Climate Model for Utilities – First Results!

After a huge amount of effort, the results from the Quant Foundry Climate Model are now in!

Unlike current models that use discounted cashflows, our Quant Foundry Climate Model digs deeply into the balance sheet and revenue stream of each corporate and evolves a dynamic management strategy around resource and generation mix deployment. Our model provides an incredibly rich set of outputs that will support decision-makers in the asset management, insurance and banking industry.

For each of the next 30 years, our model provides and estimate on a company’s; EBITDA, EBIT, debt levels, equity price, dividend yields, bond yields and probability of default. For non-financial information, the model provides details of CO2 emissions, stranded assets and capacity per technology.

The model output provides insight (and the rigour behind the methodology) that has to date been conjecture. For example, we plot the 30 top European utilities’ rating migration after 5 years based on today’s fraction of fossil fuel generation:-

Or the distribution of equity returns after five years based on today’s fraction of fossil fuel generation: –

Finally the model provides insight to the optimal transition pathway for the top European utilities over the next 30 years. The pathway is constrained by the balance sheet of each generator and the capacity for societies to adopt and fund the investment.

These are very encouraging results that we believe cut though the conjectures and delivery actionable statistics for key decision-makers.

Please feel free to contact Chris Cormack (Chris.cormack@quantfoundry.com) or David Kelly (David.kelly@quantfoundry.com) if you are interested in hearing more about our Quant Foundry Climate Model.