FORNY150 Investment Analysis of Energy Projects
Showing course contents for the educational year 2022 - 2023 .
Course responsible: Kristin Linnerud
ECTS credits: 5
Faculty: Faculty of Environmental Sciences and Natural Resource Management
Teaching language: NO
Teaching exam periods:
The course starts in the spring parallel. The course is taught and has evaluation in the spring parallel.
Course frequency: Annually
First time: Study year 2022-2023
In this course, the student gets an introduction to modern investment theory and learns through examples from the power sector and practical exercises on spreadsheets how the theory can be used to make decisions. The course consists of two parts. In part one, the student learns how to conduct an investment analysis. We focus on the net present value method, where future cash flows over the project period are converted to present values by requiring that capital earns a risk adjusted rate of return. In part two, we focus on energy projects. The student is introduced to different energy producing technologies and learns how they affect the cost structure, cash flows, risk and value. The student learns how to calculate levelized costs of energy for each technology and use these to make investment decisions.
Be able to present the most widely used analytical methods in Finance used to assess the profitability and risk of investment projects.
Be able to explain how uncertainty affects investors’ risk and how such risk can be included in an investment analysis.
Be able to present criteria for assessing whether it is profitable for the investor to carry out such investment projects.
Be able to combine this knowledge to develop good decision rules for specific investment projects in the power sector.
For a given investment project in the power sector, be able to identify which cash flows the project generates over the project period.
Be able to use spreadsheets to calculate the net present value of such projects and the associated unit costs of the electricity produced.
Be able to use spreadsheets to show how sensitive the net present value and unit cost are to variations in the discount rate, project life and factors that affect cash flows.
Have competence on how investment theory can be applied to decisions in the power sector.
Lectures, exercises where we use spreadsheets and assignments.
Bøhren, Ø., Gjærum, P.I. (2020). Finance: Introduction to investment and financing. Vigmostad & Bjørke AS. Edition 2. ISBN 9788245023282.
Peake, Stephen (2018). Renewable Energy. Power for a sustainable future. Fourth edition. Oxford University Press. Selected chapters.
- Written examination (3 hours) counts 60%
- Portfolio assessment: Submission of assignments counts 40%
Both parts must be passed to pass the course.
Minimum requirements for entrance to higher education in Norway (generell studiekompetanse).
Reduction of credits:
Overlaps with BUS220 (2,5 SP).
Overlaps with FORN120 (5 SP).
An external and internal examiner evaluates the student's work.
Allowed examination aids: B1 Calculator handed out, no other aids
Examination details: Combined assessment: Letter grades