P16
At this stage it is important to develop suite of contract documents including letters of intent, connection agreements, and customer service agreements, conditions of service, maintenance contracts, and appropriate language to allow for potential future sale or transfer of assets. Operations and maintenance Often not enough funds are set aside for operations and maintenance and system renewal leading to degradation of system performance, such as poor delta T and system losses. Long-term service agreements with major equipment suppliers and/or insurance products will help mitigate equipment performance risk. It is critical to provide training for operators and engineering staff. Expansion As the system grows to keep pace with demand growth, expansion plans will benefit from system size and expansion based on current and projected demand, and expected increased efficiency of building loads. Opportunities to review system optimization as well as financing, re-financing at lower costs of capital and asset monetization options may be explored. Successful expansion projects need to factor in system interruptions, both planned and unplanned and re-commission system after integration of the new assets.
Renewal & modernization For aging systems with reduced reliability related to poor or deferred maintenance, assess opportunities for modernization in conjunction with equipment replacement. It is also a time to analyze next generation technology options, such as lower temperature heat resources, thermal energy storage, resource recovery of waste heat; renewable resources, innovative controls and optimization tools, and integration of renewable generation. Sale & acquisition Before a sale, undertake stakeholder outreach and engagement to address changed objectives and customer service continuity covered by provisions in legal contracts. Business model spectrum The ownership and management models range from a pure public sector venture to a purely private sector approach. In between, a range of hybrid options involving varying blends of both private and public sector financing, design, operation, fuel supply, day-to-day management and decision-making are possible. Successful business models are characterized by the appropriate balance between risk and control, appropriate financing as well as ongoing governance of the objectives and overseeing the use of best practices.
Option Description
Risk Allocation
Example
1
Entirely public sector led, funded, developed, operated and owned
Public sector retains all risk
Public sector procures contracts for equipment purchase only. Procurement could be direct, or via a publicly owned arm’s length entity Public sector procures turnkey asset delivery contract(s), possibly with maintenance and/or operation options As 2, with increased private sector operational risk, and payment or investment at risk
2
Private sector assumes design & construction risk, and possibly operational risk
Public sector led: entirely publicly funded, greater use of private sector contractors Public sector led, private sector invests/takes risk in some elements of the project Joint venture- public sector & private sector partners take equity stakes in a special purpose vehicle Public funding to incentivize private sector activity Private sector ownership with public sector providing a guarantee for parts of project Private sector ownership with public sector facilitating by granting land interests
3
Private sector takes risks for discrete elements (e.g. generation assets)
4
Risks shared through joint participation in JV vehicle / regulated by shareholders agreement Public sector support only to economically unviable elements
Joint venture – both parties investing and taking risk
5
Public sector makes capital contribution and/or offers heat/power off-take contracts
6
Public sector underpins key project risks
Public sector guarantees demand or takes credit risk
7
Private sector takes all risk beyond early development stages
Public sectors makes site available and grants lease/ license/wayleaves No or minimal public sector role (e.g. planning policy / stakeholder management
8
Private sector carries all risks
Total private sector owned project
Generic delivery structures and roles with risk allocation
”In 2058, the most dramatic change in our energy system will be that we are independent from fossil fuels”. Thomas Danielsen, Energy Political Spokesman, Venstre
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