nrg’s powersam job aide
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NRG’s PowerSAM Job Aide. - PowerPoint PPT PresentationTRANSCRIPT
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NRG’s PowerSAMJob Aide
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Table of Contents Introduction Portfolio Projects Reports Review and Commitment Administration Economics Financial Forecast Terms & Definitions
PowerSAM (Statistical Analysis Model): NRG uses this tool when evaluating and requesting funds for capital and expense projects. PowerSAM provides financial analysis calculation based on market data. Additionally, it controls and records each step in the approval process as well as forwards the approval documents to the appropriate approver based on the NRG Delegation of Authority (DOA) and the commitment process workflow.
Introduction to PowerSAM
Page 3
• When a user is connected to the NRG Intranet, in the URL Field type “PowerSAM”
• PowerSAM recognizes the user’s credentials and loads their system profile through a Passive Login
Introduction to PowerSAM
Page 4
• A user’s profile setup will determine the access rights to the options available within PowerSAM
• To have your profile modified contact Business Operations
ContactsPersonnel Phone Numbers Call When You Want to Learn:
Dave Hoch 724-597-8515 (o)724-809-5265 (c)
• How to build projects in PowerSAM• How to perform economic analysis• How to work a project through Commitments
Raul Gonzalez 724-597-8560 (o)702-289-5896 (c)
• How to build projects in PowerSAM• How to perform economic analysis
Charlie Marken 832-357-8171 (o)281-413-5580 (c)
• How to perform economic analysis – especially on outages
Mike McLaughlin 724-597-8318 (o)724-678-8034 (c) • How to interpret anything financial
Joe Dominick 724-597-8349 (o)724-333-3426 (c) • As a last resort
Introduction to PowerSAM
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Navigating through PowerSAM begins with selecting one of the primary function tabs located along the top of the screen:
The Portfolio Tab provides the user with a quick overview of projects, a brief summary of project economics, as well as a simple method of selecting and sorting projects.
The Projects Tab allows the user to create new projects and edit existing projects.
Introduction to PowerSAM
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Notes
Portfolio Page 7
• Quick overview of projects for your station or region• Method for filtering, sorting, and selecting projects• Quick access into project details when the user selects a project
The Portfolio screen is designed to provide the user with a:
Portfolio Page 8
• To show additional project detail information click on the arrow
The portfolio screens can be sorted ascending or descending individually by clicking in the field headers.
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Portfolio Page 9
• On the Portfolio Tab there are two different search options available:Key Word and Advanced Filter
• Key Word Search By typing in “boiler,” the system searches key fields for the word “boiler”
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• Advanced Filter Search By clicking on the icon, the Advanced Filter window appears
1. The drop-down arrow in the “Field” section allows the user to define the search criteria
2. Once all criteria are selected the user then clicks the “Apply” button
Portfolio Page 11
Batching ProjectsFrom the Portfolio tab, users can create batch economic runs for multiple projects:
1. Select the projects you would like to batch
2. Select the “Actions” link located on the upper right of the screen
3. Click on one of the “Batch” commands to begin the analysis run
Following submission of projects into the Analysis Queue, users will still be able to access and modify other projects.
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Notes
Portfolio Page 12
ProjectsPage 13
These are the page links available on the projects tab. The links enable the user to input project data.
The “Actions” link allows the user to select certain project actions.
The “Projects” tab enables users to create new projects, edit and copy existing projects, as well as perform additional features within PowerSAM.
Along the left side of the screen will be a listing of Page Options determined by the Tab selected.
When a user first selects the projects tab; the system will default to the “Overview” page, which provides a high-level summary of project information.
Actions Menu:The Actions menu is located on the upper right corner of the Overview page; clicking on the “Actions” link will produce a number of additional functions such as:
• Creating New Projects• Editing Existing Projects• Checking In or Out a Project• Perform Economic Analysis
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Go to the upper right corner of the Overview page, click on the “Actions” menu, and select “New Project.”
A new PowerSAM Project will be created in “Checked-Out” status and defaulted to the edit mode; then data can be entered into the new project.
There is no SAVE button in PowerSAM; once the user enters information, it is automatically saved.
