Sample MBA643 Project Initiation Planning and Execution

MBA643 Project Initiation, Planning, and Execution Assignment Sample

Assignment Brief

Assessment Title: Individual Report
Word Count: 1800 Words (+/-10%)
Weighting: 40 %
Total Marks: 40
Submission: Via Turnitin,
Due Date: Monday, Week 13, 23:55pm AEST

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 (20 marks)

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 for assignment help 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 executive summary and final recommendations.

PART B (20 marks)

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.

You have been asked to evaluate whether Tilt Renewables should undertake the Snow town 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 

• 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

Introduction

In this digital era, energy has become an essential element of good quality of human life and economic development and growth. Most of our energy needs are fulfilled by the fossil fuels which are not only limited but also have adverse effect on the environment. Basis this problem, renewable energy has currently come up as an alternate solution. In this report, the focus is on the key aspects of the project risk management of the renewable sources of energy industry. (Benedek, Sebestyén, Bartók,2018)

The specific objectives here are:

1. To estimate most essential risk elements
2. To find out the capacity of such risk elements and ways to quantify them
3. To identify whether risks can be assessed with existing tools and techniques
4. To make out some innovative sources of such assessment

Project Selection

Not all the projects that come up in way of a company are taken up. That is the reason project selection exists. Project selection is thus one of the major stages of the task after the projects have been identified. Once identified, a project is not directly selected, but evaluated, compared and then finally considered for choosing. Project selection decision is sometimes considered even more typical and difficult as compared to identifying of a project. (Sinsel, Riemke &Hoffmann,2020)

There are various, tools, techniques, methods and measures for selecting a project.

Few of the acceptable methods and measures are:

1. The comparative study – In this method, international and published studies which deal with the problem of selection of an optimal renewable energy project in various countries are taken up and studied. This becomes are reference point for evaluating our own conditions and availabilities to take up the project.

2. The multicriteria approach – The success of any renewable energy plant is based on various criteria like securing the right land, access to capital, identifying reliable market, understanding the government policies in this context, identifying lines for transmitting the energy, etc. Under this approach every criterion is fully studied and then project is selected based on decision evaluation matrix of the study.

3. Analytical Hierarchy Approach – In this approach, structure of hierarchy is developed and pair wise comparison is made. Also, factors are compared based on hierarchy. Priority vector is derived, and consistency is calculated. Finally, alternative’s comprehensive priorities are got off.

Tilt Renewables has used multi criteria approach, as that is the most practical and effective approach. A list of top ten criteria is chosen and worked upon to find the economic viability and feasibility of the project.

There are several other tools which may come handy while evaluating our project like PVWatts Calculator,

Dynamic Solar Maps, GIS Data, and Analysis Tool. (Belu,2019).

Cost Management

It is the process by which a project manager plans the budgets of the project. This step starts with the initial phase of the project when the costs are approved for starting the project. Later on, those costs are closely monitored to see if the budgets are exceeded or not. In the process of cost management, the first step is cost estimation, then comes cost tracking to finally compare budgeted and actual costs. Project cost management is crucial as it sets the base line for project. It is the basis of make or break decision about the project. If this is not in place, a company may lose all its money as costs may exceed profits. Also, there are chances of incorrect invoicing to the customers. All this can make us overspend and have no track of where money is going. (Benge,2014)

To effectively manage costs, following points should be taken care of:

1. Planning for inflation as the prices change due to this which impacts project costs substantially.
2. Real time following of expenses to pluck a problem wherever and whenever it occurs and arises.
3. Prompt response to a major deviation whenever it is tracked.
4. Budgeting for unexpected costs as a new project can come up with things not accounted for, previously.
5. Company can also take up tools for cost management to have ease of control.

Tilt Renewables has set up an example in terms of its cost management as it has used up the proper techniques and followed the points mentioned above to come up to a position where, budgets can be made and cost management can be done properly.

Financing

Another important leg of any project is project financing. In today’s world apart from conventional methods of funding like IPO and bank loans, there are various other financing options available to a company. Various financing options are available like lease financing, loans and borrowings including working capital finance, long term loans, angel financing, seed financing and capital being brought up by institutional investors along with retail investors.

As a Project Manager, it is my duty to come up with proper Project Selection method that is backed by proper reasoning and logic so that the company can adopt it.

Especially when it comes to projects which are environment friendly, there are certain specific options available. Some of the available options are:

1. Equity – The conventional method of funding any project where shares of the company are issued against the money received from public at large.

2. Grants – for such projects of renewable energy, government provides grants that can be availed.

3. Incentives (state or local) – An environment friendly project bags incentives from various bodies that can be researched and asked for.

4. Debt/loan – Another traditional method of availing funds is taking loans from banks or other financial institutions

Other than the above, Energy Saving Performance Contracts, Tax equity incentives and monetising green attributes are among other sources of financing these projects.

Tilt Renewables has a blend of debt and equity in its financing structure while the former constituted 51.25% and the latter 48.75%. The company aims to maintain a blend of both so as to have optimal capital cost. The company has varied term loans ranging to a period of more than 5 years’ Various risks are associated with such funding like interest rate risk, credit risk, refinancing risk etc.

