scholarly journals The Valuation of the Operational Flexibility of the Energy Investment Project Based on a Gas-Fired Power Plant

Energies ◽  
2020 ◽  
Vol 13 (7) ◽  
pp. 1567 ◽  
Author(s):  
Dominik Kryzia ◽  
Michał Kopacz ◽  
Katarzyna Kryzia
Keyword(s):  
Monte Carlo ◽  
Net Present Value ◽  
Investment Project ◽  
Combined Cycle ◽  
Operational Flexibility ◽  
Present Value ◽  
Discounted Cash Flow ◽  
Energy Investment ◽  
Significance Level ◽  
Technical Parameters

This paper presents an attempt to the valuation of the operational flexibility of the energy investment project based on the example of combined cycle gas turbine (CCGT). For this purpose, the real options approach (ROA), net present value (NPV) method, and the Monte Carlo (MC) simulation have been used. Motivations to take up such a topic result from the fact that traditional valuation methods neglect flexibility embedded in CCGT assets. Operational flexibility was defined as the switching option to dynamically shut down and restart gas units. Valuation of the operational flexibility, the project’s extended net present value (XNPV), was based on a discounted cash flow model. The Monte Carlo simulation, allowing for better replication of the stochastic nature of market factors and some technical parameters, was introduced to the valuation model. The obtained results indicate that the value of the options significantly influences the NPV of the analyzed technology and its risk profile. The NPV was calculated at −169.1 million USD, while the XNPV amounted to 102.5 million USD. This difference, compared to the NPV distribution range at a significance level of 0.05, was more than 8.1% (almost 10.4% for α = 0.1). The results achieved help to explain the significance of the operational flexibility in the modeling profitability of CCGT technologies.

scholarly journals Assessing the Option to Abandon an Investment Project by the Binomial Options Pricing Model

2016 ◽  
Vol 2016 ◽  
pp. 1-12 ◽  
Author(s):  
Salvador Cruz Rambaud ◽  
Ana María Sánchez Pérez
Keyword(s):  
Real Option ◽  
Net Present Value ◽  
Investment Project ◽  
Mathematical Expression ◽  
Options Pricing ◽  
Pricing Model ◽  
Operational Flexibility ◽  
Present Value ◽  
Project Appraisal ◽  
Financial Options

Usually, traditional methods for investment project appraisal such as the net present value (hereinafter NPV) do not incorporate in their values the operational flexibility offered by including a real option included in the project. In this paper, real options, and more specifically the option to abandon, are analysed as a complement to cash flow sequence which quantifies the project. In this way, by considering the existing analogy with financial options, a mathematical expression is derived by using the binomial options pricing model. This methodology provides the value of the option to abandon the project within one, two, and in general n periods. Therefore, this paper aims to be a useful tool in determining the value of the option to abandon according to its residual value, thus making easier the control of the uncertainty element within the project.

AN HISTORICAL PERSPECTIVE OF NET PRESENT VALUE AND EQUIVALENT ANNUAL COST

1982 ◽  
Vol 9 (1) ◽  
pp. 103-110 ◽  
Author(s):  
Thomas W. Jones ◽  
David Smith
Keyword(s):  
Cash Flow ◽  
Annual Cost ◽  
Historical Development ◽  
Historical Perspective ◽  
Net Present Value ◽  
Present Value ◽  
Discounted Cash Flow

Net present value and equivalent annual cost are two discounted cash flow criteria for comparing investment proposals. Why have accountants taken to net present value? Why do engineers readily use equivalent annual cost? This paper investigates the historical development of these principles to provide an explanation of why this is so.

scholarly journals Is Smart Housing a Good Deal? An Answer Based on Monte Carlo Net Present Value Analysis

2019 ◽  
Vol 11 (15) ◽  
pp. 4193 ◽  
Author(s):  
Elariane ◽  
Dubé
Keyword(s):  
Monte Carlo ◽  
Net Present Value ◽  
Smart Cities ◽  
Statistical Significance ◽  
Good Deal ◽  
Present Value ◽  
Value Analysis ◽  
Social Growth ◽  
Operation Costs

The smart cities are considered to be an engine of economic and social growth. Most countries started to convert their existing cities into smart cities or construct new smart cities in order to improve the quality of life of their inhabitants. However, the problem that facing those countries while applying the concept of smart cities is the costs, especially for the residential sector. Despite the high initial and even operation costs for adopting different technologies in smart housing; the benefits could exceed those costs within the lifespan of the project. This article is shedding the light on the economics of smart housing. This study aims to evaluate the net present value (NPV) of a smart economic housing model to check the viability and feasibility of such projects. The calculation of the NPV based on Monte Carlo simulation provides an interesting methodological framework to evaluate the robustness of the results as well as providing a simple way to test for statistical significance of the results. This analysis helps to evaluate the potential profitability of smart housing solutions. The research ends up by proving the feasibility of this type of project.

