mile basis, plus the cost of fuel.The assumption was made that each of the three vans would be drivenapproximately 25,000 miles per year. It is important to note that theseestimates are for normal driving conditions. Many of the roads in theNavajo Nation are not well-maintained causing excessive wear and tear,which may decrease the useful life of the automobile. The business will

also incur expenses associated with maintaining insurance on the workvans. Motor vehicle insurance is estimated at $4,000, assuming fullcoverage is necessary due to financing requirements.

Depreciation expense is based on the assumption that tools andequipment have a useful life of seven years, while the trucks or vanshave useful lives of three years and that neither asset has a salvagevalue. The amount of depreciation expense presented is an estimatebased on the straight-line method.

The amount of miscellaneous expenses will vary from year to year

depending on the business? operations. For the first year, the business isestimated to incur $5,000 in office supplies expense to purchase acomputer, a printer, a desk, and all of the necessary materials toperform the administrative functions of the business.

Interest Expense:

If the business owner obtains a loan to finance the start-up of thebusiness, he or she will have to pay back the loan plus any associatedinterest. The amount of interest paid on the loan for one year willappear as interest expense on the income statement. The amount shown

on the income statement is an estimate for a 15-year loan in the amountof $400,000 at 7% interest.

Taxes:

The business owner is responsible for paying the taxes (both federal andNavajo business activity) associated with the business. The amount offederal income tax to be paid will vary depending on the amount of


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income generated by the business. The business owner will pay thefederal income taxes on his/her own personal tax return.

The Navajo Nation business activity tax will be 3% of gross sales. Giventhe conditions set forth above, the owner will be in the 39% marginal tax

bracket according to the current federal tax rates. The federal taxamount shown on the income statement includes the self-employmenttax for social security, Medicare, and federal unemployment.

Balance Sheet

The balance sheet shows the company?s assets, liabilities, and owner?sequity account balances at the end of the year. The account balances areshown at historical cost for assets and future costs for liabilities (seeAppendix E).

Assets:

It is recommended that the business have at least enough cash on handat any given time to pay for 100 days worth of expenses. For the firstyear of business, this is estimated to be $75,000 based on the assumptiongiven above. The business should have at least six weeks worth ofinventory on hand at any given time as well. This would be theequivalent of 36 complete systems.

The business? fixed asset account consists of the assets that are expectedto have useful lives beyond one year. These items are also referred to as

capital assets. In the beginning, the business? fixed asset account willconsist of its work vans and electricians? toolkits. Included in the valueof the work vans are the $1,000 tool racks they must be equipped with.These assets are valued according to how much they were worth whenthe business acquired them, minus any accumulated depreciation. Thebusiness may also have other assets such as accounts receivable andpre-paid expenses, depending upon the business? financial policies.

Liabilities:

The business? liabilities account consists of amounts that are to be paid

in the future for goods or services the business already received. Thenote payable for the work vans is a long-term liability, while the portionof the loan due within the next year is classified as the current portion ofthe long-term liability. If the business owner funds the business start-upwith loans, the total amount of payments remaining at the end of theyear will be classified as liabilities. At the end of the first year ofoperations, the business would have long-term liabilities in the amountof $275,000 for the start-up loan and $51,000 for the automobile loans.


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It would also have current liabilities for these loans in the amount of$13,000 for the start-up loan and $27,000 for the automobile loans. Thebusiness may also have additional liabilities such as accounts payableand wages payable depending upon its financial policies.

Owner's Equity:

The owner?s equity account is the difference between the asset accountand the liability account. It reflects the amount of income earned by thebusiness and the amount of capital invested by the owner. This accountalso tracks the owner?s ongoing deposits and withdrawals with respectto the business (see Appendix F). This account may also be referred toas the net worth of the business.

Appendices:

Appendix A

Technical Specifications for Stand Alone Solar Power System

PV-Inverter-Battery Solar System Description

A.- Solar Array

There are 6 solar modules wired 3 in series by 2 in parallel for a ratedpower equal to 0.72 KW DC @ 50.4 VDC (rated voltage).

We have specified BP solar modules, model BP SX-120S. This is a 120watt multi-crystalline photovoltaic module. For detailed informationplease visit:http://www.bpsolar.com/ContentDetails.cfm?age=38

B.- Charge Controller

This device controls the charge from the PV into the battery bank. Weare using the OutBack MX60 controller which use the MPPTtechnology (Maximum Power Point Tracking) enabling your PV systemto achieve its highest possible performance. For detailed informationplease visit:http://www.outbackpower.com/MX60.pdf

C.- Inverter-Charger

The FX2024 from OutBack is the newest sine-wave inverter on themarket and leads the way in the next generation of inverter technology.We decided to include the 2 KW (AC) units in our design in order tooffer you a strong and reliable power system and to provide the customer
http://www.bpsolar.com/ContentDetails.cfm?page=38http://www.bpsolar.com/ContentDetails.cfm?page=38http://www.bpsolar.com/ContentDetails.cfm?page=38http://www.outbackpower.com/MX60.pdfhttp://www.outbackpower.com/MX60.pdfhttp://www.outbackpower.com/MX60.pdfhttp://www.outbackpower.com/MX60.pdfhttp://www.bpsolar.com/ContentDetails.cfm?page=38


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with the option to expand the system in the future.

The FX2024 inverter it is designed to survive harsh environments. Allelectronics are located in a sealed enclosure and the unit is designed tobe ?field repairable? in the event that a failure occurs.

