Energy is a broad field for lenders, encompassing oil and gas projects, midstream pipelines and terminals, fertilizer and biofuels plants, downstream polymer and petrochemical facilities, and thermal power generating stations with private sector and state-owned company sponsors. Exponent provides expert engineering and other services on behalf of lenders during loan origination and, upon financial close, during the construction and operations phases of energy projects.
Exponent is highly qualified to assist during the origination phase of energy project financings, providing technical due diligence and market analysis services on behalf of lenders. Such services have included review of major equipment procurement contracts, supplier capabilities, the technical capacity of sponsors and their contractor(s) to effectively manage and perform, design plans, conformance of project specifications with local and international norms and standards, necessary permits and approvals from local authorities, EPC contracting strategy and structure, quality assurance/quality control (QA/QC) plans, and project economic assumptions. We can validate the suitability of the sponsor’s projections for project construction costs and assess the probability of cost overruns (estimate contingencies). We evaluate the sponsor’s timetable for construction given the scope of an energy project and external factors such as resource limitations. Affected markets in need of analysis might include fuel supplies for a power project, or raw material and product markets for a project in the downstream segment. We are often called upon to provide risk assessments, audit borrower’s financial models or estimate project cash flows for analysis of key financial ratios. Exponent makes recommendations to complete or improve the project’s investment and operations plans, if appropriate.
To assist financial institutions in administrating projects in their portfolios, Exponent has experienced and knowledgeable personnel for construction and operations phase monitoring of energy or oil and gas projects. We work together with lenders to assure that the liquidated damages, cost controls, contingencies, and insurance policies proposed by the sponsors for both construction and operation are sufficient. Once loan agreements are executed, Exponent provides oversight services during the project construction phase including cost monitoring and reporting as well as monitoring for contract compliance; engineering design, procurement and construction progress; environmental damage mitigation efforts; and schedule impacts related to major equipment fabrication and delivery as well as cost monitoring and reporting. In addition, we inspect for the development of required infrastructure for a project and provide certifications to the lenders with regards to financing at closing, disbursements, technical completion, and final completion, as necessary.
During operations, we review the annual budgets for projects, including operating and maintenance expenses and sustaining capital expenditures, and assess (when applicable) project expansion plans. Exponent can evaluate the operating management plan and technical aspects of all contractual material related to performance guarantees and operations, and compliance with applicable provisions and requirements. We have been asked to assess trends in raw material and products markets, including furnishing updated estimates of supply and demand in markets affecting project profitability and margins, and to provide review and comment on the borrower’s forecasts and projections. As part of the review of operating and maintenance cost projections, we provide annual (or more frequent) monitoring reports during the operations phase.
Exponent’s energy consultants, business analysts, and discipline engineers provide support to lenders throughout the design and construction process. Our capabilities extend to analyzing or supporting claims during project construction. Moreover, we can address complex engineering problems on energy projects either in construction or operations.
This technical, market analysis and project economics support is not just for lenders – we also provide support to project companies, and as needed/requested, the attorneys whom support the transactions.
Exponent has helped energy and alternative fuels project developers with site selection studies, marketing plans and strategies, feasibility studies, process technology assessments, preliminary capital and conversion cost estimates, analysis of supply chain logistics, and development of project economics/financing models and project memoranda.