Mid Term Case Study

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Feb 20, 2024

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1 Case Study Midterm Durgesh Kumar Mishra University of Potomac Course Number: MPM630 Prof. Svetlana Mitereva 02/01/2024

2 Midterm Case Study Abstract This case study explores the intricate landscape of the independent electric power production industry in late 1990s Ontario, Canada, as Sam Chong endeavors to establish SAMDO, a company aimed at operating electric power plants. SAMDO's initial project involves producing base load electric power, providing emergency backup power, and offering low- pressure steam to nearby manufacturing organizations. The case study delves into key activities, uncertainties, and decisions faced by Sam in this ambitious venture. It emphasizes the importance of regulatory approvals, gas supply negotiations, supplier selection, grid connections, and risk mitigation strategies. The study also underscores the need for quantifying aspects such as gas consumption, financial projections, and risk assessments to guide Sam's investment decisions. Learning This case study presents a complex scenario in the late 1990s in Ontario, Canada, where Sam Chong aims to invest in the independent electric power production industry. SAMDO plans to build and operate an electric power plant that will provide base load power to Ontario Hydro, emergency backup power to a hospital and information system-dependent organizations, and low-pressure steam to nearby manufacturing organizations. Key Activities and Components:

3 1. Selecting CCGT Plant Type : Choosing the type of CCGT plant (phase 1, 2, or 3) is a critical decision as it affects reliability, fuel efficiency, maintenance costs, and capital investment. 2. Gas Supply Arrangement : Negotiating a "take-or-pay" contract with the gas supply company to secure a sufficient gas supply pipeline for the CCGT plant. 3. Supplier Selection : Choosing a CCGT plant supplier among those offering new untested designs, state-of-the-art tested designs, or tried and true designs. 4. Grid Connection : Coordinating with Ontario Hydro for grid connections, which are essential for power distribution. 5. Local Infrastructure : Contracting with local firms for low-pressure steam connections, emergency power connections, and water supply piping. 6. Regulatory Approvals : Obtaining municipal and provincial approvals for the plant, water pipeline, steam lines, and power lines, while adhering to safety standards. Key Sources of Uncertainty: 1. Regulatory Approvals : Uncertainty regarding municipal and provincial approvals for various infrastructure components. 2. Gas Supply : Uncertainty regarding the future gas supply needs and fluctuations in gas prices.

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4 3. Grid Connection Delays : Potential delays in obtaining grid connections from Ontario Hydro, which can impact project timelines.

5 Key Responses to Uncertainty: 1. Risk Mitigation Strategy : Developing a risk mitigation plan to address delays in approvals or grid connections, including alternative contingency plans. 2. Negotiation Expertise : Building negotiation skills to secure favorable terms in contracts with gas supply companies and CCGT plant suppliers. 3. Regulatory Compliance : Engaging legal experts to navigate the regulatory approval process efficiently. Key Decisions for Sam: 1. CCGT Plant Selection : Sam should decide on the specific phase of CCGT plant design (1, 2, or 3) based on factors like capital investment, reliability, and fuel efficiency. 2. Gas Supply Contract : Sam needs to negotiate a favorable "take-or-pay" gas supply contract, considering the long-term implications of gas availability and pricing. 3. Supplier Selection : Choosing the right CCGT plant supplier with a balance of reliability, fuel efficiency, and capital cost. 4. Project Timeline : Deciding on a realistic project timeline that accounts for potential delays in regulatory approvals and grid connections. Aspects to Quantify: 1. Gas Consumption : Estimate the expected gas consumption based on CCGT plant specifications and operational requirements.

6 2. Financial Projections : Develop financial projections, including capital costs, operational expenses, and revenue forecasts, to assess the project's economic viability. 3. Risk Assessment : Quantify the potential financial impact of delays in approvals or grid connections and assess the associated risks. Outputs for Guidance: 1. Project Plan : Provide a comprehensive project plan outlining key milestones, timelines, and responsible parties. 2. Financial Analysis : Present financial projections, including cost-benefit analyses, to guide investment decisions. 3. Risk Assessment Report : Offer a risk assessment report highlighting potential challenges and mitigation strategies. The success of the SAMDO project hinges on effective decision-making, risk management, and strategic planning to navigate the complexities of the electric power production industry in Ontario.

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7 Summary The case study examines the late 1990s Ontario, Canada, electric power production industry, where Sam Chong aims to establish SAMDO, a company for independent electric power production. SAMDO inaugural project involves generating base load electric power, supplying emergency backup power, and providing low-pressure steam to local manufacturers. The case study focuses on crucial activities, uncertainties, and decisions Sam faces in this ambitious venture. It highlights the significance of regulatory approvals, gas supply negotiations, supplier selection, grid connections, and risk mitigation strategies. Quantifying aspects like gas consumption, financial projections, and risk assessments is essential to guide Sam's investment decisions and ensure SAMDO success. This summary encapsulates the key elements of the SAMDO case study, emphasizing its exploration of the challenges and opportunities in the electric power production industry in late 1990s Ontario, Canada.

8 Reference: Chapman, C. B., & Ward, S. C. (2011). SAMDO Case Study. Southampton Management School, University of Southampton. Hardy, C., & Maguire, S. (2018). Organizing Risk: Discourse, Power, and "Riskification." Academy of Management Review, 43(4), 619-643.

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