Problem Definition
GreenGrid Energy is a mid-size European utility headquartered in Frankfurt, generating EUR 3.2 billion in annual revenue with a 19% EBITDA margin. The company operates 12 GW of total generation capacity, split roughly 70% fossil fuel (3.6 GW coal and 4.8 GW natural gas) and 30% renewable (a mix of legacy hydro and early-stage onshore wind). GreenGrid serves 6 million residential and commercial customers across Central Europe.
The European Union's revised Clean Energy Directive now mandates that all utilities above 5 GW of installed capacity must source at least 60% of generation from certified renewable assets by 2032. Non-compliance triggers escalating penalties starting at EUR 150 per ton of excess CO2 emissions, roughly 40% above current market carbon credit prices. GreenGrid's coal fleet, averaging 28 years in age, faces accelerating maintenance costs and declining capacity factors, while its gas plants remain profitable but carbon-intensive.
The CEO has secured board approval for a EUR 2 billion capital envelope over the next five years to fund the energy transition. However, the leadership team is divided on the path forward. The CFO favors acquiring an existing renewable portfolio for speed and certainty, arguing that construction timelines for greenfield projects leave too little margin before the 2032 deadline. The COO advocates building new solar and wind capacity for higher long-term returns, pointing to declining per-GW costs in both technologies. The Chief Risk Officer warns that stranded asset write-downs on the coal fleet could erode the balance sheet before new assets generate returns, and that intermittent renewables may require expensive battery storage to maintain grid reliability.
Complicating matters, EU carbon credit prices have been rising sharply, meaning every year of delay increases the cost of continued fossil operation. The board wants a clear recommendation before the next quarterly earnings call. How should GreenGrid allocate its EUR 2 billion investment budget to meet the 2032 renewable mandate while preserving EBITDA margins above 16%?
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- GreenGrid's coal fleet (3.6 GW) has a remaining book value of EUR 840M and annual maintenance costs of EUR 95M, growing 8% per year
- The gas fleet (4.8 GW) has 15 years of remaining useful life and contributes 45% of current EBITDA
- Current renewable capacity (3.6 GW) operates at an average capacity factor of 32%
- EU carbon credit prices have risen 27% over the past two years and analyst consensus projects continued acceleration (see Exhibit 3)
- GreenGrid's weighted average cost of capital is 6.5%
- Retiring coal plants triggers one-time decommissioning costs of approximately EUR 60M per GW
- Grid interconnection capacity in Central Europe is constrained, adding 6-9 months to new project timelines
- Two peer utilities have completed renewable acquisitions in the past 18 months at valuations of 11-13x EBITDA
- The EU taxonomy for sustainable finance classifies natural gas as "transitional" through 2030, allowing green bond financing for gas-to-renewable conversion projects
- GreenGrid's workforce includes 1,200 employees at coal-fired facilities who would need retraining or severance upon plant closure
Exhibit 3EU Carbon Credit Price Trajectory (EUR per ton)
| Year | Price (EUR/ton) | YoY Change |
|---|---|---|
| 2023 | 85 | -- |
| 2024 | 95 | +12% |
| 2025 | 108 | +14% |
| 2026 (Proj.) | 125 | +16% |
| 2027 (Proj.) | 145 | +16% |
| 2028 (Proj.) | 170 | +17% |
| 2029 (Proj.) | 200 | +18% |
| 2030 (Proj.) | 240 | +20% |
Source: GreenGrid Energy case file
Question 1Structuring
"The CEO asks you to lay out a framework for evaluating GreenGrid's transition strategy. How would you structure your analysis?"
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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Share if the candidate asks:
- GreenGrid's current debt-to-equity ratio is 1.2x, with EUR 400M of available credit facility
- The company has no prior experience in offshore wind development
- Customer churn risk is low (regulated market) but industrial customers (30% of revenue) have begun requesting renewable energy certificates
- The board has indicated willingness to accept a temporary margin compression of up to 3 percentage points during the transition
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A structured approach should cover four areas:
-
Capacity Gap Analysis: GreenGrid needs 60% of 12 GW = 7.2 GW renewable. Current renewable is 3.6 GW, so the gap is 3.6 GW. Closing this gap requires both building or acquiring new renewable capacity and retiring fossil capacity to shift the generation mix. The coal fleet is the logical retirement candidate given its age and escalating maintenance cost trajectory.
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Portfolio Construction: Evaluate available projects on IRR, risk, timeline, and strategic fit. Consider build vs. acquire trade-offs -- greenfield builds offer higher returns but longer timelines and execution risk, while acquisitions offer speed and certainty at premium valuations (11-13x EBITDA in recent deals).
