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