Project development and transaction support

Overview

Investments in the development of new or existing long-lived, capital-intensive assets and  long-term, asset-based contracts can be especially risky in the current environment of market and regulatory change. Project investment risks are often driven by uncertainties in multiple areas. For the investment to be successfully carried out, risks must be assessed, allocated, and mitigated from the varying perspectives of the project developers/sponsors, lenders, owners, and insurers. Yet, regardless of the perspective and whether the project risks are physical or financial, the following sources of uncertainty are common to all:

Energy sector policy: drivers, directions, and implications
Regulatory support: interpretation and implementation
Electric power markets: modeling and price forecasting
Fuel supply: reliability and price forecasting
Transmission: interconnection feasibility and reliability needs assessment

To assess the influence of uncertainties in these four key common risk areas, Bates White has assembled an outstanding team of recognized energy economists and engineers that possess expertise in policy and regulation, fuels pricing and transportation, and generation and transmission planning and operations. Our experts successfully bring together a thorough understanding of the latest changes in federal and state energy policies and regulations, the planning and operational protocols of the North American regional transmission systems, and the latest technical and financial analysis techniques and models.

Bates White helps maximize the value of generation assets by identifying and assessing the markets that can most effectively be served by comparing project generation and transmission costs to market prices. Our forecasts of revenues and costs employ widely used hourly, transmission-constrained, chronological-dispatch production costing models; custom models to forecast the production of solar thermal and photovoltaic generating plants; and empirically-obtained hourly wind generation data. The transmission power flow and voltage stability modeling techniques used by our analysts have withstood the highest degree of regulatory scrutiny. Our experts have testified before FERC and state regulatory agencies and have provided technical and policy assistance to regulators and transmission planning agencies.

For more information about our experience in supporting parties engaged in litigation, arbitration, and regulatory proceedings related to energy assets, click here.

Energy sector policy and regulatory support
  • A Bates White expert authored the Baja California electricity and natural gas supply and demand forecasts and infrastructure development plans sections of the Energy Supply and Demand Assessment for the Border Region—Consultant Report. The report was prepared as input for the California Energy Commission’s 2005 Integrated Energy Policy Report.
  • On behalf of the California Energy Commission (CEC), our experts applied a Capital Asset Pricing Model (CAPM) approach to estimate the risk-adjusted discount rates, used by the CEC to calculate the Market Price Referent (MPR). This reference price is used by renewable generation project developers to set their bid price into California’s utility Renewable Portfolio Standard (RPS) renewable resource solicitations.  
  • Conducted a study on the implications of allowing the Volumetric Ethanol Excise Tax Credit (VEETC) to expire at the end of 2010. The study examined the VEETC influence on ethanol supply and market price volatility due to increased financial stress on marginal producers and its role as an incentive to invest in new ethanol refinery projects using advanced technology.
  • On behalf of Union Fenosa, a major Spanish energy company, provided technical and regulatory advice on aspects of a proposed, 500 MW wind farm located in northern Baja California, México. Supported the developer’s application for certification of the wind project as an in-state renewable resource with the California energy Commission. Carried out a comparative analysis of environmental and other siting regulations applicable to wind power projects in the U.S. and México.

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Electric power markets: modeling and price forecasting
  • Conducted a comprehensive production cost modeling study on behalf of New York Regional Interconnect, Inc. (NYRI), related to NYRI’s application to the New York Public Service Commission (NYPSC) to construct and maintain a state-of-the-art 190-mile, 1,200 MW HVDC transmission line. Performed both zonal and nodal production cost simulation modeling studies using Aurora XMP and PowerWorld Simulator.
  • Developed a probabilistic risk management model for market price forecasting, asset valuation, and power supply cost analysis. Implemented the model in multiple applications to forecast market clearing energy and capacity prices and to value retained capacity, new unit construction, power supply bids, and financial derivatives.
  • Conducted economic due diligence and transaction structuring, including market assessment, price forecasting, and risk assessment on portfolios of generating assets and contracts on behalf of private equity investors. The portfolios included cogeneration and gas-fired assets, as well as contracts for power and thermal off-take and fuel supply and transport.
  • Conducted risk assessment and valuation of complex structured transactions involving power plants and associated long-term contracts using a proprietary fundamental price forecasting model with stochastic draws on key inputs.
  • Conducted valuations of all Central Maine Power (CMP) power plants in support of the company’s negotiated sale of generation assets to FPL Energy. Applied market price forecasts and extensive Monte Carlo analyses to examine multiple transaction scenarios, including the value of retaining hydroelectric facilities as a supply hedge during the transition to competition. FPL Energy agreed to pay $845 million for all of CMP’s nonnuclear generating assets.

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Fuel Supply: reliability and price forecasting
  • Performed power plant valuation of the TNP One lignite-fueled unit for Texas–New Mexico Power Company to support the asset sale strategy, as well as litigation with respect to stranded costs.
  • Provided natural gas market and infrastructure support to sellers and buyers of electric generation facilities. Evaluated fuel requirements and infrastructure commitments, and provided gas and oil price forecasts for use in developing forward power curves for valuation purposes.
  • Advised CFE on the integration of its fuel (natural gas, oil, and coal) procurement and risk management functions. The advisory services included the definition of a risk management function and identification of business models (and related IT systems), as well as methods of transferring risk-managed benefits to the utility’s customers. Reviewed fuel purchase and sales contracts, and made recommendations regarding the appropriate price references, indices, and structures, with a particular focus on basis differentials.

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Transmission: interconnection feasibility and reliability needs assessment
  • Supported a major wind project developer in the evaluation of transmission options to wheel several hundred megawatts from northern Baja California, México to California electric utilities. Supported the project developer in challenging the timeliness and results of the interconnection feasibility study performed by the transmission owner under the CAISO Large Generator Interconnection Process, and represented the developer in the Generator Interconnection Process Reform (GIPR) stakeholder meetings.
  • Performed multiple reliability studies on behalf of Exelon Corporation related to the potential retirement of the Zion, Limerick, Oyster Creek, and Three Mile Island nuclear power plants. Assessed the impact of the retirements on transmission system reliability by performing Optimal Power Flow (OPF) and Security-Constrained Optimal Power Flow (SCOPF) studies.
  • Conducted an independent reliability needs assessment of the proposed 265-mile, 502 Junction-Mt. Storm-Meadow Brook-Loudoun 500 kV Transmission Line for the Virginia State Corporation Commission. The work involved load flow modeling of multiple transmission, generation, and demand response alternatives scenarios capable of reliably serving the forecast load. Prepared and presented testimony as to the ability of PJM’s RPM demand response programs to provide the same level of long-term reliability as that of the proposed line.
  • Conducting an independent reliability needs assessment and economic impact analysis for the proposed 765kV Potomac Allegheny Transmission Highline (PATH) for the Public Utility Commission of West Virginia.

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