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Major Projects & Clients

Major Client List

BHP Billiton

GNPower

Shell Gas & Power

 

CLP Power Asia

InterGen

SINOMACH

 

CLP Power China

Itochu

Sinosure

 

CLP Power International

JPower (EPDC)

Tohoku Electric

 

CMS Energy

Mizuho Bank

Woodside Energy

 

Edge Cap

OneEnergy

 

 

EGCO

Quezon Power

 

       

 

Major Projects

The following is a representative selection of projects completed over the past several years, click on the link to take you to that project:

Vietnam (2006): Power & Gas Market Study

Philippines (2006): Mirant Acquisition Due Diligence

China (2005): Shanghai Power & LNG Market Study

Singapore (2005): Power Market Study & GENCO Valuation

Indonesia (2005): Power Market Study & Opportunity Review

China (2004): Power Market Study

Australia (2004): Victoria Power Market Study & Project Review

Philippines (2004): LNG Terminal & 2000MW IPP Project Review

South Korea (2003): LNG-Fired IPP Project Review

New Zealand (2003): Power Market Study & 2300MW Company Evaluation

Philippines (2003): Power Market Study & Opportunity Review

Thailand (2003): Project Due Diligence – 1400MW Coal-Fired IPP

South Korea (2002-3): Market Advisory for Acquisition of 6000MW GENCO

Taiwan (2002): Power Market Study & 4Mtpa LNG Terminal Study

Japan (2002): Power Market Study & Coal Demand Forecast

New Zealand (2002): Power Market Study & Gas Demand Forecast

New Zealand (2002): Power Market Study & Opportunity Review

Western Australia (2001-2): Project Manager for 400MW IPP Solicitation

Japan (2001-2): Power Market Study & LNG Demand Forecast

Victoria, Australia (2001): Project Advisor

Queensland, Australia (2000): Project Due Diligence – Callide “C”

 

Queensland, Australia (2000): Project Due Diligence – Callide “C”

In 2000, IEC was engaged by the Client (a major international IPP listed above) to review the 800MW coal-fired Callide “C” merchant IPP project in Queensland.

At the time, the Client was negotiating to acquire the project which was still under construction. IEC’s task was to undertake an equity due-diligence audit of the documentation and to summarise the project from an equity investment perspective. The deal was near to completion and senior management wanted to ensure that no major issues had been overlooked.

IEC spent several weeks working with the project team in Queensland and reviewing all key documents including the EPC contract, O&M agreement, site lease, market study, fuel supply contract, water supply plan, ash disposal plan and financial model.

In its final report to the Client’s senior management, IEC identified several potentially serious issues and suggested possible solutions. In particular, IEC identified water supply as the most critical issue facing the project. (Within six months of the COD, Queensland experienced a severe drought and water supply was rationed to the plant resulting is a lengthy period of restricted output). Fortunately, the Client had acted on IEC’s recommendations and taken steps to reduce their financial exposure.

 

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Victoria, Australia (2001): Project Advisor

In 2001, IEC was retained by a power trading company (listed above) to act as Project Advisor for a proposed 150MW greenfield gas-fired peaking project being considered in Victoria.

Rapid load growth in Victoria during the previous five years and under-investment in new generation capacity had resulted in a reserve margin that was (and still is) close to critical levels. Victoria is a participant in the National Electricity Market (NEM) which is a Pool into which all generators must sell their output on a spot basis.

Retailers and trading companies, who must purchase from the Pool, can hedge their exposure to volatile spot prices by entering into financial contracts with generators. Alternatively, retailers/traders can build their own peaking plants which can be used as insurance against very high Pool prices.

The Client was considering building a peaking plant to cover their exposure against such Pool price spikes.

IEC’s roles, as Project Advisor, included:

Assisting with financial modelling

 

Advising on technology options

 

Assisting with site identification

 

Advising on fuel supply negotiations

 

Advising on transmission and infrastructure issues

 

Advising on Partner selection

 

Advising on general project development issues

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Japan (2001-2): Power Market Study & LNG Demand Forecast

In 2001-02, IEC was engaged by a major international oil & gas company (listed above) to produce a study of the Japanese power generation market with a focus on: (i) future LNG demand and (ii) a proposed greenfield 1000MW LNG-fired IPP project.

Japan is one of the largest power markets in the world, with installed capacity of around 230,000MW. The country is divided into nine main areas (plus Okinawa), each operated by a monopoly franchise utility. Each utility is interconnected to each other via the main grid but annual energy flows are relatively small. The situation is complicated because the six southern areas operate a 60Hz grid and the three northern areas (including TEPCO) have a 50Hz frequency.

