An approach to investments valuation in the Colombian electricity market using real options and stochastic control theory

In this paper an approach to valuate an investment in the Colombian Electricity Market (CEM) using real options and stochastic control theory is presented. In the deregulated power generation markets new valuation, capital budgeting and decision making techniques are required to increase competitiveness of the generators. Although Colombia has a deregulated market structure, these new techniques are still to be applied. A fuel thermal power unit is valuated by using Vollert's work (2003), under the CEM conditions. Some results are shown and discussed.