Risk analysis of wood pellet projects offered
August 27, 2012
By FutureMetrics LLC
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.
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.”
Click here to access the analysis.
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