scholarly journals Technologies for Waste Heat Recovery in Off-Shore Applications

2013 ◽  
Author(s):  
Leonardo Pierobon ◽  
Fredrik Haglind ◽  
Rambabu Kandepu ◽  
Alessandro Fermi ◽  
Nicola Rossetti
Keyword(s):  
Thermal Efficiency ◽  
Heat Recovery ◽  
Net Present Value ◽  
Waste Heat ◽  
Organic Rankine Cycle ◽  
Rankine Cycle ◽  
Combined Cycle ◽  
Present Value ◽  
Payback Time ◽  
Low Weight

In off-shore oil and gas platforms the selection of the gas turbine to support the electrical and mechanical demand on site is often a compromise between reliability, efficiency, compactness, low weight and fuel flexibility. Therefore, recovering the waste heat in off-shore platforms presents both technological and economic challenges that need to be overcome. However, onshore established technologies such as the steam Rankine cycle, the air bottoming cycle and the organic Rankine cycle can be tailored to recover the exhaust heat off-shore. In the present paper, benefits and challenges of these three different technologies are presented, considering the Draugen platform in the North Sea as a base case. The Turboden 65-HRS unit is considered as representative of the organic Rankine cycle technology. Air bottoming cycles are analyzed and optimal design pressure ratios are selected. We also study a one pressure level steam Rankine cycle employing the once-through heat recovery steam generator without bypass stack. We compare the three technologies considering the combined cycle thermal efficiency, the weight, the net present value, the profitability index and payback time. Both incomes related to CO2 taxes and natural gas savings are considered. The results indicate that the Turboden 65-HRS unit is the optimal technology, resulting in a combined cycle thermal efficiency of 41.5% and a net present value of around 15 M$, corresponding to a payback time of approximately 4.5 years. The total weight of the unit is expected to be around 250 ton. The air bottoming cycle without intercooling is also a possible alternative due to its low weight (76 ton) and low investment cost (8.8 M$). However, cycle performance and profitability index are poorer, 12.1% and 0.75. Furthermore, the results suggest that the once-trough single pressure steam cycle has a combined cycle thermal efficiency of 40.8% and net present value of 13.5 M$. The total weight of the steam Rankine cycle is estimated to be around 170 ton.

scholarly journals A Real Options Approach to Valuate Solar Energy Investment with Public Authority Incentives: The Italian Case

Energies ◽  
2020 ◽  
Vol 13 (16) ◽  
pp. 4181
Author(s):  
Antonio Di Bari
Keyword(s):  
Solar Energy ◽  
Real Options ◽  
Real Option ◽  
Net Present Value ◽  
Option Value ◽  
Present Value ◽  
Energy Investment ◽  
The Real ◽  
Real Options Approach ◽  
Real Option Value

Solar energy investment represents currently a valid reason to support sustainable economic development. In fact, over the last few years, governments have applied different measures to incentivize private consumers and firms to use renewable energies. Photovoltaic (PV) projects are characterized by uncertainty due to meteorological conditions, the unpredictable behavior of government, and managerial flexibility. Since the Net Present Value (NPV) approach is not able to capture these uncertain factors, it was replaced with the Real Options Approach (ROA). The latter method manages to embed flexibility in PV investment using binomial trees. This paper valuates PV investment in all regional areas in Italy using an integrated approach between the discounted cash flows method and real option value, called Expanded Net Present Value (ENPV). We fit the probability of tax benefits into a binomial lattice model after analyzing the geographical position and weather conditions of all regional capitals of Italy. The results show that the cities with high irradiance/temperature have positive NPV and high investment values. On the other hand, while most cities have negative NPV, the inclusion of the flexibility in investment decisions gives additional value to the project, making the ENPV positive and implying an attractive investment opportunity with the possibility of delaying the project. We also propose a sensitivity analysis that shows how the real option value changes when incentive policies of the government become more attractive. This paper contributes to the existing literature in the way of considering financial, meteorological/geographical, and political factors to valuate PV investment.

