Abstract
This paper presents a theoretical model for the prioritization process of investments for electric system expansion and improvement of quality levels for the supply of electricity from a distribution utility. Such model is based on the criteria of economic valued added (EVA) and the analysis in the risk-return plane. In this project a market model called tariff optimization (TAROT) was adopted, which allows the representation and calculation of the economic value added by the agents (consumers, companies, government, and society), as opposed to the classical methods that rely on the calculation of net profit. It presents an example of application of the model considering the real data of a power distribution company, where, from a candidate set of investments, whose risks and returns are known, a computer program is developed for computation of the prioritization according to a methodology and criteria based on a frontier of risk-return threshold (risk-return hurdle rates) resulting in an optimized sequence of executions.
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Abbreviations
- \(a\) :
-
Avidity (MR$/TWh)
- \(b\) :
-
Satiety (MR$/TWh)\(^{2}\)
- \(B\) :
-
Total invested capital (MR$)
- \(d\) :
-
Depreciation factor
- \(D\) :
-
Assets depreciation (MR$)
- \({\delta } \) :
-
Leverage factor or indebtedness percentage of the total invested capital
- \(\Delta B\) :
-
Capital variation (MR$)
- \(\Delta G\) :
-
Operating costs variation (MR$)
- \(\Delta L\) :
-
Profits variation (MR$)
- \(\Delta V\) :
-
Economic value added variation (MR$)
- \(e\) :
-
Operating costs factor (MR$/TWh)
- \(E\) :
-
Consumed energy (TWh)
- EBIT:
-
Earnings before interests and taxes (MR$)
- EBITDA:
-
Earnings before interests, taxes, depreciation, and amortization (MR$)
- EBT:
-
Earnings before taxes (MR$)
- \(G\) :
-
Operating costs (MR$)
- \(h_\mathrm{{L}}\) :
-
Threshold rate for the generation of profits
- \(h_\mathrm{{V}}\) :
-
Threshold rate for adding value (hurdle rate)
- \(J\) :
-
Interests (MR$)
- \(L\) :
-
Net profit (MR$)
- \(O\) :
-
Power quality imperfection onus (MR$)
- \(p\) :
-
Energy loss factor (MR$/TWh)\(^{2}\)
- \(P\) :
-
Electricity price (MR$)
- PROI:
-
Profit return on investment
- \(q\) :
-
Power quality imperfection onus factor (MR$/TWh)
- \(R\) :
-
Distribution utility income (MR$)
- \(r\) :
-
Rate of return
- \(r_\mathrm{{A}}\) :
-
Shareholder rate of return
- \(r_\mathrm{{D}}\) :
-
Debt interests
- \(r_\mathrm{{W}}\) :
-
Weighted average cost of capital (WACC)
- \(S\) :
-
Surplus (MR$)
- \(t\) :
-
Government tax
- \(T\) :
-
Average energy tariff (R$/MWh)
- \(U\) :
-
Utility (MR$)
- \(V\) :
-
Economic Value Added (MR$)
- VROI:
-
Value return on investment
- \(Y\) :
-
Shareholder yield (MR$)
References
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Acknowledgments
The authors gratefully acknowledge the financial support in part of CAPES, CNPq, FAPEMIG, ANEEL, Cemig, and Energisa, in terms of R&D projects motivating this research.
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de Campos, R., Arango, H., Bonatto, B.D. et al. Application of Risk Analysis in Prioritizing Investments in Terms of Value-Based Management and Power Quality. J Control Autom Electr Syst 24, 513–521 (2013). https://doi.org/10.1007/s40313-013-0032-3
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DOI: https://doi.org/10.1007/s40313-013-0032-3