Due Diligence on Energy Sector Projects - Resource Management Associates (Pvt) Limited

Due Diligence on Energy Sector Projects Power Generation and EconomicsConsultancy Services to Lenders to 20 MW Diesel Power Plant in Jaffna Peninsula

The distribution network in Sri Lanka’s Jaffna peninsula was separated from the main grid between 1995-2013. Two Independent Power Producers (IPPs) were procured to provide the supply to the isolated network, until the civil conflict ended in 2009, enabling re-connection to the main grid. RMA was contracted by the lenders to the one of the two IPPs (20 MW) to provide a comprehensive engineering and financial/economic due diligence on these diesel power plants. The services provided included analysis of the status of diesel generators, review of investor proposals for new investments to replace ageing and inefficient generating units, assessment of efficiency, monitoring of maintenance and fuel supply mechanism, etc.

Due Diligence on Energy Sector Projects Power Generation and EconomicsDue Diligence Study on ACE Power Embilipitiya 100 MW Diesel Power Plant

The Embilipitiya Power Plant is a USD 60 million investment, with ACE Power (Pvt) Ltd of Sri Lanka and Caterpillar Power Generation Systems (CPGS) of USA holding equal shares. CPGS required to divest a portion of their equity, and DEG of Germany the investment arm of kfW required a due diligence study to be conducted about the technical and financial status of the power plant project.

Thus RMA was appointed as the consultant to Deutsche Investitions- und Entwicklungsgesellschaft mbH – Infrastructure Department – of Germany, to conduct a due diligence study on ACE Power Embilipitiya 100 MW power plant in Sri Lanka.

The study included the evaluation of the investment and its current market value, efficiency and status of maintenance, and a review of the power purchase agreement/dispatch prospects of the power plant. Based on the RMA recommendation, the project has now been divested.

Due Diligence on Energy Sector Projects Power Generation and EconomicsLenders’ Engineer for 250 MW Independent Power Plants (IPPs)

RMA was selected as the Lenders’ Engineer by a consortium of Sri Lankan banks financing the construction of 250 MW of Independent Power Plant (IPP) capacity in four power plants in Sri Lanka. The projects were promoted by established Sri Lankan Companies. The power plants use diesel engines operated of heavy fuel.

The role of RMA was to conduct due diligence on all the technological aspects of the four power plants. RMA assisted the Banks to review the Power Purchase Agreement, Implementation Agreement and the Fuel Supply Agreement. RMA conducted supervision of the erection, testing and commissioning of the power plants on behalf of the Banks.

The total investment on the power plants were about 160 million US$, of which about 110 million US$ was financed through a syndicated long-term loan by the Consortium of Banks. The first power plant entered commercial operation in March 2002. The second power plant entered operations in April 2005. Power plants are operated by Wartsila of Finland under an Operation and Maintenance contract with ACE Power Generation and Caterpillar Power Generation Systems Ltd. The projects were developed on a Build, Own and Operate (BOO) basis under a 10-year Power Purchase Agreement with Ceylon Electricity Board.

Due Diligence on Energy Sector Projects Power Generation and EconomicsEconomic Feasibility of Expansion of Tashkent Power Plant in Uzbekistan

Uzbekistan has a mixed hydroelectric and thermal electricity generating system, dominated with natural gas. After experiencing a decline in the demand for electricity during early years of independance from the Soviet Union, the Uzbek system is experiencing a surge in demand once again. Some ageing thermal power plants have come to the end of their economic life, displaying poor fuel efficiency and reliability.

RMA was commissioned to conduct the economic evaluation of the proposal to expand the Tashkent Power Plant in Uzbekistan. The study was conducted for Mitsubishi Reasearch Institute, Japan, as a part of their due deligence on behalf of the Japan Bank for International Cooperation (JBIC). JBIC was to finance the power plant expansion project.

In this study, the entire hydro-thermal power generating system of Uzbekistan was modelled to include existing and committed power generating facilities, and the expected growth in demand for electricity over the next 20 years. The proposed expansion for the Tashkent Power Plant was then included to examine whether there will be economic benefits to the system.

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