Energy & Utilities

Developing a Power-Generation Strategy for a Major Energy Utility Company


Strongly negative net present value (NPV) of the power-generation portfolio (own power plants and industrial investments/contracts) over the next ten years—even when taking already defined but not realized cost-cutting measures into consideration


Urgent need for action to improve the NPV of the existing portfolio by operational and structural measures


Limited opportunities for growth:

  • Highly competitive environment for gas-fired and steam power plants that cogenerate heat and power; attractivity of other technologies very restricted
  • Opportunist asset acquisitions possible, but require superior skills due to the high price level

Additional risks due to the uncertain future development of coal prices and CO₂ emission taxes

Problem-Solving Approach

Building a quantitative model in order to simulate the future development of the power-generation market by drawing on the System Dynamics methodology


Examining the current cost and revenue structure and defining additional cost-improvement/value-enhancement measures


Conducting a market and competitor analysis and a high-level benchmarking


Computing a business case in order to determine the target costs for the existing power plant portfolio and for the contracted capacities


Identifying sources of competitive advantages and deriving strategic options by applying game theory


Supporting the communication of the results (e.g. with power plant managers)


Power-generation portfolio optimized along the following key levers:

  • Operating & maintenance (O&M) costs of the (partially) owned power plants reduced to best-practice level
  • Unprofitable block-unit power stations/sites sold or shut down
  • Contracted capacities further consolidated and successfully renegotiated
  • Own market power moderately exerted in bidding situations
  • Purchase price for lignite reduced as a result of renegotiations

Selective international expansion by new gas-fired and steam power plants with power-heat coupling initiated


Forward-looking vision and concept for the role as an asset-backed world-class electricity trader in a market maker position