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To Create a New Project
To Run Economic Analysis for a Project
• Base Case – Project is run through the model 1 time using only the base inputs for budget and impacts.
• Cumulative – Project is run through the model 100 times using Low, Base, and High inputs in calculating results; generates an Expected Value result.
• Tornado – Uses Low, Base, and High inputs to create a Tornado diagram that reflects the Low, Base, and High ranges each variable will create.
• Tornado/Cumulative – Generates both a Tornado diagram and Cumulative results.
On the upper right corner of the Overview page, click on the “Actions” menu and choose the type of economics run to perform (see box below).
Once started, the following message will appear on the upper left side of the screen:
It states that the project is being analyzed and how far the analysis has progressed. When “xx% Analyzing Data” disappears, the analysis is complete.
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Checking in projects from the Portfolio Tab:
• A RED check box indicates that a different user currently has the project checked out
• GREEN indicates that the project is checked out by the current user
• Projects can be checked in by clicking on the GREEN check box
• Hovering over the check box will display the user’s name
To Run Economic Analysis for a Project
• Edit – Used to update/edit project data when the project is checked-out by the current user.
• Copy – Used to create a new project that is a copy of the current project.
• Check-In/Check-Out – Used to check in and check out a project. Only one user may have a project checked out at a time; additional users can only view projects already checked out.
• Remove – Deletes the project from the system.
On the upper right corner of the Overview page, click on the “Actions” menu, and choose the type of economics run to perform (See below)
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Minimum project data requirements for this section include the Project Type, Station and Unit, Outage Related status, Start Dates and Life of Project, and Purpose and Description
TIP:Project Manager must be identified for the Commitment Process.
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The following fields are required to be completed on the Overview page: Project Type - Categorizes project based on the project’s primary purpose.Project Category - Provides additional detail to the Project Type.Station – A field used to designate the project location. A pull-down menu, providing a list of all stations associated with the user’s log-in credentials, is provided to assist with this step.Station Units - After a station is selected, a list of the available units based on that selection is provided.Outage Related - Specifies a proposed project as a base outage or to be completed in conjunction with a base outage. The available options are:
• Non-Outage Related – To be selected if the proposed project is independent from a base outage.
• Base Planned Outage – This option identifies the project as a base outage.
• Outage Related – To be selected if the proposed project is required to be completed during an outage.
Project Start Date: Identifies the date when funds are first committed.Project In-Service Date - Identifies the date which project benefits begin being realized. Last Year of Project Economics - Identifies the year in which financial benefits will no longer be realized from the project. Purpose and Description - A brief explanation of the work to be performed and why.
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When Creating a New Project
Base Outage vs. Outage RelatedIn PowerSAM, outages are identified as either a Base Planned Outage or Outage Related. Additional fields will appear depending upon which option is selected. If the “Base Planned Outage” option is selected, three additional data fields appear:
• Outage Type Selected from a drop-
down list• Outage Start Date• Outage Duration (Days)
If the “Outage Related” option is selected, two follow-up fields are required:
• A “parent” Base Planned Outage must be identified Selected from a drop-down list
• The Project Creator must review the Project Work List and determine if any activities are classified as Critical Path items
Critical Path: Includes all tasks that determine the end date of the project schedule. If an activity on the critical path is delayed by one day, then the entire project will be delayed by one day; unless another activity on the critical path can be accelerated by one day.
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Planning Commodities• These are required fields for a project to be submitted to the
Commitment Process.• This feature allows users to identify specific Systems or Equipment
Categories and allocate the appropriate percentage of overall project costs:
The Planning Commodity page contains a self-check mechanism. If the Available Systems/Equipment or Available Services totals do not equal 100%, an error message will appear in RED text.
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PowerSAM’s Risk Assessment page offers the ability for users to measure and communicate the potential risks to the organization based upon two criteria:
1. Probability an event will occur2. Severity of the potential event
The Probability of Occurrence and Severity of Consequence levels are each evaluated on a scale from 1 to 4. The Technical Risk Factor is the product of the two risk categories, and is expressed on a scale from 1 to 16.
These risk rankings do not impact the economic calculations and outputs from the PowerSAM analytical model; however, these rankings can play an important role during project evaluations by senior management.
