Answered) Question 4 (seven points). Format a Probability & Impact table and rate your risks using this scale.

Question 4 (seven points).  Read the attached “Mexi-Energy” case and format a Risk Register table.  Identify the top four risks facing the Project Management team which could be rated using the attached scale.  Format a Probability & Impact table and rate your risks using this scale.

Sam Martinez is seeking to invest a portion of his considerable assets in the “independent” electric power production industry in California, a sector projected to experience very rapid growth in the 21st century. He has set up a company “MexiEnergy Inc.” using his own funds and those of a number of family and colleagues. The intention is to use the company to build and operate an electric power plant, and then form a non-profit organization to “donate” some of the power to social service agencies serving immigrant families in L.A. 

However, the large public-sector California Energy Resources produces most of the power for California.  The main exceptions are co-generation plants associated with food processing, timber and similar industries, some small hydro plants which generate electricity for northern California via water,  and purchased power from other states.    California Energy operates all long distance distribution, selling electricity to municipal utilities for local distribution; brokering power sales to large industrial customers, and providing electricity wholesale to small rural customers.

California Energy wishes to increase its current significant dependence upon Navo Valley nuclear power reactor, which is projected to construct  three more 880 megawatt units over the next twenty-five years. Should this happen, “avoided cost” for base load power could be very low.  However, there is strong political pressure from a range of sources for publicly-declared prices well above current avoided costs to encourage private co-generation of electrical power.

Privatization of California Energy is being argued by leading environmental groups, with a view that increases in electricity cost per unit which would decrease electricity consumption.  These probabilities have been calculated as part of California Energy’s financial forecasts but lack any risk management plan.

Sam has identified what he believes to be his first big opportunity. It would involve:

1. Producing base load electric power for sale to California Energy in a northern California town using a CCGT (combined cycle gas turbine) set of natural gas powered turbines driving generators with waste heat producing high pressure steam to drive a steam turbine generator.

2. Providing (for sale) low pressure steam for manufacturing organizations in the immediate vicinity of the CCGT plant.

The local city has a natural gas network and supply, but the supply pipeline is not large enough to cope with the proposed CCGT type of natural gas-run turbine.   The gas supply company will provide a new main and gas at a price per unit fixed for a substantial period of time, but require a “take-or-pay” contract with any buyers. If Mexi-Energy decides to contract to take gas from any given date, they will have to pay for the contracted natural gas flow whether they use it or not.

A range of established suppliers of CCGT plants would be willing to sell Mexi-Energy its turbine-driven equipment.

New untested design. Very high fuel efficiency. Initial reliability is uncertain. Likely to be very reliable in the long run. Claimed very low maintenance costs. Low capital cost to encourage purchase.

     B) State of the art tested design. High fuel efficiency, high reliability and low maintenance costs. Very high capital cost.

     C) Tried and true design. Low fuel efficiency, moderate reliability and maintenance costs. Moderate capital cost.

CCGT plant suppliers will install the major plant components on a fixed price basis.  MexiEnergy Inc. has revised the scope and Contract, with stiff penalty clauses for 1) delays or 2) performance failures which the manufacturer must be responsible for. However, such penalty clauses may not be operable, for example, if ground conditions are not as tested environmentally or electrical grid connections are not in place when required.

California Energy will provide grid connections, and will not allow anyone else to do so. The plant could be delayed for weather reasons and start-up delayed due to grid hook-ups or electrical black-out failures due to ‘rolling black-outs’.

Water to turn the CCGT turbines will be taken from a river which flows through the municipality. However, no legal environmental permits have been granted to remove water from these rivers during the several drought years in California.  Permit fees statewide are rumored to rise dramatically before construction begins.

Extraction of water requires municipal planning permits, and also state gov’t. approval is required for the plant construction using water pipelines, low pressure steam lines and power lines.  All construction must be scheduled, of course, dependent upon approvals from governmental agencies.

