Capital Budgeting Approaches for Acquisition / Divesture of Asset with Strategic Dependence


 
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Capital Budgeting Approaches for Acquisition / Divesture of Asset with Strategic Dependence
Leon Ploubidis, Manager, Australia, Member
Hello from Australia! I'm keen to hear from people who have come across creative acquisition transaction structures for Transmission Substations and the Capital Budgeting approaches involved. This particular situation is a little unique though. It assumes that a Renewable Energy company has built a Wind-farm AND a Substation, but wants to divest/sell the Substation. The Windfarm still requires the use of the Substation to connect to the electricity transmission network, and will have the pay the new owner (acquirer) an annual fee for this connection.
The three scenarios are:
1. Acquire the Substation from the Renewable Energy company (Windfarm) at Fair Value. This is simple, where it's a straight acquisition, where the acquirer would simply recover its Initial Outlay through the Present Value of its future cash flows, being the annual tariff/charge to the Renewable Energy company (windfarm).
2. Acquire the Substation at a discount. I assume that given the renewable energ...Sign up
 

   

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