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The Budget Planning section is provided for the user to enter detailed information on the proposed project budget and the timing of cash requirements.
The minimum requirements for this section are:• Cost Type - Users select either Expense, Capital, or a
combination of both • Total Projected Expenditures - Users input Low, Base, and High
estimates of Total Project Spend • Total Annual Cost - Provides a breakout of the total project
spend by year • Total Monthly Cost - Provides a breakout of the Annual Costs by
Month for the first two years of a project• Cost Worksheet - Allows the Total Projected Expenditures to be
itemized into Categories, such as Labor and Materials
For a more detailed description of Expense vs. Capital, see Economics Section.
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Minimum budget data requirements for this section
If the project cost type is “Capital” or “Other” the following fields are also required: “Retirement Unit Code,” “Equipment Being Replaced,” “In Service Date of Equipment Being Replaced,” and “Estimated Life.”
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The Budget Planning section includes a self-check mechanism for the following circumstances:1. Total Projected Expenditures must match the sum of
Annual Costs2. Monthly Costs Per Year must match the Annual Costs3. Cost Worksheet Totals must match Total Projected
Expenditures Submittals
When these totals are inconsistent, the following results will occur: 1. A RED error message will
appear2. The project will be prevented
from entering the Commitment Process
Capitalized interest should be included in the total project costs; this is interest used to finance the construction of a long-term asset.
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Project Impacts identify the expected benefits realized when a project is completed.Annual Savings Impacts:• Projects that resolve a problem that arises on a regular basis• Projects that either improve current performance or avoid future
failures • Examples include:
Projects which reduce or eliminate forced outages and costs to repair
Projects which reduce or eliminate forced derates and costs to repair
Projects which improve heat rate Projects which either reduce annual costs or avoid possible
future increases in O&M costs
Risk Avoidance Impacts:• Benefit is the avoided potential effects of an Undesirable Outcome
or Big Bad Outcome (BBO)• Impact is a one-time event with serious consequences
Long-term outage and/or derate Significant heat rate penalty
• Typically, the result of an event will require that the project be completed to return the unit to normal, plus any penalties for unplanned work ???[need to be taken into account]???
• Users are required to input a probably of occurrence (i.e., the chance of the BBO occurring in the next year)
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To add a Project Impact to a Project
Step 1: From the Pull-Down menu, select the Impact type from the list of options
Step 2: Click on the “Add Impact to Project” button
The number of project impacts that can be built into a single project is four per impact type.
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Major Project Impact Types - Outage• Using this impact/benefit will analyze Major Maintenance and Capital
projects based on a reduced number of annual forced outages• Impact used when forced outages occur can be repaired and
returned to normal operation, annually• Loaded into the system are the number and average length time of
reduced ???[forced outages]??? by the project• PowerSAM converts inputs into hours to calculate potential savings• Required fields:
Impact Category – users choose between Avoid and Improve. Avoid is used to prevent future increases in forced outages. The rate will remain the same. Improve will reduce the number of outages over time.
Outage Type – the type of outage being eliminated, either forced or maintenance.
Outages Per Year – the number of unplanned outages that would occur each year if the project were not completed.
Average Outage Duration – on average, the length of each outage. Can be stated in hours, days, weeks, or months.
Total Repair Cost/Yr. – total annual labor and material cost to bring the unit back on line following an unplanned outage.
Growth Type – growth in the number of outages over time. Selections include: Exponential, linear, no change, or direct entry.
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Outages Per Year - Number of outages per year that will be eliminatedAvg. Outage Duration – Average outage length for each outage (pull-down options: Hours, Days, Weeks, Months)
Growth in the avoided forced outages over the length of the project benefit life
Major Project Impact Types - Outage
When entering “Repair Cost” the amount should be based on per event cost.
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Major Project Impact Types - Derate• Using this impact/benefit will analyze Major Maintenance and Capital
projects based on a reduced number of annual forced derates• Impact used when derates occur can be repaired and returned to
normal operation, annually• Loaded into the system are the number, average length time, and
total megawatt derate reduced by the project• PowerSAM converts inputs into hours to calculate potential savings• Required fields:
Impact Category – choose between Avoid and Improve. Avoid is used if preventing future increases in forced outages. The rate will remain the same. Improve will reduce the number of outages over time.
