Asset Estimation of Electric Power Utilities by Expected Utility Theory

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Under the deregulation of electric power industries, electric utilities need asset planning considering future risks. Though Net Present Value method (Discounted Cash Flow method) is often employed to estimate investments, the method has disadvantages which can not be considered the risks. Then, we show the asset estimation of a thermal power plant, considering the risks by using the utility function which represents the satisfaction of investors. Furthermore, we have developed the asset estimation method by probit model, which is paid attention to the execution or abandonment of the project.