New technology commercialization: Small modular nuclear reactor
In the years leading up to the 2008 financial crisis, natural gas prices had been volatile and, on average, high enough to advantage non-gas new plant builds. What’s more, political momentum for action on climate change had been growing. As a result, several power industry players were investing in advanced technology alternatives such as coal gasification, carbon sequestration, small modular nuclear reactors, and an array of renewable alternatives with new U.S. power capacity underlying the business case (and global markets being secondary).
By 2012, however, one such company investing in new power technology – an industrial supplier of power generation equipment and services – found development costs were exceeding expectations, and the life-cycle economics of its product had been hurt relative to natural gas combined cycle generation. Moreover, emerging countries, most notably China, had become critical leading near-term new capacity demand markets.
As a result, our client required a thorough and outside perspective assessment of go-forward and abandon options resulting in an updated commercialization strategy for its ongoing investment in specific advanced power generation technology.
How we helped
Strategy& pursued a multidisciplinary program review and strategic planning effort:
Conducted a high-level technology positioning review for client’s design and product development capabilities relative to those of global competitors
Reviewed and refined likely to-go development cost budgets for a realistic planning case
Developed a market model to integrate our findings and assess product demand, profitability, and value potential on a probabilistic basis
Defined funding levers to support a go-forward strategy and support an 18-month commercialization strategy road map
Conducted industrial partner equity sales due diligences and designed EPC JV governance structure
Developed China market entry strategy
Designed a manufacturing and operations strategy to support commercial ramp-up
The client substantially restructured its commercialization strategy and re-prioritized key initiatives both to better reflect enterprise level risk-return trade-offs and to ensure comprehensive and appropriately sequenced funding options consideration. In particular, the team stepped up new funding lever pursuits, including China customer partnership and industrial partner equity sales.
Most importantly, the team identified market and other trigger points for potential business exit in order to have a predefined and business-rational approach to next-tranche financial investment commitments.