Derate Type – the type of derate eliminated, either forced or maintenance.
Derates Per Year – the number of unplanned derates that would occur each year if the project were not completed.
Average Derate Duration – on average, the length of each outage. Can be stated in hours, days, weeks, or months.
Total Repair Cost/Yr. – total annual labor and material cost to bring the unit back on line following an unplanned derate.
Avg. Derate MW – average derate in megawatts during each unplanned event.
Growth Type – growth in the number of derates over time in MW/year. Selections include: Exponential, linear, no change, or direct entry.
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Derate Per Year - Number of derates per year that will be eliminatedAvg. Derate Duration – Average length of each derate (pull-down options: Hours, Days, Weeks, Months)
Avg. Derate MW – The derate, in MW, incurred when the event occurs
Major Project Impact Types - Derate
Growth in the avoided forced outages over the length of the project benefit life
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Major Project Impact Types – Heat Rate• Using this impact/benefit will analyze Major Maintenance and Capital
projects based on an improvement/avoidance of degradation in unit heat rate
• Impact used when heat rate penalties occur can be repaired and returned to normal operation, annually
• Loaded into the system is the current heat rate penalty and number of days annually improved by the project
• PowerSAM converts inputs into average annual heat rate penalty avoided to calculate potential savings
• Required fields: Heat Rate Penalty – the amount (in BTU/kWhr) improvement
occurring as a result of the project/outage. Days a Year with Penalty – the number of days in a year when
the unit will incur the penalty. Growth Type – growth in the heat rate penalty over time (in
BTU/kWhr). Selections include: Exponential, linear, no change, or direct entry.
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Heat Rate Penalty – heat rate improvement to be obtained by completing the project (measured in BTU/kWhr)Days a Year with Penalty - How often does this HR penalty occur? Is it seasonal or will it last the entire year?
Growth in heat rate improvement over the length of the project benefit life
Major Project Impact Types – Heat Rate
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Major Project Impact Types – O&M Savings
• Using this impact/benefit will analyze Major Maintenance and Capital projects based on a reduction/avoidance of O&M expense
• Impact used when additional O&M costs occur can be repaired and returned to normal operation, annually
• Loaded into the system are the number of O&M incidents per year and the total O&M Expenses per year
• O&M Savings is purely a net present value (NPV) calculation and does not use the gross margin forecasts to calculate
• Required fields: O&M Incidents/Yr. – The total number of times that the
increase in O&M would occur. This is almost always one. Total O&M Expend/Yr. – Total annual cost savings per year
realized by completing the project/outage. Growth Type – Growth in O&M savings over time in
thousands of dollars. Selections include: Exponential, linear, no change or direct entry.
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O&M Incidents/Yr - how many times does the spend event occur each year? Usually only once.
Total O&M Expend/Yr - total O&M savings or avoidance when the project is completed. Note: The details (Material Cost, Avg Man Hrs) is simply a worksheet and does not calculate a total. Total must be input manually.
Growth in the overall O&M savings or increase avoidance over the length of the project benefit life.
Major Project Impact Types – O&M Savings
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Major Project Impact Types – Undesirable Outcome• Using this impact/benefit will analyze the effects of a significant
event occurring that would result in a long-term outage, derate, heat rate impairment, or O&M spend.
• Impact used when a one-time significant event could occur that would require the project be completed. If the event occurs it would result in the project being required (plus additional costs for unplanned work).
• Loaded into the system applicable forced outage, derate, heat rate or O&M savings information, plus a percent chance of occurrence (in decimal form).
• Undesirable Outcome is calculated using the percent chance of occurrence as an annual rate to allocate benefits over the life of the project.
• Required fields: One of the following must be filled in – Outage Duration,
Derate Duration and Average Derate, or Heat Rate Penalty. Total Repair Costs – one-time cost to repair and return the unit
to normal operation. Usually, this represents the cost to do the original project plus an additional cost because an event is unplanned.
Growth Type – growth in percent chance of occurrence over time in thousands of dollars. Selections include: Exponential, linear, no change, or direct entry.
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Growth over time of the probability that the undesirable event will occur.
