Sam Martinez is seeking to invest a portion of his considerable assets in the "independent" electric power production industry in California, a sector projected to experience very rapid growth in the 21^st century. He has set up and funded a company "Ready-Energy Inc.". The intention is to use the company to build and operate an electric power plant and use innovative, state-of-the art turbine equipment to generate steam. His plan is to sell both electricity produced by turbines and steam.

However, the large public-sector (hypothetical) CA Energy Resources Inc. produces most of the power for that remote region of northern California. The main exceptions are co-generation plants which sell off extra steam, once generation of electricity takes place. These small hydro-plants generate electricity for many northern Californian towns using river water heated into steam, which turns turbines in the plant - thus electricity is produced. These "independents" are Mr. Martinez' business models but also competition. The giant electrical utility, California Energy, operates all long-distance distribution, selling electricity to municipal utilities for local distribution, brokering sales of electrical power to large industrial customers, and providing electricity wholesale to small rural customers.

Privatization of the giant California Energy is being argued by leading environmental groups, with a view that increases in electricity cost per unit which would decrease electricity consumption and that "big energy" owns too much power generation. Other groups do not want rate increases so are interested in co-generation of electricity, and want to financially back Mr. Martinez. Risk probabilities have been calculated as part of Ready-Energy's early financial forecasts, but they lack any risk management plan.

Sam has identified what he believes to be his first big opportunity and is excited to share it with you as a "Risk Management consultant". It would involve:

1. Producing base load electric power for sale using a CCGT (combined cycle gas turbine) set of natural gas powered turbines driving generators with waste heat producing high pressure steam to drive a steam turbine generator.

2. Providing (for sale) low pressure steam for manufacturing organizations in the immediate vicinity of the CCGT plant.

A range of established suppliers/vendors of turbine-run CCGT plant equipment would be willing to sell Ready-Energy its turbine-driven equipment to start operations: they offer, for differing prices (which could risk the project budget):

1. New untested design. Very high fuel efficiency. Initial reliability is uncertain. Likely to be very reliable in the long run. Claimed very low maintenance costs. Low capital cost to encourage purchase.

B) Tried and true design. Low fuel efficiency, moderate reliability and maintenance costs. Moderate capital cost. Easy to maintain.

CCGT plant suppliers will install the major plant components on a fixed price basis. Ready-Energy Inc. has revised the scope and Contract, with stiff penalty clauses for 1) delays or 2) performance failures, which the CCGT turbine manufacturer must be responsible for. However, such penalty clauses may not be operable, for example, if ground conditions are not as tested environmentally or electrical grid connections are not in place when required. The Board wants a project risk analysis to be made, and you will be assigned this responsibility.

The giant California Energy will provide grid connections and will not allow anyone else to do installations from their main grids. The plant could be delayed for weather reasons and start-up delayed due to natural gas hook-ups or even electrical failures due to 'rolling black-outs'.

Water to turn the CCGT turbines will be taken from a river which flows through the municipality. However, no legal environmental permits have been granted to remove water from these rivers during the several drought years in California. Permit fees statewide are rumored to rise dramatically this year.

Extraction of water requires municipal planning permits, and also state gov't. approval is required for the plant construction using low pressure steam lines to run steam to local companies, and hook-ups to any electrical grid power lines. All construction must be scheduled, of course, dependent upon approvals from governmental agencies. Your supervisor at Ready-Energy is pressuring you, as a Project Management consultant, to complete your work for Board review.

Instructions

Read the attached "Ready-Energy" case and format a Risk Register. 

Identify the top 6 risks facing the Project Management team. Categorize these by scope, schedule , budget and technical risks. Remember, weather or environmental/external risks would impact schedule and budget. Rate and then "score" risks using the scale provided at the end of the case exam.

 

Rating Scale

Probability ratings: 1% -39%: Unlikely 40%-69% May or may not occur 70%-89%: Likely to occur 90%-99% Highly probable

Impact ratings: 1 Minimal 2 Moderate 3 Severe 4 Catastrophic

Insert a Final Column in Risk Register: Risk Score is calculated by multiplying ___ x ___