Case Study: FutureMetrics hedges wood price risk and improves pellet project ROI with Lumivero @RISK

FutureMetrics Uses @RISK to Hedge Wood Prices in Production of Burning Wood Pellets

FutureMetrics, a consultancy in the biomass thermal energy sector, faced the challenge of managing the significant financial risk posed by volatile wood prices for wood pellet manufacturing projects. To accurately estimate costs and quantify the risk to project returns, they turned to Lumivero's @RISK software for a sophisticated risk analysis solution.

By implementing Lumivero's @RISK, FutureMetrics created a comprehensive cash flow model that used probability distributions to simulate wood price movements and their impact. This solution provided clear, measurable insights, revealing that without a price hedge, a project had a 9% chance of a negative net present value and an aggregator faced an 89.5% chance of losing a mean of $143.9 million. Using @RISK to develop a hedging strategy, Lumivero's tools helped drastically reduce the aggregator's mean expected loss to just $18,000, demonstrating a powerful mitigation of financial risk.

Futuremetrics

William Strauss

President and Founder