Deal Sourcing

EIC identified for its client small hydro power assets in Switzerland and screened the assets to establish their economic and technical potential. In a second step, communication with the owners was established to determine their willingness to sell and the related conditions. In close coordination with the client, a target acquisition portfolio was identified, and an initial financial and technical due diligence was performed. Negotiations on valuation were initiated with the owners to establish a valuation range. EIC supported the client in documenting the case for its board.

Background

The Swiss government set ambitious goals to increase the share of renewables in the overall electricity production. Small hydro power is an important element in this strategy. While Swiss utilities are experienced operators of large-scale hydro power plants, they have had little exposure to small hydro power plants, which mostly had their roots in now irrelevant industrial production.

EIC’s Initiative

An existing park of small hydro plants was owned by a scattered group of individuals and corporates and was in desperate need of upgrading. EIC established the business case for a small hydro power acquisition and expansion strategy for the utilities with the goal to consolidate the assets, upgrade the technical infrastructure to increase the output, and to automate the production to save costs. EIC received the mandate from a Swiss utility to execute this strategy.

Deal Finding

EIC identified for its client small hydro power assets in Switzerland and screened the assets to establish their economic and technical potential. In a second step, communication with the owners was established to determine their willingness to sell and related conditions. In close coordination with the client, a target acquisition portfolio was identified, and an initial financial and technical due diligence was performed. Negotiations on valuation were initiated with the owners to establish a valuation range. EIC supported the client in documenting the case for its board.

Contract Negotiation

Subsequent to the client’s board approval, EIC completed a detailed due diligence including contracting and managing external consultants, specified a valuation range, supported the client in identifying synergies, and finally negotiated the share purchase agreement.

Key Success Factors

  • Deep understanding of the national electricity market and the relevant regulations.
  • Technical and commercial know-how to establish a case for a valuable portfolio of small hydro plants.
  • Experienced team with development and negotiation skills that was able to execute a large share of the required activities in-house.