HO3-Case1-Kuniang

HO3-Case1-Kuniang - MS&E 352 Handout #3 Decision Analysis...

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MS&E 352 Handout #3 Decision Analysis II January 15 th , 2009 ________________________________________________________________________ ________________________________________________________________________ 1 of 9 Case #1: SS Kuniang Case Study #1 – S.S. Kuniang Due Thursday, January 29 th , 2009 Part I – The Decision Situation On April 9, 1981 the S.S. Kuniang ran aground off of the Florida coast during unseasonably severe weather conditions. Ed Brown, Chairman and CEO of the New England Electric System (NEES), received a call from Captain McIver, the head of his shipping subsidiary. McIver suggested that they turn this unfortunate accident to their advantage. The British owners of the Kuniang intended to declare the vessel a total loss, so that NEES might get the opportunity to acquire the ship, repair it, and then use it to haul coal. The management of NEES had been wrestling for some time with how to transport coal to their generating plants. NEES had recently arranged to have General Dynamics construct and operate a self-unloading ship with a capacity of 36,250 tons, a vessel universally referred to as the GD-I. New England Electric System NEES was a public utility holding company which owned four electric operating subsidiaries: Massachusetts Electric Company serving 750,000 customers in Massachusetts, Narragansett Electric Company serving 265,000 customers in Rhode Island, Granite State Electric Company serving 25,000 customers in New Hampshire, and New England Power Company (the generating subsidiary). In addition, NEES owned a service subsidiary, New England Power Service Company, a fuel exploration company, New England Energy Incorporated, and a shipping subsidiary, New England Shipping. As an aftermath of the energy price shocks of the early 1970's, NEES' long range plan incorporated the goals of reducing dependence on foreign oil and diversifying the fuel mix for the system's generating plants. NEES sought to achieve an energy mix of 39% coal, 25% nuclear, 18% domestic oil, 10% imported oil, and 8% hydro, wind power, and other alternatives. This plan would call for the conversion of more than half of the utility's oil-fired capacity to coal. After full conversion, NEES plants would require 3.125 million tons of coal each year: 2.7 million tons at Brayton Point, Massachusetts, 0.3 million tons at Salem Harbor, Massachusetts, and 0.125 million tons at the Providence, Rhode Island generating plants. An important part of NEES long range plan was the annual transportation of 3.125 million tons of coal. To this end, NEES established a shipping subsidiary under the direction of Captain McIver, an experienced commercial shipper.
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MS&E 352 Handout #3 Decision Analysis II January 15 th , 2009 ________________________________________________________________________ ________________________________________________________________________ 2 of 9 Case #1: SS Kuniang TRANSPORTATION Existing Arrangements The GD-I was being built by General Dynamics Ship Building division, in Quincy, Massachusetts. The vessel, the first coal-fired transport ship to be ordered in 25 years, would carry 2.25 million tons
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This note was uploaded on 06/16/2010 for the course MS&E 352 taught by Professor Ronhoward during the Winter '09 term at Stanford.

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HO3-Case1-Kuniang - MS&E 352 Handout #3 Decision Analysis...

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