Sample MBA643 Project Initiation Planning and Execution Report 3

MBA643 Project Initiation, Planning and Execution Report 3 Sample

Your Task

This assessment is made up of two parts:

• Part A students are asked to imagine they have been engaged by a Renewable Energy (utilities) company to develop a report on key aspects of project risk management and how they might be used in proposed future projects in order to manage and limit risk.

In Part A you are asked to write a report based on one of the below companies:

Infigenergy: https://www.infigenenergy.com/

Tilt Renewables: https://www.tiltrenewables.com/

The company you will analyse will depend on the LAST digit of your student number:

o 0 and 5 = Tilt Renewables

o 6 and 9 = Infigenergy

In Part B you are asked to conduct a capital budgeting analysis for the second company Tilt
Renewables. Answer the short answer questions.

Assessment Description.

PART A

The report should begin with a short executive summary and conclude with several, short general recommendations. The content you include in the report should link the project management principles detailed below with the practices of the renewable energy company you have been allocated.
The topics on which students need to make recommendations in their report include:

i) Project selection – How should the company you select determine what projects to undertake and what ones to avoid? What tools, measures, and practices are available to project analysts in this industry?

ii) Cost management – What is the role of project cost management for your chosen company? Why is it important? What strategies or approaches should the company you have chosen adopt in order to
effectively manage project costs?

iii) Financing – What financing measures or options are generally available to assist companies like the one you have chosen to fund proposed new projects? The report should include reference to any implications associated with different funding types or models.

iv) Implementation and winding up – Are there any particular issues associated with commencing a project that your company must consider? Why are they important? Who do they impact or affect? What happens when the project finishes? How are projects wound up? Do they just end or are there resource or infrastructure considerations? Are there environmental issues associated with the end of a project?

Where possible, students should relate each section back to the renewable energy company they have been allocated. The executive summary should bring together general recommendations for the student’s chosen company relating to i)-iv).

Students should provide between 200-400 words per topic, together with approximately 200 words in total for the executive summary and final recommendations.

PART B

Consider the following three sources and answer the following questions directly. You do not need to write a lot for each question and for some you will need to use excel calculations. Submit you excel spreadsheet together with your report in the separate submission inbox on the assessment table.

Source 1: Tilt Renewables Snowtown North Solar Energy Farm
https://www.tiltrenewables.com/assets-and-projects/Snowtown-North-Solar-Energy-Farm/

Source 2: Tilt Renewables (TLT.NZ) Yahoo Finance https://au.finance.yahoo.com/quote/TLT.NZ/

Source 3: Tilt Renewables Financials
https://au.finance.yahoo.com/quote/TLT.NZ/financials?p=TLT.NZ

You have been employed as a project manager by Tilt Renewables and asked to evaluate a solar farm project at Snowtown run by Tilt Energy (See Source 1).

You have been asked to evaluate whether Tilt Renewables should undertake the Snowtown North Solar Energy Farm based on the above sources. Assume this project has not yet been approved.

• Assume this is a twenty-five-year project.

• Consult source 1 for the estimated initial outlay/investment today (year 0)

• The investment will be depreciated on a straight-line basis over twenty-five years to 0 book value. It is estimated that the solar farm can be sold at the end of year 25 for $10 million.

• The solar farm will sell $15,000,000 worth of electricity each year into the grid from year 1-25

• Operating expenses for 25 years are $5.50 per solar panel per year (see number of solar panels from Source 1)

• The tax rate is 30%. All cash flows are annual and are received at the end of the year. The discount rate is 10%.

a) Based on the above information calculate the FCFs of the project. (10 marks)

b) Calculate the NPV for the solar farm. Should Tilt Renewables undertake this project? (5 marks)

c) Does the NPV take into account the CO2 emission reductions that the project will lead to (See Source 1)? Should it take this into account? Why or why not? (2 marks)

d) What is the debt to equity ratio in 2019 of Tilt Renewables according to source 3? How does this compare to other utility companies? What is the current share price according to Source 2 and when were shares first issued? (3 marks).

Solution

Part A

Executive Summary

Tilt Renewables is an electricity generation company based in Australia. The company was founded in 2016 and has been listed in both the New Zealand stock exchange (NZX) and the Australian Stock Exchange (ASX). The company deals with the production of wind energy and solar energy. The company aims for a cleaner world which will give a head start to the future generation. For Assignment Help, This report has been written in order to provide a structure of the company adopted in order to select a project after assessing risks. The readers will be enlightened with the cost management concepts adopted by the company while dealing with a project. The brief narrative provides a summary of the funding strategies latched onto by the company, which helps the company to raise capital for its renewable energy projects. Techniques such a debt funding and equity funding have been discussed briefly. The company also follows a certain procedure for starting a project which has been briefly discussed. In addition to the above, the report also deals with the process of winding up of a project followed by Tilt renewable energy.

Project Selection

Tilt Renewables deals with mostly wind and solar assets. Due to the rise in the risk of such projects, often company find it very difficult to measure the risk-reward ratio which can be extracted from a given project (Sailiand Mwiya2018). The most threatening risk which the company faces is the volume risk of wind. It is a very concept that wind energy is produced due to the flow of wind. If the volume of wind on a particular day is not up to the mark, then electricity generation is very less.