Probability - Probability (in decimal form) of the significant event occurring in the next year. Calculations/results are dependent on the decimal included here.
Undesirable Outcome Costs - Choice of impacts that would occur when the significant event occurs. Choices include forced outage, derate heat rate, or O&M savings. These events are usually long-term events with significant costs to repair (usually more than the cost to do the project).
Major Project Impact Types – Undesirable Outcome
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Environmental Review Questions
Users indicate the correct response to each question by selecting “YES” or “NO” in the drop-down box located in the right-side column
Environmental Compliance Screening Questions have been established to highlight potential project requests which will require input and approvals based upon NRG’s environmental policies.
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NERC Review Questions
Users indicate the correct response to each question by selecting “YES” or “NO” in the drop-down box located in the right-side column.
The following checklist was developed to help facility staff screen various proposed projects for potential implications under applicable regulatory requirements.
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Economic Evaluation Metrics:• ATCF Net Benefits (NPV) – PV ATCF Benefits (Gross Benefits) less PV ATCF Effective
Investment (Net Investment). Anything above -0- means a positive return.• Net Benefit/Cost Ratio (also called Benefit-to-Cost Ratio or B/C) – ATCF Net Benefits
(NPV) divided by PV ATCF Effective Investment. Anything above -0- means a positive return. This calculation takes the size of the investment out of the analysis. Can compare large-dollar to small-dollar projects to reflect the largest return. Ratio reflects, for every dollar invested, the amount returned (that dollar plus the ratio result).
• Base Discount Payback – Time, in years, required to payback the net investment. Annual NPV values are used to determine the time.
• Base IRR – Standard Excel definition of Internal Rate of Return. Calculation returns the internal rate of return for a series of discounted cash flows represented by the numbers in values. IRR is closely related to NPV.
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The Analysis Graph displays the annual results through the life of the project broken out by: • Annual Net Benefits (gray bar)• Annual Net Investment or Cost (red line)• Cash Benefit (green line) – Gross ATCF benefits from all impacts
except Undesirable Outcome.• Project Benefit (blue line) – total gross ATCF of all impacts.
Difference between blue and green lines is the Undesirable Outcomes benefit.
Results listed in the table represent the base case ATCF savings by Impact type:• Left represents “Hard Dollar”
or actual cash potentially earned by individual impact type.
• Right represents the Undesirable Outcome impact results that is based on the probably of a major event occurring. Savings is considered “Soft Dollar” where actual savings can not be measured.
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The “Project Stage” defines to which level of the Capital Planning Work Process the project has progressed. Only individuals with user rights set to “Facilitator” can assign a new Project Stage or move a new project from the Scratch Pad stage.
Scratch Pad – Default stage for new projects; provides a stage for projects to be constructed and for alternatives to be evaluated.Submitted for Review – Allows key stakeholders to review project details prior to being submitted to the plant forecast.Review Approved – Projects already reviewed by key stakeholders with no outstanding issues identified.
The Project Stages
Submitted to Forecast – Project is included in the FP&A Budget.Forecast Risk – Projects have been reviewed; however, are not included in the budget. Execution will typically be considered based upon management discretion.Commitment Submitted – Project owners are requesting funds to execute projects already approved in the budget. Commitment Approved – Project has been approved through all applicable levels required by NRG’s DOA policy; and Accounting Structure is created in SAP.Commitment Rejected – Project will not be executed; funds are not released.
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To change a project’s Stage, a user assigned the appropriate rights will select the new stage from the “Select Stage” field and click the “Change Project Stage” button.
The Log Table records the Stage history of when a project was changed and by whom.
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Users can attach external documents, such as vendor reports or technical drawings, to project files via the “Supplement” page.
Supplement Page
To perform this feature, the user clicks on the “Add Supporting Documents or Images” link.
Next, click the “Select Files” button in the next window.
Once the file to be uploaded is identifies in the Windows Search box, click “Open.”
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Additional features available on the Supplement page are:
Supplement Page
A listing of all Supplemental Documents or Images attached to the project
A historical log detailing when economic analyses were performed on the project
A historical log detailing the Check-In/ Out history of the project
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Notes
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To build a report, projects must selected in the “Portfolio Tab.”Place a check mark by the projects needed for the report.
