Strategic Planning
The global trend towards the deregulation and liberalisation of electricity markets is seemingly relentless, and this new paradigm is now being adopted in a growing number of lesser-developed countries in Africa and elsewhere.
A casualty of this trend has been the type of centralised planning previously undertaken by the vertically integrated monopoly utilities. In deregulated and liberalised markets, successor utility businesses typically operate in a competitive environment where they are subject to a range of commercial uncertainties.
In order to remain commercially viable and competitive, and to meet the performance expectations of customers and regulators, electricity utilities must carefully plan the deployment of their financial, technological and human resources on long-, medium-, and short-term planning horizons. The tools required by these utility businesses are very different from those used by monopoly utilities. These tools include:
- Strategic analysis
- Competitive analysis
- Market analysis
- Scenario planning
- Value chain analysis
- Financial analysis
- Risk analysis and risk management
- Real options pricing
- Game theory approach to trading strategy
PPA has good experience in conducting analysis using many of these approaches. Bespoke models are typically developed to assist in these analyses.
Recent projects demonstrating PPA capability in these areas include:
Lesotho
Muela Options Study. PPA recently assisted the Government of Lesotho with recommendations for an appropriate institutional and management framework for a fully commercialised and possibly privatised and efficiently operating Muela Hydropower Plant, the country's principle source of power. A traditional strategic management approach was adopted to evaluate options, and a sophisticated financial model was developed in order to assess the financial performance of the new Muela entity under a wide range of institutional, management and regulatory set-ups.
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UK
e-Commerce Electricity Trading. Advising an e-commerce company on the development of trading arrangements between themselves and their wholesale electricity supplier and on the associated contractual schedules for settlement processes.
Ethiopia
Rural Electrification Fund. Assistance to the Ethiopian Electricity Agency (EEA) in preparing a detailed design of the institutional structure for rural electrification the funding mechanism, the Rural Electrification Fund (REF) administration arrangement, and guidelines and procedures for project identification, implementation operation and monitoring. Assistance also provided in respect of tariff setting.
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Turkey
Advising a client in the process of buying a Turkish distribution utility on Heads of Agreement for the transfer of operating rights.
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Uganda
Transaction Adviser, Kakira Bagasse-Fired Cogeneration Project. Transaction Adviser aiming to develop a power purchase agreement for the export of surplus electricity that is agreeable to both the developer, Kakira Sugar, and to the utility, UETC. Financial analysis was conducted in order to test the impact of various tariff profiles on the internal rate of return of the project.
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Western Europe and USA
Electricity Storage Market Study. Study to determine the size of the market for energy storage devices.
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South Africa
Western Cape Electricity Market Study (confidential client). Advice to a major international oil company on the market for electricity in the Western Cape, including consideration of supply and demand projections, transmission constraints, the life expectancy of the Koeberg nuclear power plant.
North Africa
Utility CAPEX OPEX advice, North Africa. Advising on the capital and operating expenditure forecasts for the electricity supply systems for Tangiers and Tetouan.
Vietnam
Power Sector Market Study for BP. Study of the Vietnam power sector for BP, including demand forecasting and hydro-thermal dispatch modelling of the Vietnamese power system.
For more information about PPA’s experience in the field of strategic planning, please contact Neil Pinto
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