Real Options at Polaris Energy Corporation (A)

The (A) case involves a strategic alliance between an electric utility and a firm developing pollution control technology under considerable regulatory and technological uncertainty. The deal structure involves a licensing agreement and a minority equity purchase structured as an option.

The cases enable students to map the investment and operational practices of a firm into a taxonomy of real options, evaluate the structure of a deal using option theory, compare and contrast real options and financial options, and understand the practical difficulties surrounding the implementation of real options in organizations.