Question 4 (seven points). Read the attached “Mexi-Energy” case and format a Risk Register
table. Identify the top four risks facing the Project Management team which could be rated
using the attached scale. Format a Probability & Impact table and rate your risks using this
scale. Sam Martinez is seeking to invest a portion of his considerable assets in the
“independent” electric power production industry in California, a sector projected
to experience very rapid growth in the 21st century. He has set up a company
“MexiEnergy Inc.” using his own funds and those of a number of family and
colleagues. The intention is to use the company to build and operate an electric
power plant, and then form a non-profit organization to “donate” some of the
power to social service agencies serving immigrant families in L.A.
However, the large public-sector California Energy Resources produces
most of the power for California. The main exceptions are co-generation plants
associated with food processing, timber and similar industries, some small hydro
plants which generate electricity for northern California via water, and purchased
power from other states. California Energy operates all long distance distribution,
selling electricity to municipal utilities for local distribution; brokering power sales
to large industrial customers, and providing electricity wholesale to small rural
customers.
California Energy wishes to increase its current significant dependence upon
Navo Valley nuclear power reactor, which is projected to construct three more 880
megawatt units over the next twenty-five years. Should this happen, “avoided cost”
for base load power could be very low. However, there is strong political pressure
from a range of sources for publicly-declared prices well above current avoided
costs to encourage private co-generation of electrical power.
Privatization of California Energy is being argued by leading environmental
groups, with a view that increases in electricity cost per unit which would decrease
electricity consumption. These probabilities have been calculated as part of
California Energy’s financial forecasts but lack any risk management plan.
Sam has identified what he believes to be his first big opportunity. It would
involve:
1. Producing base load electric power for sale to California Energy in a
northern California town using a CCGT (combined cycle gas turbine) set of natural gas powered turbines driving generators with waste heat producing high pressure
steam to drive a steam turbine generator.
2. Providing (for sale) low pressure steam for manufacturing organizations
in the immediate vicinity of the CCGT plant.
The local city has a natural gas network and supply, but the supply pipeline
is not large enough to cope with the proposed CCGT type of natural gas-run
turbine. The gas supply company will provide a new main and gas at a price per
unit fixed for a substantial period of time, but require a “take-or-pay” contract with
any buyers. If Mexi-Energy decides to contract to take gas from any given date,
they will have to pay for the contracted natural gas flow whether they use it or not.
A range of established suppliers of CCGT plants would be willing to sell
Mexi-Energy its turbine-driven equipment.
A) New untested design. Very high fuel efficiency. Initial reliability is
uncertain. Likely to be very reliable in the long run. Claimed very low
maintenance costs. Low capital cost to encourage purchase.
B) State of the art tested design. High fuel efficiency, high reliability and low
maintenance costs. Very high capital cost.
C) Tried and true design. Low fuel efficiency, moderate reliability and
maintenance costs. Moderate capital cost.
CCGT plant suppliers will install the major plant components on a fixed
price basis. MexiEnergy Inc. has revised the scope and Contract, with stiff penalty
clauses for 1) delays or 2) performance failures which the manufacturer must be
responsible for. However, such penalty clauses may not be operable, for example,
if ground conditions are not as tested environmentally or electrical grid
connections are not in place when required.
California Energy will provide grid connections, and will not allow anyone
else to do so. The plant could be delayed for weather reasons and start-up delayed
due to grid hook-ups or electrical black-out failures due to ‘rolling black-outs’.
Water to turn the CCGT turbines will be taken from a river which flows through
the municipality. However, no legal environmental permits have been granted to
remove water from these rivers during the several drought years in California.
Permit fees statewide are rumored to rise dramatically before construction begins.
Extraction of water requires municipal planning permits, and also state
gov’t. approval is required for the plant construction using water pipelines, low pressure steam lines and power lines. All construction must be scheduled, of
course, dependent upon approvals from governmental agencies. Probability and Probability Impact Matrix ratings: Scale Impact ratings:
1 Minimal 1% -39%: 2 Moderate Unlikely 3 Significant
4 Catastrophic 40%-69% May
or may not
occur
70%-89%:
Likely to occur
90%-100%
Highly probable Risk Score is calculated by multiplying
___ x ___

 


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