joint venture analysis capturing the japanese offshore wind turbines market
DESCRIPTION
Joint Venture Analysis Capturing the Japanese Offshore Wind Turbines Market. April 28, 2010. Miranda Ford Johnathan Gritz. Jeremy Himelfarb Chris Loftus. Jason Shu. Japanese Market Environment. Japanese Energy Consumption by Type. Fossil Fuels. World Rank: Carbon Emissions. 1). China. - PowerPoint PPT PresentationTRANSCRIPT
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Joint Venture AnalysisCapturing the Japanese Offshore Wind Turbines Market
Miranda FordJohnathan Gritz
Jeremy HimelfarbChris Loftus
Jason Shu
April 28, 2010
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Japanese Market Environment
World Rank: Carbon Emissions1) China2) United States3) Russia4) Japan
World Rank: Energy Consumption1) United States2) China3) Russia4) Japan
Wind turbine market projected to reach $112B by 2030Wind turbine market projected to reach $112B by 2030
Japanese Energy Consumption by Type
Natural Gas
CoalHydro
Nuclear
Oil
FossilFuels
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Investment Strategy
Strategy leverages comparative advantagesStrategy leverages comparative advantages
GE / MHI Joint Venture日本風の会社
•Turbines
•Blade Design
•Capital
•Carbon-fiber
•Infrastructure
•Local knowledge
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Financial Analysis
$187M initial capital investment– Joint venture establishment– Building procurement and
modifications– Manufacturing tooling
Key assumptions– 8.1% Weighted Average Cost of
Capital (WACC)– 25% gross margin– 10% market share
Investment results– $27M Net Present Value (NPV)– 12.5 year payback period– 9.6% Internal Rate of Return (IRR)
Investment Cash Flow Analysis
($150)
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$0
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$150
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An
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low
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$0
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Cu
mu
lati
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sh
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w (
$M
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Annual Cash Flow
Cumulative Cash
12 Year Payback Period
Returns indicate a potentially profitable investmentReturns indicate a potentially profitable investment
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Risk Assessment
Risks threaten marginally profitable investmentRisks threaten marginally profitable investment
Stable government with ample checks and balances
Low probability of expropriation Pro-intellectual property policies Movement towards official inflation
target
Political / Regulatory
Risk Level: Low
Potential variance drivers– Slow down in push towards
renewable energy sources– Significant drop in fossil fuels costs– Technological advances in
competing alternative energy
Wind Turbine Market
Risk Level: Moderate
Aging population more concerned with current consumption than future environmental impact
Deflationary environment High Debt to GDP ratio
Economic / Demographic
Risk Level: Moderate
Transaction Risk Translation Risk Investor expectations Strength of the Yen Import competing
Currency
Risk Level: High
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Is this the best use of GE’s Capital?
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Conclusion
Business case does not justify this investmentBusiness case does not justify this investment
Japanese wind energy market is potentially very strong
Joint venture could leverage comparative advantages
High cost of manufacturing in Japan leads to smaller than expected market share
Projected rate of return narrowly exceeds the cost of capital– A small change could result in a negative return on investment
Importing lower cost alternatives could meet Japan’s demand– GE should pursue alternate investments to reach Japanese market
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Questions?