The industry is beginning the process of deregulation and opportunities are starting to emerge for potential IPP projects. However, the outlook for private sector investors is clouded by uncertainty over policy issues (eg. Kyoto, nuclear power, pace of deregulation) and market issues (eg. New Entrant economics, access to contestable customers, wholesale power tariffs).

Japan is the world’s largest importer of LNG (57Mtpa) and currently accounts for c.50% of total world consumption. Because power generation represents around 2/3 of total LNG used in Japan, the future of the electricity market is essential to LNG demand forecasts.

IEC compiled a complete database for the Japanese power system, including:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the prior 10 years for each of the nine main power company franchise areas

 

A database for all nuclear and fossil fuel thermal generation units (>20MW connected to the main grid) including capacity, availability, heat rate, O&M costs and age plus historical generation and fuel consumption for the previous three years

 

A database for all hydro generation and pumped storage units (>5MW) including capacity, age, monthly peak/energy and historical generation for the previous three years

 

A transmission database including constraints, losses, peak and annual flows for all major interconnectors

 

New Entrant costs

IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit on the system on an hourly basis. The model also produced wholesale spot price information, as if the system were operating as a Pool (NB. A mini Pool “JPEX” has subsequently come into operation, although it currently only represents <1% of the total market).

Multiple scenarios were run to measure the operation of the planned IPP and forecast future LNG demand. Key variables included oil price, load growth, carbon taxes, nuclear build-out program and retirement schedule of existing power plants. IEC demonstrated that the choice of these (and several other) key variables have very significant (and surprising!) effects on LNG demand. IEC was able to advise the Client on various pricing strategy options and identify those customers most likely to increase or decrease demand.

IEC also provided the Client with a detailed description of how their proposed IPP might operate under various scenarios and also advised on likely development issues that could be encountered and how these might be overcome.

IEC now has the most comprehensive database and detailed simulation model for the Japanese power market that exists outside of that country.

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Western Australia (2001-2): Project Manager for 400MW IPP Solicitation

In 2001 & 2002, IEC was retained by the Client (a major international IPP listed above) to act as the Project Manager for Western Power’s IPP solicitation in the South-West Interconnected Network (SWIS) of Western Australia.

Western Australia is not electrically connected to the eastern States and does not participate in the NEM. WA is in the very early stages of deregulation and state-owned Western Power remains the dominant power supplier. Western Power operates around 3000MW of generation capacity in the SWIS. The reserve margin is very tight and new power plants urgently need to be built, in order to meet rising demand and scheduled retirement of several older units. In 2001, Western Power was instructed to hold an IPP solicitation for 400MW of new capacity.

IEC’s role, as Project Manager, included:

Representing the Client in Perth

 

Overall project management and co-ordination

 

Liaison with Western Power

 

Liaison with Government and other relevant organisations

 

Partner selection and management

 

Identification and ranking of potential projects

 

Market assessment

 

Site identification including access to fuel supply, water, transmission and environmental issues

 

Co-ordination of engineering, finance and legal activities

 

Budget and resource management

 

Bid preparation and submission

 

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New Zealand (2002): Power Market Study & Opportunity Review

In 2002, IEC was commissioned by the Client (a major international IPP listed above) to investigate potential greenfield IPP investment opportunities in the New Zealand power market. The investigation included a study focusing on the NZ wholesale electricity market. The main deliverable a recommendation for possible entry strategies, including specific near- and medium-term opportunities.

NZ has total installed capacity of around 8,300MW of which approximately 60% is hydro. NZ has one of the most deregulated power markets in the world. All power is traded through a Pool and all customers are fully contestable. The main feature of the NZ market is the high degree of variation in hydro output (caused by limited storage capacity) which results in considerable volatility in Pool prices. All generators operate on a merchant basis and, to avoid exposure to excessively volatile Pool prices, the four main GENCOs hedge their output against their own retail load. The high level of volatility in the spot electricity prices presents a major challenge for stand-alone new entrant merchant IPPs seeking to enter the market.

IEC compiled a complete database for the NZ power market, including:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the previous 10 years for both main islands

 

A database for all hydro generation units (>1MW) including capacity, monthly energy inflows, minimum and maximum monthly generation constraints, storage capacities and actual historical generation for the previous three years

 

A database for all fossil fuel, geothermal and wind-power generation units (>10MW) including capacity, age, availability, heat rate, O&M costs plus actual historical generation and fuel consumption for the previous three years

 

A complete set of hourly nodal Pool prices for the previous three years

 

Fuel costs and availability

 

A transmission database including constraints, losses, peak and annual flows for the inter-island interconnector

IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit on the system on an hourly basis. The model also produced hourly wholesale spot Pool price information for the system and for each generator.

