Which Power Plant to Build?

Case 2
Coal, Nuclear, Natural Gas, Oil or Renewable: Which Type of Power Plant Should we Build ?
The case itself is available in the Harvard Case Pack listed in the syllabus. Here you will find the questions
you need to answer. In addition I have included an excel file (comparables.xls) that might help in the
analysis. Please submit your written answers and excel file.
1. Identify stakeholders and their basic interests related to power generation.
2. Discuss important issues related to each of the technologies ( coal, oil, natural gas nuclear and
renewables) including, but not limited to, the following (as applicable)
a) Where were the majority of proven reserves of the fuel sources located?
b) How was the fuel source obtained, transported and stored?
c) Did the electric power industry compete for the fuel source with other users?
d) What were the possible emissions and waste-products?
e) What was the likelihood of very high prices and very high price volatility for that fuel source in
the 2016-2055 lifetime of the power plant under study?
3. Briefly review the role of regulation in the US on power generation. How significant is regulation
to current decisions in terms of power plant type and emissions?
4. Identify 5 countries producing the largest amounts of carbon dioxide and those with largest per
capita emission of carbon dioxide.
5. Analyse PowerCoàfinancial performance based on an industry comparison (Comment on
ROE/ROA and any other metrics you think make sense).
6. Find the weighted average cost of capital for PowerCo. ( Clearly state any assumptions you make
while doing these calculations)
a) Use CAPM to estimate cost of equity
b) Estimate cost of debt
c) Estimate the weighted average cost of capital
7. What is the appropriate discount rate to use for each of the five technologies?
8. Estimate a project-level discount rate for a nuclear energy power plant?
9. Estimate a project-level discount rate for a renewable energy power plant?
10. Any recommendations based on your findings what PowerCo should pursue?
Financial data for Comparable Nuclear Energy Technology Firms
Comparable Firms
Ticker Symbol
CenterPoint Energy, Inc
Constellation Energy Group
Entergy Corporation
Exelon Corp
Georgia Power Company
Great Plains Energy, Incorporated
NRG Energy Inc
CNP
CEG
ETR.N
EXC
GPJ
GXP
NRG
Entergy
Total Assets
Sales
Net Income
Return on Equity ( 5- year Avg.)
Return on Assets ( 5-year Avg.)
Debt to Equity Ratio
Sales growth rate-5 year average
Interest Coverage
Bond Rating by S&P
Beta
(Beta’s are collected from Bloomberg)
(Assets etc. reported in Millions of US Dollars)
27564.00
10932.00
1132.00
13.22
4.53
1.14
7.71
5.21
BBB+
0.99
NRG Energy
24808.00
6885.00
738.00
10.16
5.60
1.17
13.90
3.57
BBB
1.07
Constellation Energy Group
21945.00
21193.00
822.40
7.89
4.36
0.98
12.90
4.60
BBB+
1.13
Financial data for Comparable Renewable Energy Technology Firms
Comparable Firms
Ticker Symbol
AES Corporation
Alter Nrg Corp.
American DG Energy Inc
Altlantic Power Corp.
Covanta Holding Corp.
Energias de Portugal S.A
Magma Energy Corp.
Suez Corp.
AES
ANRGF.PK
ADGE
ATP.To
CVA
EDP_LB
MXY.TO
SZE
Suez Group
Total Assets
Sales
Net Income
Return on Equity ( 5- year Avg.)
Return on Assets ( 5-year Avg.)
Debt to Equity Ratio
Sales growth rate-5 year average
Interest Coverage
Leverage Ratio
Bond Rating by S&P
Beta
(Beta’s are collected from Bloomberg)
(Assets etc. reported in Millions of US Dollars)
52563.00
31488.00
2512.00
6.97
9.36
0.68
4.68
3.90
3.40
N/A
0.97
Energias de Portugal S.A
30796.00
11010.00
1091.00
7.26
5.24
1.01
8.51
2.94
2.28
N/A
0.75
Covanta Holding Corporation
4368.00
1433.00
130.00
2.37
2.16
1.83
1.09
2.50
3.70
N/A
1.00

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