Creating a Report
ReportsPage 47
Creating a Report
Choose the report by clicking on one of the projectnames
ReportsPage 48
When chosen, most reports will be shown directly on the screen: • To download a report click on “Output” and select the software type (Excel, Word,
pdf, etc.)
• Reports that do not open directly on screen will provide an option to open in Excel
Creating a Report
ReportsPage 49
Notes
ReportsPage 50
Project Review Process
• Prior to a project progressing to the “Submitted to Forecast” stage, a Project Review must take place
• After the project creator has input all the available project data, click on “View Project Errors” link to produce a listing of required actions and additional input needed
Review and Comm
itment
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Project Review ProcessOnce all the Project Errors have been addressed, the “Submit Project for Review” button will be available
After review submission, a project is routed through the Review Workflow. Progress can be checked from the Review Approvals page.
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• When a project progresses to the “Submitted to Forecast” stage, the “Commitment Setup” section appears on the page’s left side .
• On the Details page, before the project can be submitted to the commitment process, the user must select the “View Errors/Refresh” link to address any highlighted outstanding issues.
Once all the Project Errors have been addressed, the “Submit Commitment ” button will be available
By clicking on the “Submit Commitment” link, the project is routed through the appropriate approval levels as defined by NRG’s Commitment Approval and DOA policies
Submitting a Project to the Commitment Process
A project must be Checked Out and in Edit mode to submit into the Commitment process.
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Reviewing Projects Submitted to the Commitment Process
From the “Commitment” tab, select the “Active Commitments” page. This allows the user to view project progress through approval levels.
• The project list displayed is determined by the user’s profile • When a project is fully approved, automated emails notifying personnel of the
approval and the accounting codes are sent out.
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Commitment Approver Roles
• Approvers identified on the Commitment routing will receive an email containing a link to the PowerSAM Commitment page
• To approve or reject the project, users click on the appropriate button and provide any required comments in the space provided
• Anytime a project is rejected, the individual issuing the rejection is required to provide the reasons in the “Comments” section
• A rejected project is returned to the submitter for correction and re-submittal
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How to Change Requested Funds (Revision)
To request additional funds after a project has been approved, click on the “Change Requested Funds” link on the “Projects” tab
• Project must be Checked Out and in Edit mode to create a new Revision• All existing Revisions must be Approved before a new Revision can be created.
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Next, click on the “Create Revision” button
Then, select the revision number you wish to edit
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How to Change Requested Funds (Revision)
A Revision document will appear, similar to that on the budget page; shown are the required fields that must be filled out
The amounts to be entered into the Revision document are additional funds only and do not include any of the original values.
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How to Change Requested Funds (Revision)
When all the required information has been entered into the revision document, click the “Submit Commitment” button to begin routing the revision request.
A revision can be followed through the approval process in the same manner as the original commitment request.
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Notes
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Administration Tab
• To access the administration functions of PowerSAM, a user must be assigned as a Security Administrator under the user profile
• When a user without the appropriate rights clicks onto the “Administration” tab, the following screen message will appear:
This tab is used to add new users to the system, update global variables used for economic calculations, set approval DOA, establish alternate approvers, and add new stations to the system.
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Administration
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Notes
Administration
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Basic Theory of Economics
Evaluating projects is one of the most important business processes in sustaining viability and longevity (Cash is King). One key to profitability is thorough research of different solutions, benefit/cost evaluation, time it will take to recover investment, risk, expected return, and cash health of the company. PowerSAM output provides guidance for overall company investment strategy through the use of “Funding Reports.”
Through PowerSAM’s economic modeling, users can:• Run project alternatives incorporating sensitivities around Market, Cost, and Inflation • Perform a Tornado Analysis - a sensitivity analysis comparing relative importance
and impact of variables/assumptions that may impact economic results• Capture possible tax incentives that could be very beneficial (quicker depreciation) by
using “Unconventional Revenue” as a project impact
Get money returned sooner and push to spend laterEconom
icsPage 62
Project Economics
Economics are run on projects for 2 reasons:1. To evaluate projects to determine if value will be created and not destroyed. Will this
project return more to the company than is being spent on the project?2. To prioritize projects. There are limited funds available to spend on Major Maintenance
and Capital. PowerSAM Economics provides the ability to rank projects and outages to ensure projects with the largest return are funded.