Multiple 20-year scenarios were run to test the sensitivity and measure the operation and profitability of all existing and planned plants. Key variables included expansion plan(s), future fuel (gas, LNG & coal) price, seasonal and annual hydro variations, load growth, carbon taxes and retirement schedule of existing power plants.

The likely timing, size, type and location of future new plants was determined. Each of these potential projects was described in detail and ranked according to its pro-forma equity returns, risk profile and potential development barriers. IEC provided recommendations to the Client on key aspects of the entry and development strategies including partners, fuel supply, siting and environmental issues.

 

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New Zealand (2002): Power Market Study & Gas Demand Forecast

 

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Japan (2002): Power Market Study & Coal Demand Forecast

In 2002, IEC was retained by a major international coal producer (listed above) to produce a study of the Japanese power generation market with a focus on future thermal coal demand.

Japan is one of the largest power markets in the world, with installed capacity of around 230,000MW. The industry is beginning the process of deregulation and the outlook for coal-fired power is clouded by uncertainty over policy issues (eg. carbon tax, nuclear power, pace of reform) and market issues (eg. competing fuel prices, economic growth). Coal-fired plants make up around 13% of installed capacity and accounts for over 20% of electricity generated in Japan. The power industry consumes around 75 million tonnes of coal annually, 99% of which is imported. Coal-fired power stations account for over 50% of all carbon emissions produced by the power industry.

IEC updated its existing database for the Japanese power system which included:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the previous 10 years for each of the three transmission regions.

 

A database for all nuclear and fossil fuel thermal generation units (>20MW connected to the main grid) including capacity, availability, heat rate, O&M costs and age plus historical generation and fuel consumption for the previous three years

 

A database for all hydro generation and pumped storage units (>5MW) including capacity, age, monthly peak/energy and historical generation for the prior three years

 

A transmission database including constraints, losses, peak and annual flows for all major interconnectors

IEC adapted its existing detailed load & dispatch simulation model that replicates the operation of every unit on the system on an hourly basis. The model also produces wholesale spot price information, as if the system were operating as a Pool (NB. A mini Pool “JPEX” has subsequently come into operation, although it only represents <1% of the total market).

Multiple scenarios were run to project future thermal coal demand. Key variables included future oil price, load growth, carbon taxes, nuclear build-out program and retirement schedule of existing power plants. The results demonstrated that the choice of these (and several other) variables have very significant effects on future coal demand in Japan. IEC was able to advise the Client on potential strategies to hedge against potential threats and capture additional market share.

IEC now has the most comprehensive database and detailed simulation model for the Japanese power market that exists outside of that country.

 

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Taiwan (2002): Power Market Study & 4Mtpa LNG Terminal Study

In 2002, IEC was engaged by the Client (a major international oil & gas company listed above) to advise on their bid for the Tatan LNG terminal.

TaiPower invited competitive bids for a new receiving terminal in northern Taiwan plus long-term supply of LNG for its proposed 4000MW CCGT power station. Taipower is the monopoly power utility in Taiwan and has installed generating capacity of 39,000MW (which includes 10,000MW of IPPs under contract).

IEC was mandated to prepare a comprehensive market study which focused on the future operation of the Tatan terminal and the adjacent power station.

As part of the study, IEC constructed a simulation model which replicated the operation of the Taiwan power generation system. IEC visited Taiwan, in order to collect and collate a detailed load, generation and transmission database:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the previous 10 years for each of the nine main power company franchise areas

 

A database for all nuclear and fossil fuel thermal generation units (>20MW connected to the main grid) including capacity, availability, heat rate, O&M costs and age plus historical generation and fuel consumption for the previous three years

 

A database for all hydro generation and pumped storage units (>5MW) including capacity, age, monthly peak/energy and historical generation for the prior three years

 

A transmission database including constraints, losses, peak and annual flows for all major interconnectors

Multiple scenarios of future load growth, expansion plan and fuel-pricing were investigated, in order to assess the market position of LNG and also to determine the optimum pricing formula for the LNG supply contract. Hourly load patterns for the power station were calculated, in order to optimise LNG storage and other terminal facilities.

 

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South Korea (2002-3): Market Advisory for Acquisition of 6000MW GENCO

IEC, working together with a major Japanese investment bank (listed above), was engaged by a major Japanese power utility (listed above) to advise on their proposed acquisition of KOSEPCO in South Korea in 2002-03.

South Korea has total installed capacity of around 60,000MW which is mostly owned and operated by six state-owned GENCOs, with only minor contributions from contracted IPPs. The state-owned GENCOs were formed in 2000, as part of the restructuring and planned privatisation of KEPCO.

KOSEPCO was the first of the five KEPCO GENCOs to be offered for privatisation by via a competitive bidding process. KOSEPCO has a total installed capacity of almost 6,000MW, comprising five large power (mostly coal-fired) stations. At the time of sale, the South Korean electricity market was in the process of deregulation and was moving toward a competitive Pool. Complex vesting contracts were stapled to KOSEPCO, as part of the sale.

