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Driven by deregulation and competition, mergers, acquisitions and divestitures are becoming commonplace in today's utility industry. In some areas, legislation has mandated the divestiture of generation from the other functions of utilities. In others, utilities have made strategic planning decisions to either enlarge or divest one or more of their previous functions. Whatever the reason and however large or small the acquisition, divestiture or merger, the procedure is complicated and time-consuming. EES Consulting has assisted many clients over the past few years to consider options, evaluate strategies and complete transactions.
Strategy
The strategic decision to acquire, divest or merge is one that is not made lightly. The utility must look at its future and decide what type of utility it wants to be. In order to do this it must understand what possibilities are available. There are new lines of business to be considered and old ones that can be expanded or eliminated. EES Consulting has been very effective in assisting utilities to understand their options and to help them make these strategic decisions.
Once a decision has been made that involves changing the strategic path of the utility, it is necessary to look at an economic comparison of the proposed options to ensure financial feasibility or determine potential savings. It is possible that financing for a new venture might need to be arranged. This could be accomplished in several ways. EES Consulting's economic analysts are adept at forecasting and financial modeling to assist in examining various scenarios.
Once a thorough assessment of the utility's current situation and future plans has been made, negotiation with any proposed partners in the transaction must proceed. EES Consulting has experience in contract negotiations that will accomplish the transition most advantageously for the client.
Regulatory Compliance
In many cases, a merger, acquisition or divestiture is governed by regulatory oversight. The regulatory requirements must first be determined on all jurisdictional levels, and then the necessary efforts made to comply with them. EES Consulting has dealt with regulation on all levels from city councils to federal energy agencies. We have worked throughout the U.S. and Canada with concentration in the west.
In the case of a merger or acquisition, much of the time and work involved goes into the due diligence process. Engineering due diligence is an examination of the assets of the proposed partners to determine that everything on the books exists and is in good working order. The assets must comply with accepted utility practice, be sufficient to meet present demands and show evidence of proper maintenance.
EES Consulting has engineers who go out into the field to physically examine these assets in order to make these determinations.
Environmental due diligence is, in part, an examination of what has gone on in the past. It involves both on-site examination and the perusal of records pertaining to environmental issues. Any noted leaks, spills, or accidents must be investigated to be certain that proper mitigation was provided. If necessary, Phase II environmental due diligence will be performed. This involves physical testing for compliance with mitigation standards.
EES Consulting has also done several financial due diligence analyses in the area of mergers and acquisitions. We have reviewed the buying and/or selling utility’s rate structures, terms and conditions, financial pro formas associated with the sale, and associated asset sheet and income statement items, and opined on their appropriateness. EES Consulting is familiar with EPA codes of both federal and state agencies and has performed environmental, financial and engineering due diligence.
Operations Planning
Any acquisition, divestiture or merger will require changes in the operation of the utility or utilities involved. The more these changes can be anticipated and planned for, the smoother the transition will be. A sound-operating plan will recognize necessary alterations and describe the specific tasks required to achieve them. It will provide an organizational plan that may allow for managerial adjustments or new hires and a business plan for the financial operation of the emerging utility.
EES Consulting has a great deal of experience in the area of operations planning and will see that the restructured utility gets off to a successful start. Related Projects |
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