There are 2 different types of Project Economics run:3. During the Budget Process, common-version Hyperion data is used. This allows for
comparison from project to project and station to station using the same Hyperion forecast data.
4. During the Commitment Process, the latest Hyperion data is used to ensure the project remains economically based.
• PowerSAM Economics are required for Discretionary Projects greater than $500K and for planned spend within the next 2 budget years
• PowerSAM Economics are not required for Regulatory, Environmental & Safety projects
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Economics
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Notes
Economics
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PowerSAM will be used as the official forecast and budget tool for all projects
Projects that are in or to be added to forecast must be designated as “Submitted to Forecast”
Projects designated as “Submitted to Forecast” must match the dollar value in the FPA financial forecast tool exactly and can not be changed until next forecast window
PowerSAM the “Official Project Forecasting Tool” of NRG
Financial ForecastPage 65
Projects that are being evaluated as a risk to EBITDA in the budget cycle time period must be designated as “Forecast Risk”
Management Reserve ProjectsIf management determines that the project needs to move from “Forecast Risk” to either “Scratch Pad” or “Submitted to Forecast:”
Under Select Stage, highlight the appropriate selection “Forecast Risk” to either “Scratch Pad” or “Submitted to Forecast” and update project stage
Projects Not Included in the Budget
Financial ForecastPage 66
• The purpose of the Risk Register is to create a repository for communicating and mitigating key risks to plant equipment that would impact profitability and is not in the financial forecast
• After the risk has been identified the next steps are as follows:
• Determine a trigger point based on measurable factors (e.g. Vibration Analysis) and notify management of progression, likely date of occurrence, and “too late” date
Future Functionality Fall 2013
Risk Register
the cost of eliminating the risk the potential for lost margin
the probability it will occur the consequences if it does occur
Financial ForecastPage 67
• Determine the date a decision needs to be made to assure appropriate lead time on materials and contractors is achieved
• Using current market curves B/C, LMO, QRAF will be automatically calculated • Uses Management Reserve to optimize profitability and longevity• Risk Tolerance is a correction factor used to represent the risk for potential loss based upon
the value of the asset: For example, for a plant with low EBITDA and a project designed to address an issue
determined to have a medium probability (3) of occurrence, the corrected value of the project would be reduced by 62.5%
See Terms and Definitions for additional information
Risk Register (cont.)
Financial ForecastPage 68
Future Functionality Fall 2013
The Funding Report is designed to provide a list of all projects on an annual basis which are budgeted to be completed in a given spend year.
This report also displays all projects categorized as a “Forecast Risk” for the same period.• PowerSAM forecast data will be uploaded into the FPA Financial Forecast system:
Current year forecast by month Next year forecast by month Future year 2-5 forecast, annually
Funding Report
• PowerSAM budget data will be uploaded into the FPA Financial Forecast system: Future years 1-2 by month Future years 3-5 forecast, annually
• Funding reports are used to assess and prioritize projects to be included in the budget/forecast cycle
• Funding report can be used to assure that the forecast contains the projects and correct dollar value for major Maintenance or Capital efforts.
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Notes
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Annual Savings Impacts - projects that resolve a recurring problem, improve current performance, or avoid future failures.
Benefit to Cost Ratio - project benefits divided by the cost, reflects how much each dollar spent on the investment returns.
Budget Planning - the process of gathering detailed information on a proposed project budget and timing of cash requirements.
Capital Expenditures (CapEx ) - create future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year. CapEx is used by a company to acquire or upgrade physical assets such as equipment, property, or buildings. In terms of the accounting equation, in contrast, an expense, a capital expenditure recorded as an asset and depreciated over time.
Capitalized interest - interest used to finance the construction of a long-term asset. Interest included in depreciation instead of taken in current period. Payback Period Discount is how long it will take for the project to return the initial investment discounting the future years cash benefit using the time value of money (TVM)(less than 3 years preferred).
Delegation of Authority (DOA)/Approval Authority - This policy establishes the framework and processes to control the commitment and expenditure of corporate resources by establishing levels and limits of authority, as well as the mechanisms to delegate authority to ensure the continuity of business operations.