IEC’s role was to: (i) advise the Client and its financial advisor on the competitive position and future prospects for KOSEPCO in the electricity market and (ii) conduct the market section of the due diligence process.

IEC prepared a comprehensive market study which integrated all relevant regulatory and operating data. As part of the study, IEC constructed a detailed simulation model of the Pool market which was then used to make 20-year projections of operating and financial performance for each of the existing (and planned) KOSEPCO stations. Multiple scenarios were created to test the sensitivity of the company to various assumptions eg. fuel cost, load growth, bidding behaviour and carbon tax.

IEC was also required to review and assess all market-related documentation provided in the data room, as part of the due diligence process. This task required IEC to review all available data, including vesting and fuel-supply contracts, and issue a detailed report identifying key risks and potential problems, together with suggested mitigation strategies and recommendations.

 

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Thailand (2003): Project Due Diligence – 1400MW Coal-Fired IPP

In 2003, IEC was engaged by the Client (a major international IPP company listed above) to undertake an independent audit and equity due-diligence of their 1400MW coal-fired IPP in Thailand. The project was only three months from financial close and senior management wanted to ensure that no major issues had been overlooked.

IEC travelled to Thailand and spent several weeks working with the project team and reviewing all key documents including the EPC contract, PPA contract, site lease, fuel supply contract, ash disposal plan and financial model. IEC personnel visited the project site and the proposed ash dump and inspected all land transport routes.

In its final report to the Client, IEC identified several (including one very serious) issues and suggested possible solutions. The recommended strategies were subsequently implemented and all issues were resolved prior to financial close.

 

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Philippines (2003): Power Market Study & Opportunity Review

In 2003, IEC was hired by a major Japanese power utility (listed above) to produce a study of the power generation market in the Philippines. The main goal of the study was to help understand the nature of the market and to identify, rank and recommend potential greenfield and acquisition IPP opportunities.

The Philippines has total installed capacity of around 15,000MW, including around 11,500MW on the main island Luzon and 1,600MW on the interconnected islands of the Visayas. 67% of the installed capacity on Luzon is owned by IPPs under long-term PPA contracts.

The power supply industry in the Philippines is in the process of deregulation, restructuring and privatisation A wholesale electricity spot market (WESM or Pool) will be established and all generation will be traded via this mechanism.

IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit on the Luzon-Visayas system on an hourly basis. The model also produced hourly wholesale spot price information for the system and for each generator.

IEC compiled a complete database for the Philippines power system, including:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the prior 10 years for Luzon and each of the five main islands in the Visayas chain

 

A database for all fossil fuel and geothermal generation units (>10MW connected to the main grid) including capacity, availability, heat rate O&M costs and age plus historical generation and fuel consumption for previous three years

 

A database for all hydro generation and pumped storage units (>1MW) including capacity, age and historical generation for prior three years

 

Fuel costs (especially gas supply from the Malampaya field)

 

PPA contractual terms, including capacity, fuel and O&M costs

 

A transmission database including constraints, losses, peak and annual flows for all major interconnectors

Multiple 20-year scenarios were run to measure the operation and profitability of the existing and future planned plants in a Pool market. Key variables included future oil price, load growth, carbon taxes, expansion plan and retirement schedule of existing power plants. The results were screened to identify and describe (size, fuel, timing, location, etc) the best opportunities for acquisitions and greenfield projects. Financials for established IPPs with long-term PPAs were compared with the outcomes for the same plants on a merchant basis, to measure the potential strain on contracts.

IEC was able to identify several lower risk plants being offered for sale as part of the privatisation and to recommend a greenfield growth strategy for the Client. The results of the study also identified certain IPPs that appear to be at high risk in a Pool market.

 

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New Zealand (2003): Power Market Study & 2300MW Company Evaluation

In 2003, IEC was commissioned by the Client (a major international IPP company listed above) to produce a detailed study of the New Zealand power market. The scope of study included the complete value chain from fuel supply through generation and retail. The general goals of the study were to understand and describe the nature of the market, identify future trends and risk factors and to recommend potential investment opportunities. The focus of the study was the competitive position and potential value of Contact Energy which was being offered for sale.

NZ has total installed capacity of around 8,300MW of which approximately 60% is hydro. NZ has one of the most deregulated power markets in the world. All power is traded through a Pool and all customers are fully contestable. Contact Energy (2300MW mixed hydro & gas) is an integrated generation/retail business and is one of the four main GENCOs competing in the market.

