Following the nuclear disaster in Fukushima in March 2011, Germany decided to accelerate the energy transition with a massive build-up of renewable energy projects (mainly in the North) and a shut-down of nuclear power plants (mainly in the South). Shortly after, it became evident that the required construction of North-South transmission corridors would be associated with significant delays.

EIC’s Initiative

EIC analyzed the situation and consulted with independent experts. The conclusion was reached that reserve power plants are needed in the South to safeguard security of supply and system stability. EIC reached out to major, well-known private equity investment houses and founded a development company to secure suitable sites and initiate permitting works for reserve power plants. In parallel, EIC undertook major efforts in explaining the rationale of building reserve power plants to policy and decision makers in Germany.

Project Development

As a regulatory framework for reserve power plants started to emerge, private equity funds invested additional capital in EIC’s development company in 2015. Within a three year period, EIC secured three sites and established the zoning prerequisites to build a total of 1,800 MW worth of dual fuel, simple cycle gas turbine plants. Technology was chosen on the basis of EIC’s assessment, confirmed by renowned engineering firms. Environmental permitting was successfully advanced and substantially completed under the leadership of EIC in 2018.

Contract Negotiation

In addition to the local site activities, the EIC team led the negotiations and concluded long-form binding term sheets in the following areas: EPC, O&M, gas and liquid fuel supply, electrical and gas interconnection. On the back of these arrangements, EIC prepared and submitted a comprehensive proposal within the framework of a European-wide tender in late 2018. The binding offer for a ten year off-take contract was submitted together with substantial financial guarantees, provided by EIC’s financial backer.

Key Success Factors

  • In-depth understanding of the dynamics of the energy transition.
  • Ability to establish and communicate a sustainable business case.
  • Access to broad and deep network, relevant to the energy industry.
  • Skill-set to negotiate relevant contracts for power plants on a BOO basis.
  • Structured approach to prioritize development in a cost-conscious manner.
  • State-of-the-art scheduling and milestone trend analysis.
  • Modelling skills to project cash flows in different scenarios.