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(Showing results 1 to 4 of 4)



The Impact of Nuclear Power Plant Construction Activity on the Electric Utility Industry's Cost of Capital

Keith Berry and Samuel Loudenslager

Year: 1987
Volume: Volume 8
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-5
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Abstract:
All across the United States, electric utilities are now faced with the prospect of prematurely abandoning partially completed nuclear units. While there are many reasons for this dilemma,[ the ratemaking implications are profound. They force regulators to make the unsavory decision as to the appropriate allocation of the fixed costs sunk in the abandoned projects between ratepayers and stockholders.' If a significant number of these plants are abandoned, the dollars at stake (estimated to be as large as $66 billion') in any ratemaking division of accountability are staggering.



Implications of Output Price Risk and Operating Leverage for the Evaluation of Petroleum Development Projects

Gordon Salahor

Year: 1998
Volume: Volume19
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No1-2
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Abstract:
This paper is the first in a series that describes how Modem Asset Pricing (MAP) may be used for project evaluation in the upstream petroleum industry. It shows how MAP methods can be used to value a project, if it i's possible to split its cash-flows into two components: one for revenue and one for cost. Two design choices for a "now or never " natural gas field development are used as examples of what can be gained by this type of approach to project evaluation. The first choice involves a tradeoff between capital and operating costs, while the second involves a tradeoff between costs and potential production rate. The results show that the use of standard DCF methods can induce systematic, and possibly misleading, biases into the analyses that lie behind project design and selection.



On the Use of Modern Asset Pricing for Comparing Alternative Royalty Systems for Petroleum Development Projects

Paul G. Bradley

Year: 1998
Volume: Volume19
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No1-3
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Abstract:
This paper is the second in a series that describes how Modern Asset Pricing (MAP) may be used for project evaluation in the upstream petroleum industry. It has two goals. First, it demonstrates how MAP can be applied to the general class of projects where the project manager does not have any future flexibility that must be analysed. Second, the usefulness of MAP in fiscal system analysis is illustrated by the evaluation of a series of oil-field development projects under a variety of fiscal regimes. In situations where different fiscal systems have the same effect on a discounted cash flow (DCF) basis, the value of afield to a developer may appear quite different when analysed using MAP. MAP takes into account the differing risk characteristics of the cash-flow streams of the developer and the government or resource owner, and provides us with an added dimension of information: comparisons of how different fiscal systems distribute risk among the parties involved in the project.



Alternative Models of Uncertain Commodity Prices for Use with Modern Asset Pricing Methods

Malcolm P. Baker, E. Scott Mayfield, and John E. Parsons

Year: 1998
Volume: Volume19
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No1-5
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Abstract:
This paper provides an introduction to alternative models of uncertain commodity prices. A model of commodity price movements is the engine around which any valuation methodology for commodity production projects is built, whether discounted cash flow (DCF) models or the recently developed modern asset pricing (MAP) methods. The accuracy of the valuation is in part dependent on the quality of the engine employed. This paper provides an overview of several basic commodity price models and explains the essential differences among them. We also show how futures prices can be used to discriminate among the models and to estimate better key parameters of the model chosen.





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