After a detailed analysis of the costs that need to be incurred, financing options can be explored. Normally, a combination of two or three financing options is ideal for such projects. Thew costs involved runs in millions and the financing from one source would generally not be sufficient and may also disturb the balance sheet equilibrium. Thus a combination of incentive, debt and equity is an ideal approach for financing. It should be done in such a manner that the weighted cost of capital is in line with the risks associated. (Benedek, Sebestyén, Bartók,2018)

Implementation and Winding Up

Post all the analysis comes the tedious part. The right implementation is the essence of every planning and projection. After studying the Tilt Renewables and its work, the project implementation
Project implementation steps are as under:

1. Preconstruction phase – This step includes project kick off with design and construction documents, plans and schedules for the project to begin.

2. Contract Execution Phase – This is overseeing the project control and changing the controls wherever needed.

3. Interconnection Phase – This phase is review and approval process based on inspection of the site and paper work submission for various approvals.

4. Project Construction Phase – This is quality control phase and oversight of project.

5. Commissioning Phase – The final testing and verification phase where permissions are received for commissioning the work.

These steps if taken up properly help in smooth implementation and execution of the project which will further help in achieving the targeted results. A proper and planned implementation not only ensures error free work but also saves lot of time and money on rework. (Chapman, 2019).

Winding up of a project is closure of a project either because the purpose for which the project was constituted is achieved or it is not a feasible and viable position for the company to run such project. In either case, winding up has to be in a particular manner and step by step process so as to not leave any harmful impact on environment and society. Apart from loss of time and money, another important concern is the human resource that was employed in the project. The experts hired at various levels and fields would go jobless. The bigger the project, the bigger the infrastructure; the bigger the infrastructure, the bigger the cost of disposal. The vast area acquired for the project needs to be cleared. The infrastructure developed should be disposed of in the best possible manner even if we have to incur some disposal costs as we cannot harm the nature. If the project goes on to run successfully and we need to think of closure after several years, by then the project will have rendered its value and the disposal would not mean disposal at loss. However, it should always be kept in mind disposal/winding up of the project is a process just like the initiation and should be done with utmost diligence and care. Tilt Renewables also clearly has its winding up policies stated so that there is no ill impact on the society and people at large. (Hillson, 2016).

Conclusion

We are talking about a renewable energy project i.e. the future of energy requirements. With huge investment, both financially and in terms of human capital, large gestation period, high risk and almost equal amount of decent profit after some initial years. More importantly a project that when set up will impact all aspects of the society, not only where it is being set up but also nearby localities.

Few recommendations that assure that such projects must be taken up are :

a. The basic understanding which runs is that a project which gives back to the society even a marginal stuff while helping investors earn a good amount of profit should be implemented.

b. The risk is high but so is the reward and if implemented with due care and diligent supervision, the project worth Millions will not only be beneficial for the owners but also the society at large.

c. We have discussed at length about the management of costs once the project is selected, along with the financing options available and how to choose the best finance option available. Then we have discussed the implementation of project and it is highly recommended that the project discussed should be taken up and implemented.

d. Such projects if economically viable must always be taken up.

e. Normally, there are lots of incentives and other unconventional means of financing such projects that can be utilised.

f. Tilt Renewables is a big name in this industry and based on the research of its work, it is highly recommended that if a future project on similar lines is taken up then this report of Tilt Renewables be used as base.

References

Agency, E. (2002). The Future for Renewable Energy 2: Prospects and Directions (2nd ed.). Routledge. https://doi.org/10.4324/9781315074436

Assmann, D. (Ed.). (2006). Renewable Energy: A Global Review of Technologies, Policies and Markets (1st ed.). Routledge. https://doi.org/10.4324/9781849772341

Belu, R. (2019). Fundamentals and Source Characteristics of Renewable Energy Systems (1st ed.). CRC Press. https://doi.org/10.1201/9780429297281

Benge, D. (2014). NRM1 Cost Management Handbook (1st ed.). Routledge. https://doi.org/10.4324/9781315848754

Chapman, R.J. (2014). The Rules of Project Risk Management: Implementation Guidelines for Major Projects (1st ed.). Routledge. https://doi.org/10.4324/9781315553177

Hillson, D. (2016). Managing Risk in Projects (1st ed.). Routledge. https://doi.org/10.4324/9781315249865

József Benedek, Tihamér-Tibor Sebestyén, Blanka Bartók, (2018),Evaluation of renewable energy sources in peripheral areas and renewable energy-based rural development, Renewable and Sustainable Energy Reviews, 90,( 516-535) https://doi.org/10.1016/j.rser.2018.03.020

Simon R. Sinsel, Rhea L. Riemke, Volker H. Hoffmann,(2020),Challenges and solution technologies for the integration of variable renewable energy sources—a review,RenewableEnergy,145,(2271-2285) https://doi.org/10.1016/j.renene.2019.06.147

Twidell, J., & Weir, T. (2005). Renewable Energy Resources, Routledge ,(2nd edition). https://doi.org/10.4324/9780203478721

Sorensen, B. (Ed.). (2011). Renewable Energy: Four Volume Set (1st ed.). Routledge. https://doi.org/10.4324/9781315793245

Jenkins, D. (2012). Renewable Energy Systems: The Earthscan Expert Guide to Renewable Energy Technologies for Home and Business (1st ed.). Routledge. https://doi.org/10.4324/9780203117262