For detailed information pleasevisit:http://www.outbackpower.com/FX2000.pdf

D.- Battery Bank

The battery bank constitutes eight flooded lead-acid batteries, wired 4 inseries by 2 in parallel, 24 VDC. The cell brand and model is Trojan T-105, respectively, and the total rated capacity for the battery bank is 500Ah @ C/100, 12 KW. Spill containment trays are provided for thebattery bank.

For detailed information about T-105 battery please visit:

http://www.trojanbattery.com/golf_card_2001.pdf

E.- System Integration

The electrical equipment (Inverter and controller) are installed on anOutBack mounting plate. A Power System DC (PSDC) enclosure islocated on one side and a Power System AC (PSAC) enclosure on theother side, laving the central area of the plate available for the

installation of up to four FX2024 inverters. The MX60 charge controllerwill be installed beside the PSDC. A DC Ground Fault ProtectionSystem, the PV array breaker and a 175 A DC rated battery breaker willbe installed in the PSDC. For detailed information please visit:

http://www.outbackpower.com/psdc.htm

http://www.outbackpower.com/psac.htm

http://www.outbackpower.com/pwrpnl.htm

F.- Mounting Structure

We have specified RoofTrac from Professional Solar Products in orderto roof-mount the PV modules. The structure it is very light and easy toinstall.

For detailed information please
http://www.outbackpower.com/FX2000.pdfhttp://www.outbackpower.com/FX2000.pdfhttp://www.outbackpower.com/FX2000.pdfhttp://www.trojanbattery.com/golf_card_2001.pdfhttp://www.trojanbattery.com/golf_card_2001.pdfhttp://www.outbackpower.com/psdc.htmhttp://www.outbackpower.com/psdc.htmhttp://www.outbackpower.com/psac.htmhttp://www.outbackpower.com/psac.htmhttp://www.outbackpower.com/pwrpnl.htmhttp://www.outbackpower.com/pwrpnl.htmhttp://www.outbackpower.com/pwrpnl.htmhttp://www.outbackpower.com/psac.htmhttp://www.outbackpower.com/psdc.htmhttp://www.trojanbattery.com/golf_card_2001.pdfhttp://www.outbackpower.com/FX2000.pdf


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visit:http://www.rooftrac.com/ROOFTRAC.htm

G.- Electric Load Estimation

In order to design the system, several assumptions were made on what

the average daily energy consumption will be, based on the initialinformation provided by the customer:

Navajo Indian Reservation

Latitude: 353729, 35.62474

Longitude: 1111501, -111.25053

Altitude: 4360 feet

Extreme condition: 3days without sunshine.

Two systems have been designed on the basis of expected loadrequirements:

1) System I

Load details:

Refrigerator specification:

Kenmore Compact refrigerators- 2.9 cu.ft. (Model:46 98291)

Voltage rating 115V to 120V, 50/60 cyclesAmperage (maximum) 0.9 ampsEst. yearly kwh/year = 419kwh/year ( in term of per day =

1148whr/day)

Compressor details are not readily available.

Lighting for a One bedroom house( Living room /bedroom/ living area/bathroom)
http://www.rooftrac.com/ROOFTRAC.htmhttp://www.rooftrac.com/ROOFTRAC.htmhttp://www.rooftrac.com/ROOFTRAC.htmhttp://www.rooftrac.com/ROOFTRAC.htm


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2) System-II

Load details:

Refrigerator specification:

Kenmore Compact refrigerators- 2.9 cu.ft. (Model:46 98291)

Voltage rating 115V to 120V, 50/60 cyclesAmperage (maximum) 0.9 ampsEst. yearly kwh/year = 419kwh/year ( in term of per day =


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1148whr/day)

Compressor details are not readily available.

Lighting for a one bedroom house (Living room /bedroom/ bathroom)

In addition to the above the above system will be able to run thefollowing:

Personal Computer

Television

Radio


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The lights specified for both systems are made with high intensity whiteLED?s (Light Emitting Diodes). These units have very low powerconsumption (10 mA per LED) and a significantly longer lifeexpectancy when compared to fluorescent light fixtures. The units

operate on 12 VDC, therefore a 24 to 12 VDC converter will be neededto step down the voltage.

For more information please visit:


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http://www.hollysolar.com/dc_led_lights/dc_led_lights.html

Note:

It is important to note that the actual daily energy consumption of theloads fed by the system must be near the calculated load in order toobtain desirable system reliability and operation. This means educatingthe system owner on the operational capabilities of their system.

Appendix BCustomer Payments under Loan Options
http://www.hollysolar.com/dc_led_lights/dc_led_lights.htmlhttp://www.hollysolar.com/dc_led_lights/dc_led_lights.htmlhttp://www.hollysolar.com/dc_led_lights/dc_led_lights.html


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The tables assume that an APS EPS Credit Purchase Agreement hasbeen deducted from the sales price for prior to financing.

Appendix CNavajo Nation Business Activity Tax Return


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Source: Office of the Navajo Tax Commission,http://www.navajotax.org/BAT_401.pdf

Appendix DPro Forma Income Statement Year 1 (25% markup on costplus labor)


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Pro Forma Income Statement Year 1 (30% markup on cost plus labor)


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Pro Forma Income Statement Year 2 (assuming 25% markup)


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Appendix EPro Forma Balance Sheet Year 1 (assuming 25% markup)Pro Forma Balance Sheet Year 1 (assuming 30% markup)


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Pro Forma Balance Sheet Year 1 (assuming 40% markup)


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Appendix F Statement of Owner?s Equity Year 1 (assuming 25%markup)


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Statement of Owner?s Equity Year 2 (assuming 25% markup)



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Renewable Energy Business Plan Template

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