Commercial Due Diligence

Divestment, Acquisition and Beyond

In today’s rapidly changing energy industry, it’s more important than ever for utilities to have a clear picture of their asset value. Given the many future unknowns around technology and speed to market, regulations, decarbonization, and more, this information allows for scenario planning and agility as operating environments and requirements evolve. Two key aspects of this commercial due diligence are capital expenditure, from the perspective of divestment or acquisition/investment, and providing an external view of the value of assets for the purpose of future reference or CapEx considerations to expand, revamp or modify the asset(s). These may include power plants, PV fields, storage facilities, electricity networks, etc., with values typically above $50M USD.

Divestment Perspective

When an asset owner decides to divest an asset and board resolutions to do so are signed off, UMS Group can help with the intensive process to make sure the right information gets into the data / deal room, giving the owner an accurate perspective on market value, defining a divestment strategy, and profiling potential candidates.

Acquisition Perspective

On the other side of the coin, for investors, the asset can be highly attractive for various reasons, i.e. portfolio diversification or because there may be still be an attractive business case for 15+ years. Typical investors (such as Private Equity, Venture Capital, Family Offices and Sovereign Wealth Funds) often lack the in-depth industrial knowledge, but are well aware of the business opportunity.  As in the divestment case is relevant, UMS Group helps potential investors with assurances that what is presented in the data / deal room corresponds to independent research (due diligence), allowing for preparation of an accurate feasibility study for an investment decision and an offering strategy.

Common Challenges

Divestor

  • Going concern value of plant / installation
  • Value of asset as stand-alone (“the kit”)
  • Current liabilities (to mitigate before sale) such as: License to operate, HSSE (Health, Safety, Security and Environment) risk potential, Technical state of Asset
  • Business case scenarios for selling proposition to market including: Potential synergies, New business potential, Validating current revenue portfolio (clients, off-take)
  • Deal Structuring
  • Acceptable financing

Clearly, the above mentioned challenges are all but exhaustive;  the Commercial Due Diligence could also be used/tailored for the purpose of substantiating a strategic direction or in support of a CapEx decision.

Common Challenges

Investor

  • Validating the information provided in the Data/Deal room, including all the items mentioned in the Divestor column
  • Independent business case
  • Validating reasons for acquisition Increasing market share, Financial opportunity, Enabler in investor’s value chain, Hedging against market volatility
  • Financing structure scenarios Total equity: Blend Equity- (convertible) Loan, Supplier-off-taker guarantees, Maintainable earnings

Clearly, the above mentioned challenges are all but exhaustive; the Commercial Due Diligence could also be used/tailored for the purpose of substantiating a strategic direction or in support of a CapEx decision.

How We Work With You

UMS Group ‘Stand Alone’

• Providing the link between “financial data” and “engineering expertise”
• Our flag reports are greatly appreciated by Investment Committees

UMS Group ‘Subcontractor’ of Main Due Diligence Partner

• We often work as subcontractor for Engineering firms and/or Financial advisors • We enable an early identification of green and red flags; we than support the Engineering firm and/or Financial advisor with a deep dive and/or root cause analysis

Bespoke Due Diligence Services

We bring value through rigorous analyses, deep industry and best practice knowledge, and strategic partnerships.

  • Cost and performance related analyses using peer-group benchmarking
  • Assessment of Information Memoranda: structuring or exploring
  • Gap & Opportunity analysis in connection with sites or stand-alone assets, such as gas fired powerplants or any hydrocarbon-based feedstock industry, nuclear generation, grids, Wind and PV installations
  • Commercial feasibility studies.
  • Identifying and contextualization of critical success factors to improve client’s understanding of all the relevant issues to drive informed decisions (through, among other aspects, underlining strengths to leverage and/or weaknesses to mitigate)
  • Comprehensive assessment of client’s business plan in the context of market conditions and the industry landscape
  • Probing corporate strategy and diagnostics of (under) performance, providing a ‘Projects For Improvement’ prioritization list and implementation roadmap, with both qualitative and quantitative objectives

Bespoke Reports for Both Buyers and Sellers Involved in the Acquisition Process

Vendor

1.) Implementation ISO55000 AM & Risk Management
2.) Best Practices Support
3.) Comparative Analysis to Focus Management Agenda

Bidder

Market Assessment (Grid Companies, Gas Storage, Power Plants, Water Companies)

Vendor

KPI’s to put performance into perspective (Reliability, Safety, OPEX, CAPEX, FTE, etc.). Risk Assessment

Bidder

KPI’s to put performance into perspective (tailored to peer group)

Vendor

Tailored Analysis, Support Preparation Q&A

Bidder

Data room analysis & support, by comparing key figures with peers, gap analysis. Flag report on key items

Due Diligence Support for Production, Transmission, Distribution and Commercial Management

Power Production

  • Gas Fired Power Plants (including mothalling/restart data
  • Coal & Ignite Fired Power Plants
  • Hydro Plants
  • Steam Supply & District Heating
  • Solar & Wind

Transmission & System Operations

  • Power Transmission
  • Assuring System Security (Methods, Costs)
  • Gas Storage & Transmission (limited)
  • Data from every continent (but Antarctica)
  • Data from small and large companies, in desert and under arctic conditions
  • Library of ‘common & best practices’

Distribution

  • Power & Gas Distribution Data
  • SAIDI/SAIFI root cause analysis for developing nations as well as developed nations
  • Grid loss reduction programs
  • Smart Meter Practices

Commercial Management

  • Margins in trading, retail, asset management
  • Option Valuation
  • Contract Valuation
  • Flexibility Valuation (Industry, Storage, Plants)
  • Costs of ‘greening’

Power Production

  • 20+ years of benchmarking experience, with experts based in USA, Europe and Australia
  • (De-)Mothballing Projects
  • Biomass Conversion Projects
  • Renewable Subsidy Regimes (selected European countries)

Transmission & System Operations

  • 20+ years of benchmarking experience, with experts based in USA, Europe and Australia
  • Regulatory Regime (selected countries)
  • “Deep dives” on various topics (losses, RAB, Regulatory Power, FTE’s, IT Architecture, etc.)

Distribution

  • 20+ years of benchmarking experience, with experts based in USA, Europe and Australia
  • Regulatory Regime (selected countries)
  • “Deep dives” on various topics (losses, RAB, Regulatory Power, FTE’s, Smart Meters, etc.)

Commercial Management

  • Dedicated team headed by former trading manager with extensive experience in Due Diligence
  • 5+ years of commercial management projects in Europe, China and Australia

Excerpt of Experience

Why UMS Group?

Embark on Solutions That Transform

 

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