The main feature of the NZ market is the high degree of variation in hydro output (caused by limited storage capacity) which results in considerable volatility in wholesale Pool prices. All generators operate on a merchant basis but, to avoid exposure to excessively volatile Pool revenue, they generally hedge their output against their own retail businesses.

The second key issue is NZ’s future expansion plan which will be largely influenced by choice of fuel. As its domestic gas reserves rapidly become exhausted and because new hydro projects are not feasible, NZ will have to choose between increasing its coal-fired capacity and/or importing LNG as a fuel source. Each of these options result in quite different outcomes for the market, in general, and for Contact Energy, specifically.

Furthermore, NZ (which has ratified the Kyoto treaty) is likely to introduce a carbon tax which will have additional implications for all power companies and consumers.

IEC utilised and updated its existing database for the NZ power market which included:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the prior 10 years for both main islands

 

A database for all hydro generation units (>1MW), including capacity, monthly energy inflows, minimum and maximum monthly generation constraints, storage capacities and actual historical generation for the previous three years

 

A database for all fossil fuel and geothermal generation units (>10MW connected to the main grid) including capacity, age, availability, heat rate, O&M costs plus actual historical generation and fuel consumption for the previous three years

 

A complete set of hourly nodal Pool prices for the prior three years

 

Fuel costs and availability

 

A transmission database including constraints, losses, peak and annual flows for the NS interconnector

 

Historical and current retail tariffs (imputed to remove T&D charges) over the previous five years

 

Actual retail sales (GWh) for each of the four main GENCOs

IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit on the system on an hourly basis. The model also produced hourly wholesale spot price information for the system and for each generator. The results for each GENCO were overlaid with their respective retail load profiles and their net positions were calculated hourly.

The retail market was analysed in detail to determine if patterns were present that could enable forecasting of retail tariffs.

Multiple 20-year scenarios were run to test the sensitivity and measure the operation and profitability of all existing and planned plants. Key variables included expansion plan, future oil price, hydro variations, load growth, carbon taxes, New Entrant prices, retail market share and retail load profile.

The results were used to determine the range of possible outcomes and respective risks for Contact Energy and to recommend a methodology for valuing the company. Recommendations and suggestions were also made to the Client regarding opportunities for greenfield projects that were identified during the study.

 

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South Korea (2003): LNG-Fired IPP Project Review

In 2003, IEC was hired by a major Japanese trading company (listed above) to advise on their possible purchase of an interest in the proposed 1100MW LNG-fired Kwangyang IPP power project in South Korea.

South Korea has total installed capacity of around 60,000MW which is mostly owned and operated by state-owned GENCOs, with only minor contributions from contracted IPPs. The Kwangyang project was being developed as one of the first merchant IPP plants in the market and was also linked to a proposed LNG receiving terminal located nearby.

IEC’s role was to: (i) review and comment on the market study that had already been prepared by the seller; (ii) to advise the Client of IEC’s alternative views on the market and the project; (iii) review and comment on the financial model prepared by the seller and; (iv) advise the Client on the overall risks and benefits of the project.

IEC was able to update and adapt its existing model of the South Korean Pool market and, using revised assumptions provided by the Client and the seller, produce detailed multi-year projections of revenues and costs for the project. Multiple scenarios were run to evaluate the sensitivity of the project to the various market risk factors. IEC was able to identify some very serious issues that had not been previously considered and was able to offer suggested mitigation strategies.

IEC also made a line-by-line review of the financial model and identified a number of major logic issues that resulted in project returns significantly different to those previously assumed.

 

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Philippines (2004): LNG Terminal & 2000MW IPP Project Review

In 2004, IEC was hired by a major Japanese utility to produce a report on the potential to build, own and operate an LNG-receiving terminal and associated 2000MW power station in the Philippines. The main goal of the report was to describe the nature of the power generation market and to determine the optimum size, location and timing for the new facility, as well as to estimate the potential LNG sales volumes and netback prices that might be available.

The Philippines has total installed capacity of around 15,000MW, including around 11,500MW on the main island Luzon. Although the Luzon power market is currently oversupplied, new capacity will be required by 2009, based on current and projected rates of load growth and scheduled retirements. Domestic fuel resources are very limited in the Philippines and future power plants will need to be fuelled by either imported coal or LNG, if no new local reserves are discovered soon. For reasons of security of supply and environmental sensitivity, it is unlikely that coal will be sole imported fuel source. Therefore, it seems inevitable that LNG will be imported eventually.

The power supply industry in the Philippines is in the process of deregulation, restructuring and privatisation A wholesale electricity spot market (WESM or Pool) will be established and all power will be traded via this mechanism. The Government is planning to privatise all of its generation assets and the industry will rely on the private sector to build all new generation capacity. Because it is unlikely that long-term creditworthy PPAs will become available to IPP investors in the medium-term, any new plant has to be considered merchant.

