Electrical Energy Conversion and Power Systems

Universidad de Oviedo

Project Management
Previous Analysis

Lecturer: Javier Daz lvarez

Previous Analysis
What do I have to think before starting a project?

- Needs - Targets - Requirements

- Functional - Technical

Needs
Needs: something needed; a requirement; sometimes something vague
Some considerations:
We have to take into account the needs of all the stakeholders. Frequently, they are contradictory. The direction of the company (helped by the PM if the designation has been done) has to balance and prioritize conflictive needs. It is very important to understand the differences between needs and wishes. Sometimes, it is important to help the customer to understand its needs and it could be an opportunity to increase the scope. But the target should be the satisfaction of the client, the increment of the scope is only a possitve collateral effect.

Needs
Project 1. Wind Farm
We need to make a 50 MW wind farm in the following 24 months to meet the targets of the company.

Project 2. Substation in Oviedo

We need to improve the quality of the electricity distribution in Oviedo. The key indicators of distribution quality are not as high as they should be.

Project 3. Bridge.
We need a bridge to increase the capacity of a road from 1.000 to 4.000 vehicles per hour.

Targets
Targets should be developed as an evolution of the needs. They should comply with the five elements of the SMART model: S: Specific M: Measurable A: Agreed upon R: Realistic T: Time constrained

Targets
Project 1. Wind Farm
Achieve the final reception, the environmental reception and the final inscription of the wind farm in 24 months.

Project 2. Substation in Oviedo

Construct the substation and sign the Take Over Certificate in twelve months.

Project 3. Bridge.
Promote and construct the new bridge (4.000 vehicles per hour) in 36 months taking into account the environmental gaps (ciconia nigra).

Requirements
Functional requirements are the needs of the customer. They come from the targets. The better defined targets, the better functional requirements well have.

Technical requirements are developed by the project team to meet with functional requirements.

Exercise 2.1
Project 1. Tansmission line from nuclear power station 100 km from Madrid to Madrid.
Needs, targets and requirements

Project 2. Oil refinery in Guadalajara.

Needs, targets and requirements

Project selection
Each company has its own practices Selection should be as much objective as possible Most of the times, selection is not only a quantitative issue Selection should be coordinated with strategic targets of the company

Selection tools
Profit cost ratio
Profit/Cost

Net Present Value

NPV = -I0+((Fi)/(1+r)i)

Selection tools (II)

IRR
Interest rate which makes NPV=0

Payback periode
Time to recover invested money

Exercise 2.2
- Calculate PCR, NPV, IRR and Payback Periode of these projects
Project A Investment Incomes year 1 Expenses year 1 Incomes year 2 Expenses year 2 Incomes year 3 Expenses year 3 Incomes year 4 Expenses year 4 Incomes year 5 Expenses year 5 -6500 4000 -500 4000 -500 2000 -1000 1000 -1000 1000 -1000 Project B -6500 2500 -500 2500 -500 2500 -1000 2500 -1000 2500 -1000 Project C -6500 1000 -500 1000 -500 2000 -1000 4000 -1000 4000 -1000 Project D -10000 6000 -1000 5000 -1000 4000 -1000 3000 -1000 2000 -1000 Project D -10000 2000 -1000 3000 -1000 4000 -1000 5000 -1000 6000 -1000

Exercise 2.2. Solution.

Project A

Project B

Project C

Project D

Project E

PCR

1,14

1,19

1,14

1,33

1,33

Payback periode

2 years

3,75 years

4,5 years

2,25 years

4 years

NPV

535,26

380,70 -

567,70

2.591,12

1.365,14

IRR

13,33%

10,35%

5,47%

20,27%

12,01%