Sterling Energy Experience - Asset Acquisition | Power Plant Due Diligence

Asset Acquisition and Transition Support

Acquisition and Transition Support for Wisvest
Sterling Energy assisted Wisvest in the acquisition of two assets on the East Coast. The assets consisted of a 590 MW three-unit plant and a single-unit 466 MW plant.

Sterling Energy provided a five person core management team of highly skilled power plant business professionals to manage the transition and establish the business for the acquiring entity. The broad role definitions for the effort included:

Overall transition project management
Planning and control
Physical plant management
Business systems
Marketing and trading
Engineering, environmental and capital project management

Our scope of work included:

Development of the mission and vision for the new entity
Development of one- and five-year business and marketing plans
Development of the business, administrative and accounting programs for the new Wisvest business entity
Development of the marketing and trading plan for the entry into the newly formed competitive NEPOOL market
Transition the 1,000 person work force to the new entity
Development of a capital and major maintenance program
Support the non-recourse debt transaction for the new entity
Spearhead business strategies for the emerging NEPOOL market

Acquisition Support for Sempra Generation’s Purchase of Twin Oaks
Sterling Energy assisted in the bid preparation and due diligence of this 305 MW lignite-fired plant consisting of two ABB-Combustion Engineering circulating fluidized bed (CFB) boilers. After project award, we worked on the transition to integrate Twin Oaks into the Sempra Energy business management system and created a stand-alone business entity.

Acquisition Support for Sempra Generation’s Purchase of the AEP Portfolio
Sterling Energy was retained to assist with the acquisition of AEP’s ten power generation facilities in the Southwest. Sterling Energy’s scope encompassed several transition activities including the establishment of the business offices and the integration of the engineering and support groups into the Sempra organization.

Acquisition Support and Transition Management for US Power Generating Co.
US Power Generating Company purchased three East Coast power generating facilities, a total of 2,096 MW representing 23% of the area’s generating capacity. Because this 2006 acquisition was US Power Generating Company’s first, plant operating entities and business processes did not exist. US Power Generating Company selected Sterling Energy to lead and manage the development of stand-alone O&M business entities and business processes for the three facilities: a 1,280 MW thermal facility and the 816 MW gas turbine facilities.

Sterling Energy provided a four person core team of power plant business and O&M professionals to support the acquisition and to manage the rapid and simultaneous transitions of the three plants to US Power Generating Company ownership. Sterling’s deliverables fell into three broad categories – acquisition support, business entity and process development, and transition services – as outlined below.

Acquisition Support

Fixed asset review
Inventory audit management
Regulatory and environmental compliance assessment

Business Entity and Process Development

Business entity formation
Accounting system selection, setup, and training
Maintenance and materials management system (MMMS) selection, setup, and training
Preventive maintenance and condition-based maintenance task development
Management policy development
Capital and O&M budget development and training
Operating plan development
Procurement program development
Business process mapping
Payroll system development, setup, and training
Organization and staffing review
Safety and health program review

Transition Services

Payroll management services
Payroll audit and reconciliation services
Benefit management services

The results are best described by this note from the Chairman and CEO in 2007:

“You accomplished the incredibly ambitious things you told us you would and put us in a position to close the deal on time and with a great feeling of confidence that critical issues we needed to deal with by closing are under control. I deeply appreciate what you did and the exceptional spirit, dedication, excellence and grace with which you did it. Ian and I and our entire team are very impressed and we thank you very much.”

Acquisition and Development Support for International Mining Company
Sterling Energy has supported the acquisition and development of power generation assets for several of Barrick Gold’s large mining projects. We’ve provided advice and performed analyses on a wide range of business, technical and operational issues.

Due diligence – Site inspections, document reviews, economic and plant performance analyses, and strategic advice regarding the successful acquisition of three power plants
Economic modeling – Economic and plant performance models for individual plants and multi-plant power supply entities
Contract negotiations – Negotiation of plant performance test guidelines and targets, lease performance issues and measures, and general support before and after contract closings
Performance tests – Owner’s representative for plant performance and emissions tests. Development of emissions test specifications and solicitation and selection of testing firm.
Power supply options – Economic evaluation of self-build and power purchase agreement scenarios for a large mining project
Power supply infrastructure – Advice and analysis regarding consolidated maintenance facilities and other common infrastructure
Feasibility study – Site inspection, equipment inspection, business model development, and advice regarding a proposed merchant plant opportunity
Reliability modeling – Monte Carlo analyses of plant and power system reliability under a range of mine load and plant reliability scenarios
Merit order study – Analyses of the impacts of expected changes in plant configurations, fuel costs, and system capacity on the average and marginal costs of energy in the national electric system
Emission control options – Identification and analyses of the technical and economic aspects of a range of emissions control strategies for two different sets of multi-plant power generation facilities
Asset management support – Ongoing review and analyses of plant reports and performance data, identification of and recommendations regarding emerging issues, participation in quarterly management meetings, and strategic advice regarding risks and opportunities related to future operations
Project financing support – Identification of risks and risk mitigation strategies, presentation to banks’ engineer and prospective lenders, review of documents related to proposed financing

Due Diligence Assessment for a 6,200 MW Power Plant Fleet
Sterling Energy performed a due diligence assessment of Duke Energy North America’s ten-plant DENA fleet consisting of six 2×1 CCGT plants and eight steam units totaling approximately 6,200 MW of generation. The assignment included document reviews, site visits, economic models, and a comprehensive due diligence report.

