Abstract
In the regulated environment, valuation of power plants was simpler. Investor-owned utilities were able to pass costs of generation projects on to end users. Today, at least two power plant valuation methodologies exist: discounted cash flow (DCF) analyses and option approaches. While the approaches or modeling techniques are rather straightforward, the inputs or assumptions put into the model are not. Valuation in the current, quasi-deregulated market depends on numerous factors between the wellhead and the wall socket including fuel prices; environmental compliance costs; the changing structure of the generation, transmission, and distribution sectors; the role of energy marketers; the direction of electricity deregulation and national energy policy; and the plant owner's business strategy (stand-alone or portfolio of plants; baseload, mid-merit, or peaker; etc.).
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