For those of you at an infra fund, how much time you typically spent on round 1 bids?
I understand the answer to this it depends but at the bare minimum, how much time (in hours) do you typically spend working through model and reading CIM before you submit a bid for an asset (NOT a platform)? Let's say a power or a renewables asset, which is what I focus on
Lt's say for round 1 the only materials made avaliable to you are cim and model
I feel like I am struggling with the intrconnection and permits side of the thing / need to rely on specialist. I have ~ 8 years of experience in finance with only 20 months on the power/utilities/renewables side.
thx
Based on the most helpful WSO content, here's what you need to know:
Time Spent on Round 1 Bids:
Challenges with Interconnection and Permits:
Modeling and CIM Review:
In summary, while the exact hours can vary, expect to invest significant time in detailed modeling and CIM review, and don't hesitate to rely on specialists for complex areas like interconnection and permits.
Sources: Interviewing For Infrastructure Investment Roles, Interviewing For Infrastructure Investment Roles, Q&A - Infrastructure PE & IBD, Thoughts on Power and Renewables IB, Financial modelling on the buyside
Are you asking about a greenfield development asset or an operating asset?
actually both! though on operating, dont think there would be as much to DD.
Would have thought that greenfield development would have less to DD but perhaps more time to churn through analysis work (scenario analysis to flex far more assumptions given lack of information)
Curious to know, is most of the time spent just reading through documentation to check if permits are really documented and power contracts / PPAs (for renewables / but really any revenue driver) is in place vs modeling various sensitivities (merchant exposure / esc. rates / refinancing / re-contracting, etc.)?
OP here. For me, it's the second that I do and which find frustrating. Very modeling tedious with a bunch of sensitivities. I feel there is less BS analysis to do with an operating asset (ok maybe a refinancing and some repowering capex in case of turbine, what else??) but with development assets so many diff scenarios
Building monthly models is such a collosal waste of time. I would bet the answer wouldnt be MUCH different if it were an annual model. All in the name of sculpting debt reliably
And then during DD for dev asset, I can't make any sense of the interconnection lines. How am I supposed to know how much capacity does the line have, whthr physical upgrades would be necessary at some point (leading to curtailment) or if the genrator can just tap the POI instead of having to build a full system...I DONT KNOW. And I think that's a vry important skillst to have
Same goes for permitting. Here is a list of 15 prmits projct has. OK GREAT. I dont know what is missing and which one is the most important (I hear for NY that is Article IX but I might be wrong)
(1) I agree with you on monthly models. The only time that level of granularity seems to me to really matter is if you are dealing with a regulated asset and there are awkward rate case/rider considerations. For example, I have worked on a deal where turning the initial annual model into a monthly model pushed ~$200 million of revenue out from Year 1 to Year 4 because of the timing around the regulatory filing and how our specific revenue calc worked. Outside of situations like that, I have never really seen there being a value in having a monthly model. Sure, if the bankers want to build it up that way, I am fine with it. It is not like I would say no to someone else doing that work for me.
(2) In terms of the interconnect and such, that is what diligence is for. That's what hiring independent engineers is for. That's what having an operations team or consultants are for. You clearly aren't going to know every detail of every part of the deal from the start. You also don't know what you don't know. This is why in my time in corp dev at a utility, I have not really seen any deal where a buyer didn't have some form of operationally focused people brought in to assist in the diligence (or where we preempted some of that work by hiring an independent engineer ourselves).
Now, there is clearly a range here. Not everyone can hire an independent engineer and a gazillion other consultants for every single deal. And often times drowning a deal in additional manpower isn't even helpful. Just a finance professional should not be expected to know everything about operations. If a fund is not willing to provide infrastructure to support to their investment team (having an internal operations team, hiring consultants, etc), the fund is failing at putting the investment team in a position to succeed.
Can be as little as maybe 5 hours to be honest...don't be too impressed. My fund basically just skims through the CIM to check for obvious dealbreakers vs the fund mandate, does a quick valuation calc assuming vendor's projections are all good, then give a NBIO based on a simplistic multiple of the vendor's pro forma EBITDA. Only if we actually get shortlisted do we get serious and prep a PDM with further analysis and a DD budget approval, takes us maybe 2 weeks all-in.
I feel you look at more platform investments ? what kind of risks do you typically see?
LAck of a built out mgmt team including engineers?
Geographic concentration?
Lack of economies of scale w/rt to financing/supplier terms and / or pipeline?
Well yes but we take this approach too for asset sales. Pretty sure we have a bad rep in the market by this point for being an unreliable round 2 bidder, but it's not my call...
Yeah, management team is a big one. Engineers/technical expertise not strictly required but we want to see C-suite with both long-term vertical-specific experience (ideally at that same platform) and skin in the game (being willing to take the bulk of their comp in RSUs is fine). Geographic concentration and economies of scale not really. Main checklist items are contracted long-term revenues, barriers to entry (preferably regulatory), and high-probability near-term growth projects (new adjacent business lines, capacity expansion, etc.) for our upside. For an infra fund we have a flexible definition of "infra" but are laser-focused on minimising risks while preserving just a bit of potential upside - feels like almost every transaction I've worked on at some point suddenly starts talking about sub-debt, convertible bonds, seller put and call options, etc. even though we're supposed to be a pure equity fund with preference for control.
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