Valuation Real Option for Investment Project Addition Source Supply Power in Coal Processing Plant ABC Mine Operation PT XYZ

Abstract

Real options appraisal in investment projects provides a robust framework for decision-making under uncertainty, especially in the context of large-scale industrial operations. This research focuses on real options appraisal for an investment project in a coal processing plant at PT XYZ's ABC mine operation. The need for this research arises due to the inherent uncertainty of fossil energy sources, regulatory changes, and technological developments that significantly impact the viability and profitability of mining projects. The main objectives of this study are to evaluate the feasibility of different investment strategies for the ABC mine operation using real options appraisal and to determine the impact of various uncertainties on project profitability. The methodology used was a combination of qualitative and quantitative analysis, including scenario planning, sensitivity analysis, and the use of Monte Carlo simuDEFon to model the potential outcomes and risks associated with different investment options. The expected outcomes of this research include a comprehensive valuation model that incorporates uncertainties specific to the coal industry and provides actionable insights for PT XYZ's investment decisions. The model aims to decide on expansion projects with reference to constraints optimising the timing and scale of investments in ABC mine operations, thereby improving the company's ability to navigate investment project feasibility and regulatory changes.