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Risk Architecture: Three risk dimensions -- (a) construction and execution risk on new builds, (b) stranded asset write-downs on coal retirement (EUR 840M book value at stake), and (c) intermittency risk requiring backup capacity or storage investment.
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Financial Guardrails: Model the transition so that EBITDA stays above 16%. This means sequencing investments so that new revenue from renewables begins flowing before coal retirement eliminates existing cash flows. Carbon credit cost avoidance should be factored as a return component of renewable investment. Additionally, the EUR 840M coal book value write-down must be staged to avoid a single-quarter earnings shock that could trigger covenant breaches on existing debt facilities.
A strong candidate will note that these four areas are not independent -- the capacity gap determines which projects to evaluate, the project timelines constrain the retirement sequence, and the retirement sequence determines the financial impact. The framework must be solved iteratively, not linearly.
What the interviewer is looking forShow guidanceHide guidance
Good (demonstrates basic structure): Candidate identifies 2-3 pillars such as financial analysis, regulatory requirements, and project selection. Uses a standard framework (e.g., costs vs. benefits, build vs. buy). Recognizes that the 2032 deadline creates a binding time constraint.
Strong (demonstrates tailored thinking): Candidate builds a framework specific to energy transition rather than recycling a generic profitability tree. Separates the problem into: (1) capacity gap analysis -- how much renewable capacity is actually needed, (2) portfolio construction -- which projects to fund and in what sequence, (3) risk management -- stranded assets, construction risk, intermittency, and (4) financial viability -- maintaining margins during transition. Recognizes that the percentage target depends on BOTH adding renewables AND retiring fossil assets.
Excellent (demonstrates strategic depth): Adds sequencing logic -- the order of investments matters because carbon credit costs escalate over time (Exhibit 3) and early coal retirement triggers immediate write-downs against the EUR 840M book value. Identifies that the 60% target requires either adding 3.6 GW of renewables AND retiring 3.6 GW of coal (keeping total at 12 GW), or adding even more renewables to dilute the fossil share without retiring assets. Questions whether the EUR 2B budget accounts for decommissioning costs (EUR 60M/GW) or potential asset sale proceeds. Recognizes the optionality embedded in the gas fleet -- gas plants may serve as flexible dispatchable backup for intermittent renewables rather than being retired, effectively becoming more valuable as renewable penetration increases. Links the workforce impact (1,200 coal employees) to transition timing and political feasibility.
Question 2Numeracy
"The strategy team has narrowed the options to two candidate portfolios. Using Exhibit 2, calculate the total capex, weighted average IRR, and remaining budget buffer for each portfolio. Which portfolio better fits GreenGrid's constraints?"
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
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- Portfolio X (Diversified Build): Iberian Solar Array + Alpine Wind Corridor + Rhine Storage Hub
- Portfolio Y (Scale Play): Nordic Acquisition + Iberian Solar Array
- Budget constraint: EUR 2,000M
- Minimum new renewable capacity required: 3.6 GW
Exhibit 2GreenGrid Renewable Project Pipeline
| Project | Type | Capacity (GW) | Capex (EUR M) | Est. IRR | Risk Rating | Time to Operational |
|---|---|---|---|---|---|---|
| Baltic Offshore Wind | Offshore Wind | 1.5 | 1,200 | 14.2% | High | 4.5 years |
| Iberian Solar Array | Solar PV | 2.0 | 600 | 10.8% | Low | 1.5 years |
| Alpine Wind Corridor | Onshore Wind | 1.2 | 480 | 9.5% | Low | 2.0 years |
| Rhine Storage Hub | Battery | 0.5 | 300 | 6.2% | Medium | 1.0 year |
| Nordic Acquisition | Mixed Renewables | 2.5 | 1,400 | 8.1% | Low | Immediate |
Source: GreenGrid Energy case file
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Calculation
Portfolio X: Diversified Build
| Project | Capacity (GW) | Capex (EUR M) | IRR | Weight (Capex Share) |
|---|---|---|---|---|
| Iberian Solar Array | 2.0 | 600 | 10.8% | 600 / 1,380 = 43.5% |
| Alpine Wind Corridor | 1.2 | 480 | 9.5% | 480 / 1,380 = 34.8% |
| Rhine Storage Hub | 0.5 | 300 | 6.2% | 300 / 1,380 = 21.7% |
| Total | 3.7 | 1,380 |
