WEnergy Global was considering the pros and cons of moving forward with a 25-year term renewable energy project over multiple geographies, which required a thorough financial feasibility and scenario analysis. WEnergy Global turned to Palisade’s @RISK to determine whether or not the probability of risk on revenue and ROI warranted moving forward or rejecting the project.
WEnergy Global Pte. Ltd. is a one-stop solution provider of renewable energy systems and energy-efficiency technologies. The company designs, procures and builds power plants, such as solar PV, biomass, small hydro power and wind. The organization works in conjunction with financers and investors to ensure speedy deployment of renewable power projects in low and medium risk environments in Singapore, other ASEAN countries, India and Sri Lanka. Currently, WEnergy covers a large range of projects in solar energy, such as rooftop solar plants for households and businesses to full-fledged solar power and solar-diesel/solar-diesel-battery hybrid plants across target countries.
WEnergy Global was considering the pros and cons of moving forward with a 25-year term renewable energy project over multiple geographies, which required a thorough financial feasibility and scenario analysis. The project had two very visible complexities that presented significant risks on revenue and return on investment:
- Revenue Variability: The variable price of power in the countries involved in the project showed a significant standard deviation, so using a 25-year average or expected average value projection would not provide the accuracy necessary to competently examine risk probability.
- Currency Exchange Rate Volatility: Since two currencies were involved in the project investment, a thorough exchange rate analysis was also required. One of these currencies had shown volatility in the previous 20 years, and using an expected average exchange rate was ineffective for this analysis
WEnergy Global turned to Palisade’s @RISK to determine whether or not the probability of risk on revenue and ROI warranted moving forward or rejecting the project. Ashish Chawla, Manager of Investment Structuring and Operations of WEnergy Global chose @RISK and was very familiar with the solution. “I learned about the software during my MBA studies, and it took our professor less than 30 minutes to explain how to use the software,” said Chawla.
Decision Analyst, Unilever
The most challenging aspect of WEnergy Global’s analysis of the potential project was capturing the impact of variable inputs in a single output distribution which involved multi-variable analysis. By using @RISK, WEnergy Global had a platform to perform that task and allowed them to move beyond traditional scenario analysis (best and worst case, for example) and employ a more sophisticated approach of probabilistic scenario analysis.
The utilization of @RISK provided an excellent platform to perform this tedious and overwhelming analysis. Overall, the financial model featured 75 (3X25) unique input variables, and a complex simulation with 50,000 iterations was performed using @RISK in just a matter of minutes instead of hours or even days. The most obvious and immediate impact was the time and resources saved in making the analysis.
Beyond the speed of analysis, WEnergy Global found two key features of @RISK to be extremely helpful:
- Define distribution for input variables. The user-friendly nature of the feature allowed researchers to pick and choose the type of distribution for input variables and enter key parameters. 2. Excel Reports: This feature allowed easy and quick access to output results and verification of the iterations carried by the software and sensitivity analysis, which was critical in examining the feasibility of the project. Chawla said that @RISK was “instrumental in helping to analyze the probability of risks and their bearing on project’s IRR.” As a result, WEnergy Global decided to pursue the multimillion dollar project, which will commence in June 2015.
“@RISK simulation software has been very helpful in performing rigorous financial analysis of our projects,” said S.A. Ramsundersingh, CEO of WEnergy Global. “It has not only given us great perspectives on our projects’ analysis, but has also enabled us to introduce complexities in performing feasibility studies leading to important investment decisions. @RISK is a great tool for saving time, resources and energy in making critical management decisions.”