IEC provided the Client with a detailed understanding of the market fundamentals and likely future trends. IEC was able to adapt and update its existing model for the Luzon power market and examine the potential operation of the proposed project. The optimum location, size and timing for a new terminal were established; a range of potential netback prices and daily and annual off-take schedules were produced; the competitive position and economic potential of a 2000MW merchant LNG-fired plant were described.

IEC also prepared a detailed set of recommendations to the Client for the development process which included critical issues, schedule, resource requirements and budget.

 

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Australia (2004): Victoria Power Market Study & Project Review

IEC, working together with a major Japanese investment bank (listed above), was engaged in 2004 by a Japanese trading company to advise on the possibility of developing a 500MW greenfield gas-fired IPP power plant in Victoria, Australia.

Rapid load growth in Victoria (8400MW installed capacity) during the past five years and under-investment in new generation capacity has resulted in a reserve margin that is close to critical levels. Victoria is a participant in the Australian National Electricity Market (NEM) which comprises 38,000MW of installed generating capacity and also includes Queensland, NSW, ACT and South Australia. Tasmania will join the NEM, when the BassLink interconnector is complete. The NEM is wholesale electricity market or Pool into which all generators must sell their output. The market is deregulated and privatised and all generators in Victoria are merchant IPPs.

IEC prepared a market summary for the Client which included a description of the Pool and a numerical analysis of the supply/demand balance. IEC presented a rationale for an IPP project and summarised and ranked the possible options, which included a greenfield 500MW gas-fired CCGT plant at the top of the list.

IEC prepared a detailed description of the opportunity including size, technology type, fuel, timing, etc. The description also included an analysis of the competitive position, projected Pool revenues and a risk assessment for the project.

IEC also included a detailed set of recommendations for the development process, which included critical issues, schedule, resource requirements and budget. IEC also completed a site screening study that identified three potential locations for a new gas-fired CCGT, each ranked according to transmission access, gas supply access, water and other infrastructure and NIMBY issues.

 

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China (2004): Guanxi Power Market Study

In 2004, IEC was engaged by the Client (a major international IPP company listed above) to produce a study of the power generation market in Guanxi province in southern China. The general goals of the study were to evaluate the market as if it were operating as a competitive Pool-type market, in contrast with the existing planned central dispatch system. The focus of the study was to evaluate the competitive position and projected capacity factor of a proposed 1200MW coal-fired project under development by the Client.

China has total installed generation capacity of around 440,000MW and this is increasing by 50,000MW each year. One of the fastest growth areas is the South China Grid (74,000MW installed capacity) where load is currently growing at over 14% pa. Guanxi province, which forms part of the SCG, has 10,000MW of installed capacity of which around 60% is hydro and the remaining 40% is coal-fired plant.

Some of the key questions to be answered were:

i.

What is the most likely annual and seasonal capacity factor for the proposed plant, given the high degree of variation in hydro generation?

 

ii.

What will be the effect of a very large hydro project scheduled for commissioning at the same time as the proposed coal-fired plant?

 

iii.

What could be the effects of increased transmission exports or imports into the province?

 

iv.

What would be the effect of a move to a Pool-type market

As the basis for the study, IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit in the Guanxi grid on an hourly basis.

IEC visited Guanxi and compiled a complete database which included:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the previous five years

 

A database for all coal-fired generation units (>10MW connected to the main grid) including capacity, availability, heat rate, O&M costs and age plus historical generation and fuel consumption for the prior three years

 

A database for all hydro generation units including capacity, monthly energy inflows, minimum and maximum monthly generation limits and actual historical generation for the prior three years

 

Estimated fuel costs

 

Official 10 year expansion plan

 

A transmission database including constraints, peak and annual flows for the major interconnectors

Multiple 20-year scenarios were run to project the future capacity factors operation of all coal-fired units. Key variables included load growth, expansion plan, hydro variations and transmission flows.

IEC was able to identify and quantify several key risk factors for the project and to suggest solutions, based on examples of IPPs operating in similar hydro-rich markets that we had previously encountered (eg. NZ, Vietnam). IEC also produced a set of most-likely outcomes for the proposed project which could be fed into the Client’s financial model and used as a basis for making a decision on whether to proceed with construction.

 

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Indonesia (2005): Power Market Study & Opportunity Review

In 2005, IEC was engaged by an international IPP company (listed above) to produce a study of the power generation market in the Indonesia. The main goal of the study was to help understand the nature of the market and to identify, rank and recommend potential greenfield and acquisition IPP opportunities.

Indonesia is the world’s fourth largest nation (population 240 million) and has total installed generation capacity of around 22,000MW, including around 5,00MW of captive plant. Most of the generation capacity is located in the Java-Bali grid (17,000MW plus 3,000MW captive plant).

