Case Studies

Generation Fleet Financial Analysis

Category: Project Assessments
Industry: Energy
Client Type: Utility
Service Provided: Assessment
The Issue:

Modus consultants developed a financial cost model for a large merchant generation fleet that consisted of plants from several previously merged companies using separate accounting systems. The model quantified the total expenditures for the fleet’s nuclear, coal, gas, and hydro plants and standardized common cost categories across the fleet. It includes more than three years of historical costs and compares components of generation cost (variable, fixed, generation support, and service company costs) related to each of the client’s power plants and total fleet.

The Solution:

The model is used to evaluate cost drivers, develop benchmarks, and determine areas for cost reduction across the fleet. In the years following the “Great Recession” and related lower electricity demand, the model proved to be an important resource in evaluating asset dispatch and retirement decisions and in balancing or prioritizing plant capital expenditures. Based on the results of this engagement and additional analyses regarding market outlook and coming environmental regulations, the client deemed several plants uneconomical, redirecting financial resources to more profitable plants.