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Risk analysis of wood pellet projects offered

August 27, 2012, Bethel, ME – A recently released paper by FutureMetrics offers a free analysis tool for those considering getting into the wood pellet manufacturing business.


August 27, 2012
By FutureMetrics LLC

Authored by FutureMetrics President William Strauss, the analysis illustrates the use of Monte Carlo simulation, a computerized mathematical technique that allows people to account for risk in quantitative analysis and decision-making.

According to Strauss, there are four key risk factors for a project—based on a 50,000-ton-per-year pellet manufacturing facility co-located with a combined-heat-and-power plant supplying hot water for belt drying and power:

• wood cost;
• the ability for pellet prices to rise over time;

• the initial price of pellets sold from the mill; and

• the ability of the facility to run in the upper end of its name plate capacity.

In conclusion, Strauss states: “Thianalysis has identified the key risk exposures of this project. With some attention, some of those risks can be mitigated and/or better defined. Focused attention to these key areas can then provide revised inputs … The decision to go or no-go with the project should follow a careful review of a revised simulation based on the outcomes of the focused analysis of the markets and the key input metrics.”

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Click here to access the analysis.


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