Weighted average IRR:
- (0.435 x 10.8%) + (0.348 x 9.5%) + (0.217 x 6.2%)
- = 4.70% + 3.31% + 1.35%
- = 9.4%
Remaining budget buffer: 2,000 - 1,380 = EUR 620M
Portfolio Y: Scale Play
| Project | Capacity (GW) | Capex (EUR M) | IRR | Weight (Capex Share) |
|---|---|---|---|---|
| Nordic Acquisition | 2.5 | 1,400 | 8.1% | 1,400 / 2,000 = 70.0% |
| Iberian Solar Array | 2.0 | 600 | 10.8% | 600 / 2,000 = 30.0% |
| Total | 4.5 | 2,000 |
Weighted average IRR:
- (0.70 x 8.1%) + (0.30 x 10.8%)
- = 5.67% + 3.24%
- = 8.9%
Remaining budget buffer: 2,000 - 2,000 = EUR 0
Comparison Summary
| Metric | Portfolio X | Portfolio Y |
|---|---|---|
| Total capacity added | 3.7 GW | 4.5 GW |
| Total capex | EUR 1,380M | EUR 2,000M |
| Weighted average IRR | 9.4% | 8.9% |
| Budget buffer | EUR 620M | EUR 0 |
| Time to fully operational | ~2 years | Immediate + 1.5 years |
| Overall risk profile | Low to Medium | Low |
Key insight: Portfolio X delivers a higher IRR (9.4% vs. 8.9%) and retains a EUR 620M buffer. This buffer covers coal decommissioning costs (EUR 60M/GW x 3.6 GW = EUR 216M) and leaves EUR 404M for cost overruns or opportunistic additions. Portfolio Y adds more capacity (4.5 GW vs. 3.7 GW) and delivers faster, but exhausts the entire budget with zero margin for error.
Common trap: Candidates may propose including the Baltic Offshore Wind project because it has the highest individual IRR at 14.2%. However, at EUR 1,200M it consumes 60% of the budget, carries a High risk rating, and its 4.5-year construction timeline creates dangerous proximity to the 2032 deadline. Paired with any other project, it either exceeds the EUR 2B budget or falls short of the 3.6 GW capacity minimum.
Question 3Judgement & Insights
"Review Exhibits 1 and 3. What strategic risks should the CEO weigh when setting the pace of GreenGrid's transition?"
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
Exhibit 1European Utility Generation Mix and Financial Performance (2024)
| Utility | Revenue (EUR B) | Capacity (GW) | Renewable % | EBITDA Margin |
|---|---|---|---|---|
| NordPower | 5.1 | 18 | 65% | 24% |
| Volta AG | 2.8 | 10 | 45% | 21% |
| GreenGrid Energy | 3.2 | 12 | 30% | 19% |
| SudEnergie | 4.5 | 15 | 20% | 17% |
| Lumina Energy | 1.9 | 7 | 75% | 15% |
Source: GreenGrid Energy case file
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Three risks emerge from the exhibits:
-
Non-linear cost of delay: Exhibit 3 shows carbon credit prices accelerating from EUR 108/ton today to a projected EUR 240/ton by 2030. The year-over-year increase itself is growing -- from 12% in 2024 to a projected 20% by 2030. Each year of delay compounds the cost of compliance at an increasing rate. For context, if GreenGrid's coal fleet emits roughly 9 million tons of CO2 per year, the difference between acting in 2025 versus 2027 represents hundreds of millions in additional carbon costs. This argues strongly for front-loading investment into fast-deploying assets rather than waiting for "perfect" projects.
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Transition execution risk: Exhibit 1 reveals a counterintuitive data point -- Lumina Energy at 75% renewable has the worst EBITDA margin in the peer set at 15%, while NordPower at 65% renewable leads at 24%. This contradicts the naive assumption that higher renewable penetration automatically yields better margins. The likely explanation is that Lumina over-invested in capital-intensive asset classes (possibly offshore wind), took on excessive debt, or failed to sequence its coal retirement against renewable revenue ramp-up. GreenGrid should target NordPower's profile as the operational benchmark, not Lumina's renewable percentage.
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Gas fleet optionality: GreenGrid's 4.8 GW gas fleet should not be viewed purely as a liability. As intermittent solar and wind capacity scales, flexible gas-fired generation becomes increasingly valuable as dispatchable backup for periods of low wind or cloud cover. Premature gas retirement could force expensive battery storage purchases or expose GreenGrid to grid reliability penalties. The gas fleet is a strategic option that hedges against intermittency risk, not just a transition cost to be eliminated.
What the interviewer is looking forShow guidanceHide guidance
Good (surface-level reading): Candidate notes that carbon prices are rising so delay is expensive. Observes from Exhibit 1 that peer utilities with higher renewable percentages tend to have higher EBITDA margins. Concludes GreenGrid should move quickly.
