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Electric Power Asset Valuations

We help market participants value the full range of electric power assets including generation, storage, transmission, distribution and customer-side. Our triangulation approach covering costs, comparables and cash flows helps produce the most accurate and credible results possible.

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Overview

Electric Power Asset Valuations

BRG professionals advise market participants on valuing the full range of electric power assets, including generation, storage, transmission, distribution, and customer-side. Our triangulation approach covers costs, comparables, and cash flows and helps produce accurate and credible results.

Overview

Electric power assets can be a considerable valuation challenge. BRG professionals provide accurate and credible results and specialize in a triangulation approach that includes costs, comparables, and cash flows.

From a valuation perspective, electric power assets are particularly complex. On a technical level, the science and engineering of electricity (e.g., the concept of reactive power and phase angle) challenge even the best minds. On the economic front, electric power involves a broad range of commodity and electricity markets—from PJM capacity to global wood pellets—each with unique characteristics. From a regulatory angle, there are myriad international, national, state/provincial, and even local considerations, from the Paris climate accords to city noise ordinances.

To provide the most accurate and credible valuations, BRG professionals apply a triangulation approach involving accounting cost fundamentals, appropriate market comparables, and state-of-the-art cash-flow forecasting and analysis, including real options.

Generation/Storage

BRG professionals have valued a wide spectrum of central station and distributed generation/storage assets around the world. Their experience ranges from GW-scale nuclear and fossil generation in North America to kW-scale solar microgrids in India.

These valuations are used primarily for external mergers/acquisitions and internal capital investment decisions.

  • “Buy vs. Build” Analysis. A central US utility was considering building, and needed regulatory approval for, a large natural gas-fired plant to replace power from retiring coal-fired plants. BRG professionals led the effort to conduct an in-depth economic valuation of the plant across a range of potential futures; and to compare the plant to an alternative proposed by an opposing party—buying power via a power purchase agreement with a neighboring utility. Our analysis provided a well-founded and credible assessment of the plant’s value, including optionality. Ultimately, all parties agreed that the plant had considerable value to the utility and its customers, and development is proceeding.

Transmission/Distribution

BRG professionals have valued individual T&D assets, such as transmission lines linking important supply and demand centers in Australia, and entire T&D businesses, such as a Central American distribution company. Optionality often plays a major role in these infrastructure investments.

  • Acquisition Analysis. An international power company was expanding into new and growing markets in Latin America. It had been unable to acquire value-creating assets in an important market in the region. Most important, its estimates of value appeared out of line with the reality on the ground. BRG professionals led a team that conducted in-depth analysis of the market and potential acquisitions, and worked with the client on a winning bid for a sizable regional power business. Under the client’s management, the business increased in value and was eventually divested at a profit with a change in company strategy.

Customer-Side

BRG professionals have valued both regulated and unregulated “customer-side” assets. Forecasts of technology development and penetration typically play a major role here.

  • New Business Analysis. A western US utility was considering expansion in a new retail service business where technology was improving rapidly. BRG professionals worked closely with the client to understand the needs and preferences of its customers, the utility’s internal capabilities, and the competitive landscape. They then valued different business plans involving a variety of service offerings. Their analysis revealed that the “default” plan for expanding into this new business, despite its apparent attractiveness, involved extraordinary risks and would almost certainly lead to substantial losses. It also revealed that other plans created considerably more value—higher return and lower risk. The utility’s top management commented, “The analysis revealed the pros and cons of alternative plans much more clearly than before. The default plan turned out to be among the least preferred—expensive and risky. And a previously controversial plan turned out to be preferred—most cost effective and least risky. We and our Board enthusiastically adopted this preferred plan. In hindsight, this saved our customers millions of dollars.”