Primary Author: Mr. Antoine de Chillaz and Mr. Bruno N. Rodrigues
Audience Focus: Intermediate
Application Type: Application
Venue: 2014 AACE International Annual Meeting, New Orleans, LA, USA
Abstract: Economic analysis, such as business plan, provides valuable data regarding investment decisions for industrial projects, however it is inherently subject to uncertainty (construction cost, operability of asset, cost of utilities…). A common technique to address uncertainty is to carry out a sensitivity analysis for input variables of the business plan. This paper introduces a probabilistic approach based on Monte Carlo simulations which aims at providing a quantitative picture of the range of the possible financial outcomes of a project. This method provides a better insight of risks both regarding investment decisions and assessment of different technical solutions. The paper describes a methodology regarding a practical use of business plans for project management purpose. It also illustrates the benefits of this general approach with an example of a thermal power plants project.
Audience Focus: Intermediate
Application Type: Application
Venue: 2014 AACE International Annual Meeting, New Orleans, LA, USA
Abstract: Economic analysis, such as business plan, provides valuable data regarding investment decisions for industrial projects, however it is inherently subject to uncertainty (construction cost, operability of asset, cost of utilities…). A common technique to address uncertainty is to carry out a sensitivity analysis for input variables of the business plan. This paper introduces a probabilistic approach based on Monte Carlo simulations which aims at providing a quantitative picture of the range of the possible financial outcomes of a project. This method provides a better insight of risks both regarding investment decisions and assessment of different technical solutions. The paper describes a methodology regarding a practical use of business plans for project management purpose. It also illustrates the benefits of this general approach with an example of a thermal power plants project.