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http://dx.doi.org/10.7316/KHNES.2014.25.3.319

A Study on Economic Evaluation of SNG Project using Real Option Valuation Model  

Kang, Seung Jin (Grad. School of Knowledge-based Technology and Energy Korea Polytechnic Univ.)
Hong, Jin Pyo (Korea Electric Power Corporation Electric Power Research Institute)
Publication Information
Transactions of the Korean hydrogen and new energy society / v.25, no.3, 2014 , pp. 319-335 More about this Journal
Abstract
This study attempts to suggest an economic analysis model for SNG projects, which can reflect the future uncertainty objectively and applies the real option valuation incorporating the flexible investment decision. Based on this analysis model, net present value and internal rate of return were estimated by using preliminary feasibility study report of SNG project. And economic evaluation of SNG project was performed with real option valuation using binomial option model. Through this, the difference of analysis results between the real option valuation model and the discounted cash flow model were compared and the usefulness of the real option valuation model was confirmed. From the actual proof analysis, it is confirmed that the real option valuation model showed higher SNG project value than the discounted cash flow model did. It was confirmed that by applying the real option valuation model, economic analysis can be performed on not only the current straightforward SNG project, but also various future portfolios having options such as expansion, modification, or decommission.
Keywords
Discounted cash flow; Real option; Synthetic natural gas; Binomial option; Net present value; Internal rate of return;
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Times Cited By KSCI : 1  (Citation Analysis)
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