Regulatory and Market Due Diligence to Support Acquisition of Meerwind Wind Farm

The Situation

Blackstone had developed and project financed the “Meerwind” offshore wind farm and was looking to exit its investment in early 2016 by selling its stake to a “stability-over-growth” investor. China Three Gorges Corporation (CTG) is a major clean energy producer looking to develop its international portfolio and was interested in purchasing Meerwind.

CTG hired a NERA team consisting of Managing Director Sean Gammons, Managing Director Tomas Haug, Principal Dominik Huebler, Principal Marco Schonborn and Analyst Florian Mockel to analyse possible power price scenarios as well as the regulatory and market conditions faced by offshore wind farms in Germany.

NERA's Role

NERA developed a range of scenarios that considered different forecasts of input prices as well as possible changes to the market design and to the regulatory framework. NERA then used its proprietary power market model to forecast the expected development of power prices, the generation mix, and other key parameters of the German power market.

Additionally, NERA conducted a detailed analysis of the economic conditions supporting the German support scheme for renewable energies. This analysis was twofold and included:

  • a comprehensive summary of historical developments of European and particularly German support for Renewables; and

  • an outlook on the possible development of the relevant support scheme in light of the drafts for the new German power market law and renewable energy law.

To complement the report and market modelling NERA held a two-day workshop and gave a detailed presentation on the functioning of the German power market to a large CTG delegation to whom we explained and discussed the results. NERA also organised a meeting between CTG and the German Federal Ministry for Economic Affairs and Energy (BMWi) to allow CTG to discuss further questions directly with the ministry.

The Result

In June 2016 CTG successfully concluded negotiations with Blackstone to purchase Blackstone’s shareholdings.

NERA provided the client with the necessary background understanding to assess the fundamental risk factors and mitigating options available for evaluating the investment opportunity and for evaluating the long-term stability of the support regime. NERA also developed different regulatory and power price scenarios that allowed the client to understand the upside and downside around the base case.

During an extended Q&A phase NERA provided the client with hotline support to address questions from its board in order to give the appropriate assurance for signing the deal.