Project Risk Assessment in view of IPP’s

ABSTRACT  

During the past few years, the worldwide power generation industry has been going through tremendous changes. Many of state owned power generation utilities have already been privatized, and many others are undergoing the privatization process.

Parallel to this development, Independent Power Producers (IPP’s) have been awarded rights to build, operate and own a power plant in many countries worldwide.

In this way, large state owned or privatized power generation utilities are receiving strong competition from smaller, but aggressive and most competitive IPP’s.

Large utilities which are running a number of power generation plants of different sizes with location in different areas of the country, using various fuels or hydro power are able to reduce their operational risk to an absolute minimum. This is, however completely different in the case of much smaller IPP’s.

Smaller IPP’s are mostly running one, in some cases' two or three power plants. Very often they are depending only on one or maximum two fuels. They have signed competitive power delivery contracts, including also non-availability penalties, with power distribution companies. And at last but not least, they have limited maintenance and operation back-up compared to large utilities. All these aspects are potentially  increasing the risk of loosing money due to power plant non-availability.

Both, large utilities and small IPP’s are very well aware of the importance of proper risk assessment. It is not necessary to emphasize, that it can considerably contribute to reduction of an adverse commercial impact to an absolute minimum.

Proper risk assessment must consider not only the technical, political and environmental risk but also future country economical growing and power demand increase rate scenario. All of them can influence the economic balance of the power generation project positively or adversely.

In order to reduce the operational risk and consequential loss of profit to an absolute minimum it is eminently important to use the right tools and criteria’s for a proper risk assessment.

What is important for proper risk assessment, which tools shall be used, where the greatest risk is hidden,  how can a consultant contribute to a successful and profitable realization of the project ?  

Authors

(Status 1998)

Peter Luby (Author & Speaker)

Marketing Manager

 IMTE AG Power Consulting Engineers

Switzerland

Dr. Lim Ken Huat (Co-Author)

 Chief Operating Officer

Malakoff Engineering Sdn. Bhd.

Malaysia

Project Director Lumut 1303 MW Combined Cycle Power Plant Malaysia

Azmi Abdullah (Co-Author)

Chief Operating Officer

Segari Energy Ventures  Sdn. Bhd.

Malaysia