A feasibility study is an analysis of how a project can be completed, taking into accounting all the aspects that affect its success, as market, economic, technological, legal, operational and scheduling aspects. Feasibility studies are used to assess potential positive and negative outcomes of a project, identifying the best alternatives, before investing a considerable amount of time and money into it.
A feasibility study should identify the strengths and weaknesses of an existing business or proposed venture, opportunities and risks, the resources required for the execution, and ultimately the chances of success.
The parameters that are most often used to compare alternative investments are the Internal Rate of Return (IRR), the net present value of the project (NPV) and the return of the investment (ROI). The time of return is also considered, which is the time required for the investment to be paid off.
Our approach to feasibility studies is lean but accurate and enables to screen a portfolio of opportunities, thus identifying those that have a lower risk and a higher profitability.
How do we approach the work?
BEN can assist you in the preparation of a feasibility study for a new project in a wide variety of sectors, including energy, environment, industry, infrastructure and services.
BEN typically carries out feasibility studies on the basis of the Investor’s conceptual design, completing the definition of the project with a thorough appraisal of other elements such as:
- market analysis
- technology and process
- project execution
- legal frame
- time schedule
BEN may help the Investor handling also the following topics:
- Environmental impact study
- Permit application
- Structured finance
- Project execution strategy
- Call for tenders
- Project control
The project is modelled with the Prima3 expert system, that enables to analyze EPC cost, O&M costs and to perform a quantitative risk analysis with the Montecarlo method.
The project is described and key drivers are identified, so that a sensitivity analysis may be undertaken.
Monte Carlo simulation is a computerized mathematical technique that allows to account for risk in quantitative analysis and decision making. This technique is used in many fields such as finance, project management, energy, manufacturing, engineering, research and development, insurance, oil & gas, transportation, and the environment.
The Monte Carlo method defines a probability distribution for each parametre of the business model that has inherent uncertainty. The calculation is made in thousands of iterations, each time using a different set of random values from the probability functions.
The Monte Carlo method can be used to estimate the probability that the project holds to repay debt or to obtain a given return to the stake holders.
SWOT analysis is a technique use to identify and estimate Strenghts, Weaknesses, Opportunities and Threats of a given project.
Identifying weaknesses and risks is of paramount importance, so that corrective measures may be undertaken to minimize them.
Identifying strengths and opportunities is also important, because they reflect the reasons why the project should be pursued with the necessary momentum.
Benchmarking is a fundamental exercise: comparing our project with other similar projects is the best way to:
- learn from the experience of other players, and to
- understand the critical factors of success.
This exercise helps to avoid pitfalls and to focus on the key aspects to be overviewed by the project manager.