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Unformatted text preview: e-related conferences Infrastructure EPC companies EPC Private sector development companies Private Individual project developers Individual Strategic and operational investors Strategic Research and intelligence resources Research Specialized Consultants Specialized 3 2. 2. Project Structures Typical structures: Typical Include many participants Include Various types of project owners/partners could include: Various Individual project developers Individual project Strategic and operational Investors Strategic and Governments Governments Passive Investors (e.g., funds and institutional investors) Passive Investors funds Service providers/project contractors, equipment manufacturers, feedstock suppliers, O&M Service feedstock providers, offtakers providers, Various forms of debt – some recourse and some totally non-recourse project risk Various Can be totally private sector or PPP Can The Developer is responsible for structuring these complex arrangements – The which requires creative, experienced individuals. Developers tend to be highly compensated with project profit participation, which Developers can create cultural issues in traditional company 4 PROJECT STRUCTURES PROJECT Illustrative US Cogeneration Project Coal Fired Power Plant Power Enterprises Capital Company SPC* Coal Company EPC Enterprises SPC* SPC* 48% GP Interest 12% GP Interest Fuel Supply Agreement Transportation Company Lime Company Illustrative Cogeneration Plant, Ltd. Lime Supply Agreement O&M Agreement U.S. Operating Services Company * A wholly-owned special purpose subsidiary was used to hold the partnership interests Management Service Agreement U.S. Generating Company Electric Utility 40% LP Interest Construction/Term Financing Power Purchase Agreement Steam Sales Agreement Food Processor Turnkey Construction Contract Lenders Bechtel Power Corporation Tax Exempt Debt Major Subcontracts 5 3. 3. Getting Into The Business (1) Steps for entering the Development business: Steps Identify target sectors, project prioritization and selection criteria, and strategic approach Identify prioritization and selection Form company Form Hire staff Hire Develop and nurture “project opportunity network” Develop Options for approaching projects: Options Develop relationships with project developers/companies in target sectors Develop developers/companies Create “greenfield” opportunity -- with or without Partner Create opportunity -- with Bid government-sponsored project on specific opportunity -- with or without partner Bid sponsored -- with Buy partial or total position of another developer Buy Buy an existing operating asset or business Buy Participate-in or develop ancillary business activities or expertise, which: Participate Increases the revenue/profit streams available Increases Increases sector expertise and enhances industry credibility and reputation Increases reputation Expands relationships and possibly improves “deal flow” Expands deal flow May ultimately evolve into independent businesses themselves. May independent businesses 6 Getting Into The Business (2) (2) Characteristics of infrastructure projects and the Characteristics development/finance process Very complex ownership and financial structures Very New players entering industry, bringing tremendous capital but limited New imited experience Keys to success: Keys Creative financing and access to funding Creative Understanding government regulations and managing government Understanding relationships Ability to evaluate specific industry potentials and trends Ability Ability to understand and weather long-term business-cycles Ability Ability to link together and mitigate the myriad of project risks, including the Ability mitigate s, risks involved in project construction, feedstock pricing, off-take pricing, risks take political risk, currency risk, etc, political A shortage of experienced professionals in the sectors – and good ones shortage sectors and are very expensive. are 7 4. 4. Organization Infrastructure projects are highly capital-iintensive ventures – so ntensive Infrastructure so normally you would design your business to maximize your ability to leverage your capital. Therefore, one approach is to: Therefore, Create multiple levels into which strategic or financial investors can be Create introduced, and Multiple levels at which value can be harvested. Multiple 8 4. 4. Organization Any particular block or level of the business can be added or Any built at any time bringing in strategic, financial or special purpose partners as desired. In one model, The company owns a Holding Company which in In turn owns x% of the Operating Company. At the Operating Company level, a strategic or financial investor might be At brought into the business to purchase part of the Company. This investment could be made at any time – either at the beginning or later This in the future -- as the value of the overall business becomes clearer, and the the as value of a particular partner easier to define. 9 4. 4. Organization Below th...
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