The investment based and capacity based incentives are accounted for in the cost installed (subtracted) value and then two values are considered issuance of equity and purchase of property which are based on the cost installed. These values are used to calculate the investing activities and financial activities which according to the original models should not have the IBI and CBI effects.
The IBI and CBI reductions are included in the investing activities (correct) and already included in the financial activities in the issuance of equity (and then added again) which gives a pretax project return the includes the IBI and CBI, which is incorrect because the IBI and CBI were already accounted for in the investing activities which leads to a double counting.
The fix to this issue includes:
- consistent definitions of issuance of equity for all financial models
- removal of the IBI and CBI from the financing activities
Additional details and code references included in the attached Word Document.
FinancialMarketsIssues2023.9.6 IBI.docx
The investment based and capacity based incentives are accounted for in the cost installed (subtracted) value and then two values are considered issuance of equity and purchase of property which are based on the cost installed. These values are used to calculate the investing activities and financial activities which according to the original models should not have the IBI and CBI effects.
The IBI and CBI reductions are included in the investing activities (correct) and already included in the financial activities in the issuance of equity (and then added again) which gives a pretax project return the includes the IBI and CBI, which is incorrect because the IBI and CBI were already accounted for in the investing activities which leads to a double counting.
The fix to this issue includes:
Additional details and code references included in the attached Word Document.
FinancialMarketsIssues2023.9.6 IBI.docx