Risk Based Business Planning
Desalination Plant Investment Evaluation
- Client
- Major Oil Operator
- Country
- Denmark
- Year
- 2008-2010
- Industry
- Oil & Gas, Power & Utilities
- Service
- Risk Management
A major oil company was studying an innovative desalination process coupled with a regasification plant. kwantis assessed whether the investment would pay off, from the market and public acceptance to a probabilistic NPV.
The challenge
The client needed to know whether an innovative desalination process, coupled with a regasification plant, made business sense, and what could stand in its way.
Our approach
kwantis carried out a complete business analysis in five parts:
- Market study: the expected scenario for the business case, based on demand and supply at world, European and Italian level.
- Public acceptance: a benchmark of similar projects on the NIMBY (“not in my backyard”) effect, with the lessons to apply during planning and execution to avoid delays.
- Costs and revenues: CAPEX and OPEX estimates for each project item, at both high and detailed level, and an assessment of every possible revenue stream.
- Profitability: NPV and IRR calculated probabilistically, including all the uncertainties and risks in the project risk register.
- Sensitivity: the effect of alternative conditions on the investment, such as the regasification terminal load factor, the water price, the distance from shore and technical improvements to the desalination process.
The outcome
The probabilistic NPV put the scenarios on equal terms, so the client could compare them and see which conditions drive the success of the investment.
