Risk Identification of Power Plant Investment Projects. 10 May, 2016 Asian Power Utility Forum Peter Cockcroft

Transcription

1 Risk Identification of Power Plant Investment Projects 10 May, 2016 Asian Power Utility Forum Peter Cockcroft 1

2 What is risk? What is risk management? Why bother with it? Different perspectives of Risk A suggested process Identify Quantify (assess) Response Avoid (Terminate) Transfer Mitigate (Treat) Accept (Take) Monitoring and Review 2

3 Risk Uncertainty 3

4 ISO According to ISO 31000:2009, risk is the effect of uncertainty on objectives and an effect is a positive or negative deviation from what is expected. 4

5 What Can Go Wrong? 5

6 Contract Risk The lawyers did a bad job 6

7 Political Risk War Nationalisation 7

8 Development Risk The engineers get it wrong 8

9 Environment Risk 9

10 Operational Risk 10

11 Corporate Risk Their stock suffers, or they are subject to a takeover bid 11

12 PHASES OF RISK MANAGEMENT 12

13 Step 1 Establish the Context: Understand The Business What is the Business, and the Environment in which it operates? Step 2 Identify Risks What are the uncertainties associated with achieving the objectives? Step 3 Analyse Risks Utilise consistent analytical methods Step 4 Assess Risks Which risks are most significant? Step 5 Respond to Risks What do you choose to do about risks? 13

14 Risk Identification Tools and Techniques Documentation Reviews Information Gathering Techniques Brainstorming Delphi Technique Interviewing Root cause identification SWOT analysis Checklist Analysis Assumptions Analysis Diagramming Techniques Cause and Effect (Fishbone) diagrams System or process flow charts Influence diagrams Stakeholder Identification and mapping 14

15 15

16 Risk Identification When a power plant development project goes wrong there can be several things to blame, ranging from inexperience at the hand of the developer, to site specific problems, technical issues, regulatory problems and permitting issues, all of which affect financial and technical viability of the project. Failure to develop a project can come at a great cost to the developer, and other stakeholders involved. 16

17 Some Questions????? Which key risks impact the development of a power plant project? How do risks vary in practice by energy source, and location? How do these risks impact development performance? How do developers manage these risks? Where along the development process do these risks make impact? How do risks impact new project investment decision making? How do risks impact power plant development project selection? 17

18 Power plant development projects Typically capital intensive Comprise of a complex network of interconnected risks which can impact the development's performance. Failure to develop the power plant to meet the performance constraints can come at a great cost to the developer and other stakeholders involved. It is essential for developers to be able to analyse the risk in their project opportunities to develop investment strategy plan based on their risk appetite, and ability to manage the risk. 18

19 Power generation technologies Biomass Coal Geothermal Hydro Nuclear Oil, Gas Solar Wind 19

20 Average power plant development time and plant lifetime 20

21 Project development categories Power plant size: The generation output of the power plant. Development type: Whether this is a new plant, expansion or a version thereof. Site characteristics: Including if this is an undeveloped site or not. 21

22 Power plant developers Investor Owned Utilities (IOUs), Public Owned Utilities (POUs), Independent Power Producers (IPPs) In recent years utility mergers, redesigned holding structures, and establishment of non-regulated subsidiaries that own power plants and foreign owned utilities, have changed the nature of these boundaries. 22

23 Project Development Process Development of new power plants is generally either in the hands of a regulatory authority (in centralized regulated systems), or the energy companies (in liberalized deregulated systems). 23

24 Phases of development The power plant lifecycle can be divided into the following general phases: 1) Planning phase, 2) Construction and commissioning phase, 3) Operation phase, and 4) Decommissioning phase 24

25 25

26 26

27 Project evaluation Bottom up process (reactive) Landowner seeks developers Referral and word of mouth Relationships and past customers Tenders Top down process (proactive) The geographic location, The energy technology, The ideal site the project specifics 27

28 Stakeholders 28

29 Forms of Partnering Partner's experience Size of project under development Risk management Will they contribute? Will they pay cash calls? 29

30 Alignment is critical Strategic Partnerships Public-Private partnership Joint Ventures 30

31 31

32 The process of identifying risks varies from project to project. During pre-selection phase, initial risk identification may be developed by specialized groups on behalf of the developer or the developer themselves depending on in-house knowledge. Once a project has been selected, effective, ongoing risk identification requires input from the entire project team and from others outside it, such as owner's representatives, contractors, and internal and external consultants or advisors 32

33 Country attractiveness Developer's network in that geographic area Ease of development Labor resource availability Stakeholders influence Political pressure Prior project commitments Level of expertise knowledge in that area Country's power plant portfolio mix and renewable. energy targets Government support Country's future outlook Climate change strategy 33

34 Select energy technology Perceived technology risk Competitive advantage 34

35 Select the site Connection points Resource availability Land availability Accessibility Environmental analysis Floods and earthquakes 35

36 Select the project Investment strategy Analysis bias for project selection Country risk analysis Resource growth potential 36

37 37

38 38

39 Development Phases Planning risks Construction risks Operation risks Decommissioningrisks 39

40 Risk Classification 1. World system risk 2. World price risk 3. Country risk 4. Institutional and regulatory risk 5. Industry and competitive risk 6. Project risk 40

41 Develop a matrix for each classification 41

42 42

43 43

44 44

45 45

46 46

47 47

48 Additional Slides 48

49 Power plant size Mega Projects: Mega Projects typically cost over USD 1 billion and attract public attention because of their substantial impact on communities, budgets, and the environment. Such projects suffer from a high risk of being derailed or cancelled entirely due to the difficulties of implementing such large, complex, and frequently politically as well as environmentally sensitive projects. 49

50 Biomass Pyrolysis-based biofuels, Lignocellulose sugar-based biofuels, Direct Combustion, Cofiring with Coal, Biomass Gasification, Municipal Waste, Pyrolysis, Landfill Gas, Anaerobic Digestion, Sewage Digestion 50

51 Geothermal Dry Steam (Vapor), Flashed Steam, Binary Cycle, Petrothermal (Hot Dry Rock), Geothermal Preheat, Fossil Superheat 51

52 Hydro Large (Pelton Turbine, Francis Turbine, Propeller Turbine, Kaplan Turbine), Small/Mini (Run of river), Micro, Hydrokinetic turbines 52

53 Oil and Gas Reciprocating, Natural Gas (Shale Gas), Simple Gas Turbine (Aero-Derivative Gas Turbine, With Recuperation, Humid Air Turbine, Cascaded Humid Air Turbine, Heavy Frame Gas Turbine), Combined Cycle, 53

54 Coal Pulverized, Atmospheric Circulating Fluidized-Bed, Pressurized Fluidized Bed Combustion, Integrated Gasification Combined Cycle, Integrated-Gasification Humid-Air Turbine, Direct Coal-Fired Combined Cycle, Supercritical & Ultra-Supercritical Coal Comb 54

55 Nuclear Nuclear Fission (Boiling Water Reactor, Pressurized Water Reactor, Pressurized Heavy Water Reactor, Advanced Gas-Cooled Reactor, High Temp Gas-Cooled Reactor, Gas Turbine Modular Helium Reactor, Breeder Reactors), Nuclear Fusion 55

56 Solar Solar PV Crystalline silicon, Thin film, Amorphous Silicon, Thin film, Indium Diselenide, Flat Plate, High Efficiency Multi Junction, Solar Thermal Trough, Tower, Dish, Salt Pond 56

57 Wind Onshore Wind Turbines, Offshore Wind Turbines, Higher-altitude wind generator, Wind kites 57

58 58