Risk assessment of power plant investment by three level ordered probit model considering project suspension

Under the deregulation in electricity, electrical power industries encounter may risks. The electrical power supplier should evaluate future uncertainty adequately and plan an appropriate investment project. Therefore, it is necessary to develop a new method to evaluate the risks for the investment. We have already proposed two new asset evaluation methods. One is the method using a net present value based on utility indifference pricing (UNPV method) and the other is probit model which simplifies UNPV method. We have checked their effectiveness through the project evaluation of a gas thermal power plant. In this paper, we propose three level ordered probit model. In the conventional probit model, we pay attention only to execution and rejection of the project. Some project should be suspended because the evaluation of the project is positive, but relatively low. In the new three level ordered probit model, we introduce suspension status for the project evaluation adding to execution and rejection. We apply it to the project evaluation of gas thermal power plant and show the effectiveness of the new method.