The power supply industry in Indonesia (and the economy, in general) is still emerging from the financial and political chaos of the past seven years, since the collapse of the Suharto regime and the 1997 Asian monetary crisis. Load growth has begun to accelerate but investment in new capacity has not matched the rise in demand. PLN, the monopoly utility, has been partially restructured and retail tariffs have been successfully raised and are now approaching economically rational levels. Most of the IPP projects which PLN cancelled or defaulted on in the late 1990’s have now been re-negotiated or otherwise resolved.

The Indonesian power industry is now ready to move forward and will require significant investment in new capacity.

As part of the study, IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit in the Java-Bali grid on an hourly basis.

IEC compiled a detailed database for the Java-Bali grid, including:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the previous 10 years

 

A database of all fossil fuel and geothermal generation units (>10MW connected to the main grid) including capacity, availability, heat rate, O&M costs and age plus historical generation and fuel consumption for the prior three years

 

A database of all hydro generation units including capacity, monthly energy inflows, minimum and maximum monthly generation constraints and actual historical generation for the previous three years

 

Fuel costs and availability

 

PPA contractual terms, including capacity fees, fuel and O&M costs

 

A transmission database including constraints, losses, peak and annual flows for all major interconnectors

Multiple 20-year scenarios were run to measure the operation and profitability of all existing and future planned plants. Key variables included future coal and gas price, load growth, expansion plan and retirement schedule of existing power plants. The results were screened to identify, describe (size, fuel, timing, location, etc) and rank the best opportunities for acquisitions and greenfield projects. Financials for established IPPs with long-term PPAs were compared with the outcomes for the same plants on a merchant basis, to measure the potential strain on contracts.

IEC was able recommend a potential entry and long-term growth strategy for the Client, which included several specific near-term opportunities. The study also identified risk factors associated with several established IPPs and provided a basis for their valuation, should they become available for purchase.

 

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Singapore (2005): Power Market Study & GENCO Valuation

In 2005, IEC was retained by the Client (a major international IPP company listed above) to produce a study of the power generation market in the Singapore. The scope of study included the complete value chain from fuel supply through generation and retail. The goal of the study was to produce a detailed assessment of the market, including key risks and future trends. In particular, the Client was interested in the competitive position and future revenue growth projections for each of the major GENCOs, ahead of a possible privatisation

Singapore has total installed generating capacity of around 8,600MW and the market is in the process of deregulation. All power is traded through a Pool and customers above 3kW are contestable. Competing generators operate on a merchant basis, although the Government has provided vesting contracts which cover 65% of the market. The main feature of the market is the very high reserve margin which has resulted from the recent build out of several large gas-fired plants. Over 85% of installed capacity is owned by three large GENCOs (Tuas Power, Senoko Power & Power Seraya) which are all 100% state-owned. The Government is considering a privatisation of these GENCOs.

As part of the study, IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit on an hourly basis.

IEC compiled a detailed database for the Singapore grid, including:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the previous 10 years

 

A database for all generators (>10MW and connected to the main grid), including capacity, availability, heat rate, O&M costs and age plus historical generation and fuel consumption for the prior three years

 

Detailed fuel costs and supply constraints

 

Vesting contract details

 

Historical and current retail tariffs (imputed to remove T&D charges) over the prior five years

 

Future expansion options

IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit on the system on an hourly basis. The model also produced hourly wholesale spot Pool price information for the system and for each generator. The results for each GENCO were compared with their respective vesting contract portfolio and estimated retail load profiles and net positions were calculated hourly.

Multiple 20-year scenarios were run to test the sensitivity and measure the operation and profitability of all existing and planned plants. Key variables included expansion plan, future oil price, fuel options, load growth, vesting contract schedules, retail tariffs, New Entrant costs, carbon taxes and retirement schedule of existing power plants.

The results were used to determine the range of possible financial outcomes and respective risks for each GENCO and to recommend a methodology for valuing the companies. Recommendations and suggestions were also made regarding opportunities for greenfield projects that were identified during the study.

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China (2005): Shanghai Power & LNG Market Study

In 2005, IEC was engaged by the Client (a major international IPP company listed above) to prepare a study of the Shanghai power and LNG market, as part of their development efforts for a proposed 1440MW LNG-fired CCGT IPP plant.

The Shanghai power market had a peak demand of 18,500MW and annual load growth of >20% pa in 2005. Installed capacity (12,500MW - mainly coal) and imports (3000MW) were insufficient to meet demand and the summer deficit was c.5000MW. Restrictions on building new coal-fired plants and shortages of pipeline gas for power generation resulted in a proposal to construct an LNG import terminal to supply new CCGT capacity.