The company has been newly established and is just five years down in the business; hence it uses the Agent-Based Modelling (ABM) method to solving the complexity of any kind of problems which can arise from renewable sources (DeAngelisand Diaz2019). The ABM method is very flexible, which efficiently analyzes renewable sources.

The company being very new, has adopted the feed-in tariff method where the company is paid for the surplus energy produced. The company selects a project which can provide a high feed-in tariff (Ye, Rodriguesand Lin2017). Generally, a renewable energy project is started keeping in mind a long-term goal. The company is very new, has a long way of generating revenue from its investments. Therefore, Tilt Renewables uses this method which serves the purpose of a long-term contract mostly from 15 to 20 years.

Cost Management

A cost manager is an integral part of the project management team who surveys the quantity required for the completion of the project.

Role and importance of cost manager

• The cost manager takes care of estimating the project’s viability by using appraisal techniques.

• It is the duty of a cost manager to look after the capital expenditure and revenue expenditure of a project which will provide an overview of the project’s total cost allocation.

• The budgetary estimations are conducted by the cost manager.

• The cost manager takes charge of controlling the cost of constructions and other activities. Cost control is a very important aspect while developing a project because it is a way of finding alternate measure to reduce the cost of a project.

• He or she must prepare the contract documents for the purpose of the project.

Project cost management strategies

• Expert judgement: Advice taken from the expert in concern to the project cost.

• Analogous estimate: It involves budgeting the project and finding out the time required for the completion of the project.

• Parametric estimation: It is a way of finding the cost of an activity encircling the project by using algorithms backed up by historical data.

• Bottom-up estimation: Estimation from the lower level of activities (Alhassan et al 2021).

• Three-point estimation: Analyzing the risk involved.

• Cost of quality: Estimation of both cost of conformance and cost of non-conformance.

Recommendation of strategies for the company

• Use of vendor database in order to provide the clients with information about the cardholder.
• Establishment of project management guidelines for the Core team within the group of networks.
• Development of a newer project initiation process to improve the project program.

Funding

Funding a renewable energy-based project can be done by the following methods.

• Funding from cash reserves: Tilt Renewables is a large company with a larger reserve of cash. Hence the company can easily fund the project by the cash reserve.

• Equity financing: Tilt renewables is a listed company. Hence it can raise capital by the selling of shares. In order to fund any project, the company will supply shares in the market. This kind of funding entails high strategic growth, which might involve fund expansion or merger and acquisition opportunities.

• Debt financing: Tilt Renewables is relatively a newer company with $522.99 million as debt outstanding to date. The company has the opportunity to grow in the market because it invests in renewable sources of energy. Hence it can procure loans from financial institutions in order to fund the projects. Debt financing will help the company enjoy tax deductions also (Muellerand Sensini2021).

• Government schemes: The government of Australia has provided a large range of funding schemes for companies who are trying to form successful renewable source of energy. Government schemes such as Clean Energy Finance Corp or CEFC helps the Australian renewable energy companies with increased cash inflow in the energy sector. The South Australia Government provides grants to the company in order to sustain itself in the market.

Implementation & Winding Up

The process to start a new project

• Awareness about the energy situation: Survey of the nearby area to assess the current condition of the energy consumption by houses.

• Choosing an energy source: As per the goal, try to choose an energy source that can be used to supply energy to the area.

• Assessing risk: Since the risk involved in starting a new project is very high hence the risks must be assessed prior to the investment.

• Cost determination: It is a very important aspect of a project. Before initiating the project, one must know about the finances required for the project. The cost must be estimated.

• Choosing an installer: The project shall be initiated by the installation of the technology required to generate energy.
Issues and recommendation to tackle it

• Change in management: At times, inputs are to be made using the available budget, which can be very tough. Hence a free up budget may be prepared if things go haywire.

• Design issue: The architecture of the project may not support the work. Hence proper blueprint of the design must be prepared in order to assess the flaws with the project.

• Integration: Often, machines do not work, which can create problems in the project. Hence the machines used must be properly checked, and quality must be assured.

• Budget failure: The improper estimation may result in underestimation of a budget which will result in lack of finances. Hence before initiating the project, the project manager should try to thoroughly check the cost and, if possible, over-allocate the cost (Frefer et al 2018).

Winding up a project

• Transferring the necessary deliveries.
• Confirmation of the project completion.
• All the contracts must be reviewed.
• The team members must exit.
• Post completion checks must be conducted.
• All the necessary documentation must be duly protected.

Conclusions & Recommendations

Renewable sources are very important for the long run in the future. Hence more and more companies are cropping up in order to invest or start a new project which will help the mankind in future. However, the risks are gradually increasing. In case of Tilt Renewables, the risk of volume is a prime concern which can be avoided by proper assessment of the environment or the energy model by using the ABM techniques. The company is very new in comparison to the other market giants even then it is performing very well in the renewable energy sector. The company has funded the project mostly by debts which can be beneficial as the company is aiming for long term investments which can be observed as it uses the feed-in tariff model. The company takes minute analysis while implementing a project. However, the company should try to avoid frequent investments as it has already invested and started many projects. Moreover, the company has accumulated a debt of over $500 million in just a span of 5 to 6 years which can cause problems in the future as the leverage ratio might go down. The company should post project completion service unlike other companies which will significantly increase the goodwill of the company in the market.

Part B -Tilt Renewables: Snowtown North Solar Energy Farm
(Refer to my ‘Content Guidelines & Resources’ document)

Bibliography