OPTIMASI STRIPPING RATIO DENGAN METODE DISCOUNTED CASH FLOW PADA PROJECT PLTU MULUT TAMBANG

2020 ◽  
Vol 4 (3) ◽  
pp. 128-133
Author(s):  
Yudi Arista Yulanda ◽  
M. Taufik Toha ◽  
Fahrurrozi Syarkowi
Keyword(s):  
Cash Flow ◽  
Discount Rate ◽  
Net Present Value ◽  
Spot Price ◽  
Present Value ◽  
Discounted Cash Flow

Harga batubara acuan pada bulan Januari 2020 adalah 65.93 USD/ton turun jauh dari tahun 2018 dimana harga batubara acuan sempat mencapai 107.83 USD/ton pada bulan Agustus. Dalam upaya menaikkan ratio elektrifikasi dalam RUPTL PLN 2018-2027 PLTU Mulut Tambang mendapatkan porsi 11 persen dengan peningkatan jumlah pembangkit setiap tahun nya. Keberadaan Batubara sebagai sumber daya alam yang terbatas dan tidak dapat diperbaharui menuntut penerapan prinsip konservasi cadangan batubara untuk mengoptimalkan keuntungan dan cadangan dengan memilih Stripping Ratio yang optimum. Tujuan penelitian ini yaitu untuk menentukan Stripping Ratio Optimum yang akan memberikan keuntungan terbaik menggunakan metode discounted cash flow sehingga batas penambangan optimum (Ultimate Pit Limit) juga dapat ditentukan. Optimasi ini dilakukan dengan men-generate data variasi Stripping Ratio yang menggambarkan pit limit dan cadangan dari masing-masing stripping ratio tersebut kemudian memasukkan konsiderasi ekonomi yang di discount rate untuk mendapat angka Net Present Value (NPV) sehingga bisa dianalisis dalam kurva optimasi. Hasil penelitian adalah Stripping Ratio optimum berdasarkan kurva optimasi dengan metode Konvensional NPV skenario Spot Price adalah 4.5 dengan total cadangan 7.5jt MT dan umur tambang 8 Tahun serta NPV 21,7 juta US$.

Evaluation Method of Net Present Value of Investment Project taking into account the Influence of Environmental Factors

2019 ◽  
Vol 2019 (1) ◽  
pp. 139-156
Author(s):  
Denis Shageev
Keyword(s):  
Environmental Factors ◽  
Risk Premium ◽  
Evaluation Method ◽  
Swot Analysis ◽  
Net Present Value ◽  
Positive Impact ◽  
Investment Project ◽  
Present Value ◽  
Chi Square ◽  
A New Technique

In the complex and unpredictable environment of the XXI century, in advanced and emerging economies it is becoming increasingly important for investors to adopt new techniques that allows for the most accurate assessment of net present value (NPV) of an investment project through a risk premium or risk adjustment. The existing methods of risk assessment do not always meet the modern requirements of investors due to various limitations and shortcomings. Therefore, the article provides a new technique that allows to assess the NPV taking into account not only the negative but also the positive impact of environmental factors. Drawing on this technique, the authors propose to evaluate the influence of environmental factors using the triad of STEP-, SNW- and SWOT-analysis based on heuristic and expert technologies. It is proposed to check the agreement of the results of evaluation through the Chi-square criterion. The methodology further uses these estimates to calculate the risk premium and adjust the risk to determine the NPV.

scholarly journals Analisis Penilaian Proyek Penanaman Modal untuk Penambahan BUS dengan Metode Net Present Value pada PO. Telaga Biru Putra Pagar Alam

2020 ◽  
Vol 9 (2) ◽  
pp. 96-108
Author(s):  
Zulaiha
Keyword(s):  
Quantitative Analysis ◽  
Cash Flow ◽  
Net Present Value ◽  
Investment Project ◽  
Residual Value ◽  
Present Value ◽  
Cash Inflow

This study aims to determine and analyze how the analysis of investment project assessments for bus additions using the Net Present Value at Po. TelagaBiru Putra PagarAlam ". The results of the study were based on a quantitative analysis of Operational Cash flow at Po. TelagaBiru Putra PagarAlam, namely to estimate cash flow, it is necessary to determine the estimated period / time, and this is adjusted to the life of the project for the next 5 years. Outside this period, the project is considered to be no longer profitable. Because the amount of costs will exceed income. It is predicted that in 2009 net cash inflow will be received of Rp. 542,818,018, - increased in 2010 to 569,433,437, - increased in 2011 to 583,852,265, - and increased again in 2012 to 636,454,673, - and in 2013 after determining the residual value to be Rp. 892.836.049, - these values are used in determining the Net Present Value.

