New federal policies portend a wave of demand-response programs, and perhaps a new era in resource planning.
When President Bush signed the energy bill on August 8, he set in motion a chain of events that might lead to major changes in the way utilities price and meter retail electric services—and ultimately in the way they value and use non-traditional energy resources.
Which is the best energy company?
(September 2005) Top honors in our first annual financial ranking go to those staying with the basics and to those dealing with soaring commodity prices.
Does your company measure up?
Few companies achieve sustainable high performance. Markets change but companies fail to adapt, and investors are unforgiving. Utilities, and new entrants, learned this lesson during the first competitive market cycle of the late 1990s and early 2000s, when few companies sustained a high-performance leadership.
Finding and applying the efficient frontier.
Buyers of power-plant assets use a number of tried-and-true approaches to asset valuation, including discounted cash flow and option-pricing models. While the valuation approaches employed generally are sophisticated, they focus almost exclusively on individual assets. Conspicuously missing is consideration of the asset portfolio as a whole. For illustrative purposes, we performed an assessment of a basic new power-plant portfolio. The results are well suited for general risk analysis and risk management, portfolio planning and restructuring, power plant acquisition, development, and divestiture.
The efficient frontier is a portfolio analysis concept designed to assess risk vs. return for an investment portfolio.
The efficient frontier is a portfolio analysis concept designed to assess risk vs. return for an investment portfolio. While the financial projections of individual assets are key to the analysis, the end result is critical to successful structuring of the portfolio as a whole. Key to the efficient frontier is that it represents the highest level of a portfolio's return for any given level of risk. It can be applied to physical assets, as well as financial instruments—simultaneously. Figure 1 displays a typical efficient frontier chart.