Six Hydroelectric Power Stations Due Diligence
Europe and Central AsiaOctober 22, 2020
K&M was engaged by Potomac Capital Investment Corporation to perform due diligence of six small hydropower plants in Austria for sale-leaseback transactions. The plants have capacities of 11.9 MW, 2.8 MW, 3 MW, 9.75 MW, 6.6 MW, and 12.2 MW, totaling 46.25 MW. Potomac Capital would purchase the assets and lease them back to the original owner over a period of 99 years, after which the original owner would have the option to purchase the assets or sign a services contract with Potomac Capital or a designated private party. K&M reviewed the electric power market in Austria and Central Europe, including the regulatory environment and future trends. K&M assessed the pool of qualified bidders and operators who may be willing to enter into PPAs and Operations Agreements with the facility owner in the future. K&M performed a technical review of the Engineering Report, Service Contract, Facility Operations Agreement, and Power Purchase Agreement Term Sheet to evaluate the reasonableness and commercial “arm’s length” nature of each. K&M also assessed the Facility Appraisal Report and commented on the fair market value of each facility. Finally, K&M compared the proposed equity rates of return for Potomac Capital’s investment with expected returns from investments in the European energy market.