The key issues for the study included the identification and quantification of the key risk factors for the project eg. power & gas supply-demand balance, gas pricing, take-or-pay commitments, annual dispatch levels, required tariffs.

As part of the study, IEC constructed a detailed load & dispatch model for the Shanghai power market, as well as a long-term gas supply & demand model. Long-term projections of plant dispatch, LNG demand & fuel pricing were prepared for a number of scenarios.

As part of the conclusions, IEC provided recommendations and advice on how best to structure both the power offtake agreement and fuel supply contract in a manner that minimized the risk to the project.

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Philippines (2006): Mirant Acquisition Due Diligence

In 2006, IEC was engaged by the Client (a major international IPP company listed above) as market advisor for the due diligence and valuation of Mirant's power generation business in the Philippines which was being sold by competitive auction.

The Mirant business comprised 3150MW of mixed gas-fired (Ilijan 1200MW) & coal-fired (Sual 1220MW & Pagbilao 735MW) power generation facilities on Luzon. Most of the output was locked into long-term ECAs with NPC (the state-owned utility) but 250MW of surplus capacity was available for sale on a merchant basis. This block of merchant capacity formed the basis of what was termed the Energy Supply Business (ESB).

IEC's main role was to assist with the valuation of the ESB. IEC used its in-house Pool simulation model1 to make long-term projections of EBITDA for the ESB (which included c.50MW of existing hedging contracts with 3rd-party customers). In addition, to the existing 250MW, EBITDA projections were made for possible future capacity additions (expansions & greenfield) and other growth options for the ESB. The analysis included an assessment of both the future WESM (Pool) & contestable retail markets.

In addition, to a set of long-term EBITDA projections for a range of scenarios testing the key variables (eg. oil price, expansion plan, Pool behaviour, retail tariffs, etc), IEC was able to highlight the main risk factors and advise on possible mitigation strategies.

1 IEC has developed a detailed load & dispatch model that simulates the Luzon-Visayas WESM Pool and retail market through 2025. The model includes a complete database for all connected plants (including hydro) and hourly load data for the system.

 

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Vietnam (2006): Power & Gas Market Study

In 2006, IEC was engaged by the Client (a major international IPP company listed above) to produce a comprehensive study of the power generation market in the Vietnam. The goal of the study was to produce a detailed assessment of the market (power & fuel), including key risks and future trends, as well as identifying possible opportunities and recommendations for an entry strategy.

Vietnam has a highly regulated, hydro-dominated power market with total installed generating capacity of around 11,400MW. The system reserve margin is very low and results in a shortfall of c.500MW. Annual growth in demand is 14% pa.

Notwithstanding the rapid growth, the number of projects under construction and development greatly exceeds the expected demand. Most of the proposed new capacity under development is located in the north of the country, although most of the demand growth will be in the south. The main trunk 500kV transmission line linking north and south is likely to be severely constrained, if all projects in the north proceed as schedule, resulting in either shortages in the south and/or major upgrades on the interconnector. Furthermore, recent large offshore gas discoveries in the south are ideally suited for supply to new CCGT plants.

EVN - the state-owned utility - operates as a vertically-integrated monopoly. To date, only 2000MW of IPPs - supplying EVN under PPA - have been awarded. Over the next 5 years, it is likely that EVN's huge capex requirements will force it to award many additional IPPs. Many of the new IPPs are likely to be projects already under development.

A major goal of the study was to assess the fundamentals of all of the projects under development and identify which had the greater chance of proceeding in the near term.

As part of the study, IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit on an hourly basis.

IEC compiled a detailed database for the Vietnam grid, including:

A complete set of hourly load data (8760 points) plus historical annual data (peak load and energy) for the previous 10 years

 

A database for all generators (>10MW and connected to the main grid), including capacity, availability, heat rate, O&M costs and age plus historical generation and fuel consumption

 

A database of all hydro generation units including capacity, monthly energy inflows, minimum and maximum monthly generation constraints and actual historical generation

 

Transmission constraints

 

Fuel availability, costs and supply constraints

 

Future expansion options

 

Historical and current retail tariffs over the prior five years

 

EVN balance sheets and cash flows (historical & projected)


IEC constructed a detailed load & dispatch simulation model that replicated the operation of every unit on the system on an hourly basis for the period 2006-2025. Multiple 20-year scenarios were run to test the sensitivity of key variables including: expansion plan, future oil price, fuel options, load growth, New Entrant costs (gas vs. coal), hydrology and transmission capacity.

Based on the results of the study, IEC was able to provide detailed recommendations identifying the projects with the soundest fundamentals and also those with a low probability of proceeding in the medium-term. Recommendations and suggestions were offered regarding specific opportunities for greenfield projects and general entry strategies.

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