Business Case Studies & Business Publications

AES Tietê: Expansion Plant in Brazil

Allayannis, George...

Case

AES Tietê: Expansion Plant in Brazil

Allayannis, George (Yiorgos); Yemen, Gerry; Oliveira, Roberson

F-1732 | Published October 22, 2015 | 14 pages Case

Collection: Darden School of Business

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This case allows students to learn the principles of capital budgeting in a global context. It features a power company in Brazil that is a subsidiary of AES Corporation. A new-to-the-firm manager is assigned his first big project: to evaluate and defend the case for investing in a 500 MW thermal power plant. He must present his findings to the Global Valuation Review team, including a recommendation for the project and a bid price for the upcoming government auction. The manager must build three different valuations: a base case, an optimistic scenario, and a pessimistic scenario.

• Build a discounted free cash flow model to value a project. • Understand the impact of government regulation on capital investment. • Discuss alternative bidding strategies and potential levers that a company could use when executing capital budgeting.