Acquisition Support for a 1,500 MW Coal Plant
Sterling Energy led the technical due diligence of a large coal-fired plant in the western U.S. We developed an alternate business model based on gas operations. We then quantified the market opportunity, met with regulators to assess environmental issues, and developed an economic model to support an offer to acquire the plant. Our client approved the proposal that we had developed on their behalf and presented the proposal to the owners. This was well-received, so we developed detailed budgets for conversion and restart, modeled proposed PPA terms, met with regulators and other key stakeholders, and developed and submitted an air permit application. We presented the opportunity to several investors; however, the financial crisis of late 2008 derailed the project.

Acquisition Support for Landfill Gas, Geothermal, Hydro and Biomass Portfolio
Sterling Energy provided due diligence support for the acquisition of a portfolio of alternative energy plants in the western U.S. This portfolio consisted of five biomass, eight landfill gas, one hydroelectric and two geothermal plants. Each project was evaluated in key areas including: leadership and management tools, plant performance, maintenance management, business management and administration, operations management, regulatory compliance, and health and safety. The process included benchmarking the performance of each facility. The results were collated into the “smart book”, a comprehensive project report that the buyer continues to use.

Coal Power Plant Acquisition and Biomass Conversion
Sterling was engaged to perform a due diligence assessment for the acquisition of a 50 MW coal-fired circulating fluidized bed power plant for conversion to tire derived and wood fuel. Sterling Energy managed the initial phases of the conversion program.

Asset Acquisition and Transition Support for Kenetech Windpower
A Sterling Energy principal led the acquisition effort of the Kenetech Windpower operating assets in the Altamont Pass area of California for a partnership of M&N Windpower and FPL Energy. Assets included 164 MW of wind power projects, 400 MW of power sales and master land lease contracts. We performed a due diligence review, developed an acquisition pro forma financial model and led the operating and management transition effort.

Acquisition Due Diligence Review for Costa Rica Wind Project
A Sterling Energy principal performed due diligence review of the acquisition of the 20 MW Pesa Project in Costa Rica. The project employs the Kenetech KVS-33 wind turbine technology in a very energetic wind regime.

Development Stage Wind Project Acquisition and Due Diligence Support
Sterling Energy provided due diligence support for the acquisition of a development-stage 150 MW project. Our scope included a review of the wind resource assessment and reviews of the wind turbine purchase agreement and construction contracts.

Acquisition Due Diligence and Valuation of California Wind Power Project
Sterling Energy performed an acquisition due diligence assessment and valuation analysis of an 11 MW wind project in California. The project included 139 turbines rated at 65 kW and 95 kW. A detailed project operating and financial model was developed for valuation purposes. A development and financial analysis was performed for a 9 MW expansion of the project to take advantage of an unused portion of a power purchase agreement

Greenfield Development and Wind Project Acquisition Support Services
Sterling Energy performed greenfield development and wind project acquisition support services for a major generation company. Services provided include project feasibility assessment, development plans, development support, acquisition evaluation and due diligence.

Acquisition Support for Multiple Biomass Power Projects
Over a period of 18 months, Sterling Energy performed due diligence assessments of six California biomass projects totaling 106 MW for a new entrant into the renewable energy business. One project was acquired.

California 220 MW Wind Power Assets Acquisition Assessment
Sterling Energy performed an acquisition assessment of 220 MW of operating wind turbine projects in California. The assessment focused on long term production and price forecasts, long term operating and maintenance costs, permit issues, repowering and asset valuation.

Valuation Assessment of California Wind Power Developer
Sterling Energy performed a valuation assessment of a California wind power developer with 38 MW of operating assets and 1,500 MW of wind power development assets.

Wind Project Development Valuation
Sterling Energy developed a valuation of a 1,500 MW wind project development for a large Japanese trading company.

Wind Project Due Diligence
Sterling Energy performed a due diligence assessment of a 24 MW wind project employing Vestas V-90 wind turbines for a large bank considering a tax equity investment in the project.

Large Wind Project Due Diligence
Sterling Energy performed a due diligence assessment for a large financial institution investor for a 283 MW wind project in the Southwest. The assessment included opinions regarding a new MHI 2.4 MW wind turbine being deployed on the project, production forecasts, operating costs and contract reviews.

Acquisition Due Diligence and Valuation of a Merchant Plant Fleet
Sterling Energy performed facility assessments, reviewed documents and developed valuation models for a fleet of eight combined and simple cycle merchant plants in the West.

Acquisition Due Diligence and Valuation of Two Merchant Plants
Sterling Energy performed due diligence and developed valuation models for two large combined cycle merchant plants in western Canada.

Acquisition Due Diligence and Transition Support for a Combined Cycle Plant
Sterling Energy performed due diligence and provided support during the client’s successful acquisition of a 70 MW combined cycle combustion turbine plant in the West. In addition to the typical due diligence scope, Sterling’s reviewed the facility’s compliance with the NERC reliability standards and provided recommendations for improvement.

Acquisition Due Diligence and Transition Support for Two Cogeneration Plants
Sterling Energy performed due diligence and provided support during the client’s successful acquisition of two 45 MW gas turbine cogeneration plants in California.

Transition Management for a 158 MW Power Plant in New England
Sterling Energy provided transition management services to the buyers of a 158 MW plant in New England.

For more information please contact Ron Fawcett or Dave Morgan.