Entrepreneur seeks Investment for his Start-up Power Plant Business

Opportunity Snapshot

Investment Opportunity

Project is in need of funds to acquire a plant and enhance it. A bank to cooperate and loan the majority of the amount to the company has already been identified.

Scope: Acquisition of a power plant and doubling its capacity from energy facilities; Participation in the start of a new family run power company in India focused on renewable and reliable energy.

Revenue generation through sale of electricity, as well as oils.

Plant is up and running and investment thesis will create additional value within a medium timespan (6 years)

Project is in need of funding, to acquire the plant and enhance the plant. A bank to cooperate and loan the majority of the amount to the company has already been identifiied.

Timeline and milestone:
• Acquisiton by the end of the year
• Capacity doubled by middle of 2014 (before Monsoon rains start)
• Solid waste processing up and running by the end of 2014

NPV after 6 years reaches a zero value at 12.64%. Generally at 10% discount rate the NPV is positive, furthermore, sensitivity analysis of the financial forecasts have provided the most important success factors as well as an 86% chance of a positive NPV at 10% (after 10,000 iterations).

Competitive Advantage

Background of the entrepreneurs (Indian / German; Indian, UK; Indian) has a good mix of inside and outside market expertise. Furthermore, partners for the pyrolysis plant who are well experienced are already on board. The current team is already involved in running the operations, hence why this is a very attractive opportunity.

Rationale for the deal

• India still has high demand for gas.
• Through growing the company and adding value through a whole solution the company will from its current value be exnahced and thus more valuable, furthermore, selling electricity will generate cash inflows.
• Pyrolysis is already available in India and many companies are producing it, however, this facility will be a state of the art facility, not just another cheap Chinese production.

Use of financing

The funding is needed to:
• Buy the existing, up and running plant.
• The current company has overleveraged and is in need of fund.
• The capacity of the plant to be doubled which will take around 6 months.
• Additional facilities for waste management and solid waste processing will be set up (pyrolysis plant) creating gas for the plant through waste to process gas.
• After successful transformation further financing rounds will be available to grow the company and add more facilities.

Opportunity for the investor

Debt investors will be issued bonds at an interest rate of 10% which mature after 6 years.

Equity investors will receive a one to one mixture of preference and ordinary shares, meaning that when buying an ordinary share investors will commit to buying a preference share. (Investors who provide a big investment can be exempt from that rule and will be negotiated with, individually)
• Ordinary shares will not pay dividends but shareholders will benefit from organisation growth and the value created through implementing the investment thesis
• Preference shares will pay a fixed dividend annually and repurchased by the organisation within the first 6 years , the liquidation value of each preference share (the price at which the share will be repurchased by the organisation) is the initial price at which the share has been issued. The preference share is non-convertible and can therefore not be converted to ordinary shares.

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