USD 250 M Investment Due-Diligence for A Power Plant Project

A power plant is an industrial facility used to generate electric power with the help of other energy sources or generators which converts different energy sources into electric power. A private equity fund (owned by one of the top EPC players in India) was looking to raise USD 250 Million for investing in a power plant project in Sub Saharan Africa.

The key issues had to be considered first. Our team of analysts performed a detailed study and mapped down the factors and problems that drive the industry. Investment in an African country meant keeping in mind their poor infrastructure and unstable economic past. It might imply high risk and uncertain return portfolio due to a slower growth rate. Also, the target technology and power source are not so common compared to the other countries.

After considering the key issues, a study of the country, technology and business returns were done by our team. The industry was analysed closely, and broad mitigation plans were created for the key identified challenges. After getting an understanding of the industry our analysts worked on a flexible financial modeller as a part of the business plan.

The business plan was designed after taking the opinions and knowledge of the industry experts and considering the resources and technology available. It was seen that renewable energy had a mixed market outlook in Middle East and Africa, like the economies in the region themselves. While some countries were reluctant to develop renewable energy due to abundance in conventional resources, the others could not afford to support the development of renewable energy. Multiple levels of analysis were done and few options for investment were designed by the team. A robust investment pitch conveying the business plan and the expected IRRs was then designed from the shortlisted designs and presented to the client. The client was satisfied with the business plan and decided to go forward with the idea.

A private equity fund (owned by one of the top EPC players in India) was looking toraise USD 250 Million for investing in a power plant project in Sub Saharan Africa

KEY ISSUES

• Investment in an African country: Poor infrastructure and unstable economic past
• High risk and uncertain returns portfolio
• Target technology and power source not so common
• First investment of the fund

APPROACH

• Study of the country, technology and business returns
• Created broad mitigation plans for the key identified challenges
• Worked on a flexible financial modeler as a part of the business plan

RESULT

• A robust investment pitch conveying the business plan and the expected IRRs

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