Risk Based Business Planning, Renewable
Renewable Risk Based Business Plan
Geothermal energy can be cost competitive with fossil fuel alternatives. However, its rate of deployment has been slower than other renewables over the last thirty years, especially due to high CAPEX (capital expenditures) involved and the risks associated to the exploration and development that limit the financing possibility.
In order to support the financing of a 2 billion euro geothermal power plant, kwantis performed a risk based business plan. This approach includes all the project uncertainties inside a business plan, highlighting the main criticalities and tailoring specific mitigation action to increase probability of project success.
The analysis started with a complete Risk Assesssment to provide a high level understanding and prioritization of the project risks. Such analysis increased the alertness of the management, team members, stakeholders towards the top risks to be monitored effectively.
"Address the level of confidence on a cash flow estimation"
All the risks identified were then included in the Cash Flow model and through a Monte Carlo simulation, the power plant profitability has been evaluated. Through the monitoring of NPV (Net Present Value) and IRR (Internal Rate of Return) factors, both on a probabilistic basis, it has been possible to identify the probability to reach a predefined level of profitability.