Terms & Definitions
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EBITDA (Earnings Before Interest ,Taxes, Depreciation and Amortization) – the profitability of an organization (Earnings) before Interest ,Taxes, Depreciation and Amortization.
Economic analysis - an assessment of the viability, stability, and profitability of a project. Within the PowerSAM model, financial analysis is performed in the following ways:
• Base Case – Project is run through the model 1 time using only the base inputs for budget and impacts.
• Cumulative – Project is run through the model 100 times using Low, Base, and High inputs in calculating results; generates an Expected Value result.
• Tornado – Uses Low, Base, and High inputs to create a Tornado diagram that reflects the Low, Base, and High ranges each variable will create.
• Tornado/Cumulative – Generates both a Tornado diagram and Cumulative results.
Expense - is an outflow of cash or other valuable assets from a person or company to another person or company. This outflow of cash is generally one side of a trade for products or services that have equal or better current or future value to the buyer than to the seller. In terms of the accounting equation, expenses reduce owners' equity. In terms of accounting treatment, an expense is recorded immediately and directly impacts the income statement at EBITDA of the company, reducing its net profit.
FP&A – Financial Planning and Analysis.
Financial analysis – the process of evaluating businesses, projects, budgets, and other financial related results for investments. Financial analysis involves using historical performance to forecast future performance.
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Funding report – output from PowerSAM which ranks projects according to value and risk.
Hyperion Datamart – Software platform utilized for financial analysis, budgeting, and planning.
IRR (Internal Rate of Return) - is the % return necessary for the project to match the opportunity cost of capital (assumes gains immediately reinvested at return rate).
LMO (Lost Margin Opportunity) – loss of energy revenue as a result of a plant’s inability to generate.
Major Maintenance – Expense project greater than $50K. (See definition for Expense.)
NPV (Net Present Value) - subtracts the expected cost from the expected benefits and cash out/in are discounted at a predetermined TVM rate (+ value a must to accept, then evaluate drain on cash or credit).
O&M (Operations and Maintenance) – see definition for Expense.
Payback period – the time period (in years) required to return the total net investment.
PowerSAM (Statistical Analysis Model) - NRG uses this tool to evaluate and request funds for capital and expense projects. PowerSAM provides financial analysis calculation based on market data. Additionally, it controls and records each step in the approval process as well as forwards the approval documents to the appropriate approver based on the NRG DOA and the commitment process workflow.
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Probability of Occurrence - defines the likelihood that an event will occur on a scale from 1 to 4, with 4 being most likely.
Project Impacts - identify the expected benefits realized when a project is completed.
Project Stage - defines to which level of the Capital Planning Work Process the project has progressed.
Remaining Useful Life (RUL) - the period during which an asset is expected to be usable for the purpose it was acquired. It may or may not correspond with the item’s actual physical life or economic life. It is good practice to stop capitalizing assets three years prior to an asset’s end of Useful Life.
Retirement Unit Code (RUC) - a set of Uniform Retirement Units. The rules and definitions set forth to establish Uniform Retirement Units is useful in establishing capitalization versus expensing guidelines for electric utilities and maintaining accounts and records in conformity with the Uniform System of Accounts.
Risk Avoidance Impacts – projects that resolve a problem that arises from an Undesirable Outcome or Big Bad Outcome (BBO).
Risk Tolerance - a correction factor to adjust the quantified risk adjustment factor (QRAF) based upon the value of the asset.
Sensitivity Analysis – the process of evaluating a project with varying inputs to develop an understanding of how variable affect results.
Terms & Definitions
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Severity of Consequence - defines the level of severity of a forecasted event on a scale from 1 to 4, with 4 being the most devastating.
Technical Risk Factor - the product of the probability of occurrence and the severity of consequence risk categories, expressed on a scale from 1 to 16.
Tornado Analysis - a sensitivity analysis comparing relative importance and impact of variables/assumptions that may impact the economic results.
Total Projected Expenditures – the total anticipated costs to complete a project.
Unconventional Revenue – revenue from a non-traditional source such as tax credits.
Undesirable Outcome - a single significant event occurring that would result in a long-term outage, derate, heat rate impairment, or O&M spend.
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