The situation
- Our client wanted to estimate the size of reserves required
today to cover their nuclear decommissioning costs. A key issue was
that a number of different parties had very different views as to
what the decommissioning costs would be and it was essential that
all parties came to a consensus view.
Solution
- LCP identified the key factors that have a significant impact
on the ultimate decommissioning cost and built a powerful financial
model of the decommissioning process that allowed the client to
assess the impact of changing these key factors. We then simulated
the decommissioning process many thousands of times to build up a
picture of what the likely range of costs could be.
Client benefits
- By showing the range of possible costs we reconciled all of the
different parties. We managed to change the debate away from "what
is the cost?" to it being an issue of how prudent the reserves
should be and hence "how likely is it that the costs will be
covered by the reserves?".