scholarly journals EVALUASI KELAYAKAN EKONOMIS TAMBANG PT AJE UNTUK PENERBITAN IZIN USAHA PERTAMBANGAN OPERASI PRODUKSI DI DINAS PERTAMBANGAN DAN ENERGI KABUPATEN TANAH BUMBU

2019 ◽  
Vol 3 (03) ◽  
Author(s):  
Aji Ahdinata ◽  
Agus Triantoro ◽  
Riswan Riswan
Keyword(s):  
Cash Flow ◽  
Flow Rate ◽  
Net Present Value ◽  
Payback Period ◽  
Rate Of Return ◽  
Present Value ◽  
Discounted Cash Flow

Dokumen studi kelayakan merupakan salah satu syarat dalam penerbitan IUP Operasi Produksi untuk memperoleh secara rinci seluruh aspek yang berkaitan penentuan kelayakan ekonomis dan teknis usaha pertambangan termasuk dampak lingkungan serta perencanaan pascatambang. Dokumen studi kelayakan dievaluasi dari segi kelayakan ekonomis pada salah satu perusahaan yang ada di Kabupaten Tanah Bumbu. Masalah yang diuraikan dalam penelitian ini yaitu evaluasi laporan studi kelayakan dari segi kelayakan ekonomi dalam proses penerbitan IUP Operasi Produksi. Laporan yang dievaluasi adalah laporan yang dilaporkan oleh PT AJE.Proses evaluasi kelayakan ekonomis tambang PT AJE melalui proses evaluasi proyek menggunakan kriteria Net Present Value (NPV), Discounted Cash Flow Rate of Return (DCFROR) dan Payback Period (PBP). Selain itu dilakukan pula analisis risiko menggunakan analisis sensitivitas atas perubahan dari perubahan harga jual batubara dan biaya ongkos operasi. Jumlah cadangan diambil berdasarkan data pemboran sebanyak 20 lokasi titik bor yang disampaikan PT AJE dari hasil eksplorasi lanjutan. Total cadangan terbukti adalah 1.211.644,20 ton terdiri dari 4 (empat) seam. Ditargetkan produksi batubara sebanyak  242.329 Ton/Tahun atau  20.194  Ton/Bulan, dengan SR 4 dan faktor kehilangan 10% serta umur tambang perusahaan 5 (lima) tahun. Harga jual batubara dihitung berdasarkan Harga Batubara Acuan (HBA) dan Harga Patokan Batubara (HPB) pada rata-rata Tahun 2016 sesuai dengan Peraturan Direktur Jenderal Mineral dan Batubara Nomor 999.K/30/DJB/2011adalah Rp572.686/Tonase. Total nilai pinjaman yang diajukan adalah Rp53.678.991.660, yang dipinjam tersebut akan dibayarkan selama jangka waktu 3 tahun, dan bank memberikan bunga pinjaman sebesar 13,5% per tahun.Hasil analisis kelayakan tambang menunjukkan bahwa proyek penambangan batubara ini layak dilanjutkan ke tahap operasi produksi karena memiliki nilai NPV sebesar Rp91.836.172.472 atau bernilai positif, laju pengembalian (DCFROR) sebesar 61,21 % atau lebih besar dari tingkat bunga minimum (15,6%), dan PBP selama 1,65 tahun atau dengan kata lain 3,35 tahun lebih cepat dari umur tambang.

scholarly journals EVALUATION OF INVESTMENT PROJECTS IN CASE OF CONFLICT BETWEEN THE INTERNAL RATE OF RETURN AND THE NET PRESENT VALUE METHODS

Ekonomika ◽  
2010 ◽  
Vol 89 (4) ◽  
pp. 116-130 ◽  
Author(s):  
Jonas Mackevičius ◽  
Vladislav Tomaševič
Keyword(s):  
Net Present Value ◽  
Investment Project ◽  
Expected Profit ◽  
Rate Of Return ◽  
Internal Rate Of Return ◽  
Present Value ◽  
Investment Projects ◽  
Internal Rate

Results obtained by employing the net present value (NPV) and the internal rate of return (IRR) methods allow to objectively determine the effectiveness and attractiveness of an investment project and to compare investment projects differing in scope, length or the amount of expected profit. While results obtained by the NPV and IRR methods normally correlate, contradictions are possible in individual cases. Such contradictions are called ‘conflict between the IRR and NPV methods’. The paper deals with the main characteristics of NPV and IRR, analysing the substance of the conflict and cases of its manifestation. A technique for the resolution of the NPV and IRR conflict is proposed.

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