Strong (identifies the exhibit trap): Candidate spots that Lumina Energy has the highest renewable share (75%) but the lowest EBITDA margin (15%) -- contradicting the pattern that more renewables equal higher margins. Probes why: likely over-invested in expensive asset classes, took on excessive debt to fund an aggressive timeline, or failed to manage decommissioning costs during the transition. Recognizes that NordPower achieved a better outcome (65% renewable, 24% margin) through disciplined execution. Draws the conclusion that speed of transition matters less than quality of execution.
Excellent (full "So What?" cascade):
| Level | Insight |
|---|---|
| Surface | Carbon prices are rising 12-20% annually; delay increases costs non-linearly |
| Implication | A 2-year delay does not cost 2x more -- it costs 3-4x more due to price acceleration (Exhibit 3 shows EUR 108/ton in 2025 rising to EUR 200/ton by 2029) |
| Actionable | GreenGrid should front-load investments in the fastest-deploying assets (solar at 1.5 years, acquisition at immediate) to begin avoiding carbon costs in Year 1 |
| Level | Insight |
|---|---|
| Surface | Lumina Energy has 75% renewable but only 15% EBITDA margin |
| Implication | Aggressive transition can destroy value if funded through excessive debt or allocated to high-cost project types -- the HOW matters as much as the WHAT |
| Actionable | GreenGrid should benchmark its transition cost-per-GW against NordPower (24% margin at 65% renewable) rather than simply maximizing renewable percentage |
Question 4Synthesis
"The CEO has 10 minutes before the board meeting. What is your recommendation?"
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
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Recommendation: Adopt Portfolio X (Iberian Solar + Alpine Wind + Rhine Storage) and execute a phased coal retirement over 3 years.
Three reasons:
-
Meets the mandate with margin of safety. Adding 3.7 GW of new renewable capacity brings GreenGrid to 7.3 GW renewable. After retiring the 3.6 GW coal fleet, the total fleet is 12 GW with 7.3 GW renewable -- 61%, clearing the 60% threshold. The EUR 620M budget buffer covers decommissioning costs (EUR 216M at EUR 60M per GW) and leaves EUR 404M for contingencies or opportunistic capacity additions.
-
Preserves financial resilience. Portfolio X delivers a 9.4% weighted average IRR, well above the 6.5% WACC. All three assets reach operational status within 2 years, meaning renewable revenue begins flowing before coal retirement eliminates legacy cash flows. This sequencing protects the 16% EBITDA floor the board requires.
-
Avoids the offshore wind trap. The Baltic Offshore Wind project's 14.2% IRR is attractive on paper, but it carries High construction risk, a 4.5-year timeline that leaves almost no margin before the 2032 deadline, and a EUR 1.2B price tag that would eliminate all budget flexibility. GreenGrid has no offshore development experience -- this is not the project on which to build that capability.
What to avoid:
- Do not pursue the Baltic Offshore Wind project in this investment cycle. Its 14.2% headline IRR does not compensate for the combination of High construction risk, a 4.5-year timeline, EUR 1.2B cost (60% of total budget), and GreenGrid's zero offshore development experience. Revisit only after the first wave of projects is operational and risk appetite can be re-assessed.
What to monitor over the next 12-18 months:
- Carbon credit prices -- if they exceed Exhibit 3 projections, accelerate the coal retirement schedule to avoid escalating compliance costs
- Industrial customer demand -- if renewable energy certificate requests from the 30% industrial customer base intensify, Portfolio Y's extra 0.8 GW of capacity may justify the budget stretch in a second investment round
- Offshore wind cost trends -- if industry construction risk decreases and per-GW costs decline, the Baltic project becomes a candidate for the next investment cycle after 2027
- Lumina Energy's trajectory -- track whether Lumina's margins recover or deteriorate further, as a real-time case study in how transition pace affects financial health
- Regulatory timeline shifts -- any acceleration of the 2032 deadline or tightening of interim targets would narrow the execution window and potentially eliminate Portfolio Y as an option
Contributed by CaseDrill practice community
What the interviewer is looking forShow guidanceHide guidance
Good: Recommends one portfolio with basic rationale covering regulatory compliance and financial fit. States a clear position rather than hedging.
Strong: Provides a sequenced recommendation with risk mitigation measures, identifies the key trade-off between speed and cost discipline, and addresses likely board concerns proactively.
Excellent: Delivers a crisp three-part structure -- what to do, what to avoid, and what to monitor -- with specific numbers supporting each point. Connects the recommendation back to the exhibits and the peer benchmarking insight from Question 3.