Abstract

ARANGO ARANGO, Mónica A.; ARROYAVE CATANO, Elizabeth T.  and  HERNANDEZ, Juan D.. VALUATION OF THERMAL ENERGY PROJECTS UNDER UNCERTAINTY CONDITIONS THROUGH REAL OPTIONS. Rev. ing. univ. Medellín [online]. 2013, vol.12, n.23, pp.83-100. ISSN 1692-3324.

This article shows the valuation of carbon-based plant for generation of thermal energy in a Latin American country, taking real options into consideration. The work first shows the probabilistic behavior of each variable which affects financial viability of the project. For this purpose, ARIMA-GARCH models which allow foreseeing means and volatility of variables which determine the cash flow are proposed. Due to the high volatility of energy prices and the increased international price of carbon during the last years, these projects are not expected to be financially viable. However, when considering the real option to expansion, abandonment and continue can result scenarios in which this technology is competitive. Results obtained suggest a decrease of loss risks and an increase of the project value.

Keywords : Real options; valuation; Monte Carlo simulation; energy.

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