A feasibility study of a major infrastructure project (a heating main)

Competence area: Investment, M&A services

Industry/sector: energy / heat and power generation

Year of completion: 2004

Client: StroyTransGaz, Russia

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Project background:

The Client, the strategic investor of the project, wanted Investorium to develop a concept of a heating main to carry heat from North West CHPP to Primorsky district of St. Petersburg. The heating main was expected to resolve the issue of the heat deficit and supply heating to newly built living blocks in the North of St. Petersburg. Investorium was also responsible for having the project approved by its main participants and stakeholders, and namely: GUP TEK SPb (a city government-controlled heat supply monopoly, the owner and operator of St. Petersburg's boiler house facilities), VTB Bank (the financial investor of the project), the regional and Federal energy commissions (the energy rates approval authorities).

Scope of work:

The main incentive for the project was the lack of capacity of the heat generation facilities (boiler houses) in Primorsky district of St. Petersburg caused by the housing construction boom in the area. Also, due to the long distances from the boiler facilities to heated buildings and increased pipeline wear, the heat losses in the heating mains increased 1.7 times, while the payload increased by only 6.2%. The business idea behind the project entailed the construction of an above-the-ground heat pipeline with the view to supplying heat generated by North West CHPP to the district’s boiler facilities and to curb the heat deficit in the area.

What made the project challenging was the need to calculate a new rates model for the North West CHPP, acting as a combined heat and electricity generation facility. Initially, this power plant was built with the intention to export the generated electricity to Finland, and heat generation was not accounted for in the rates they charged. It was up to Investorium to develop a new rates model and have it approved both on the regional and Federal levels by respective energy commissions. In addition, the very concept of the project was in conflict with the investment program of GUP TEK SPb which involved developing the boiler facilities on an independent basis, but Investorium’s effort resulted in harmonizing the positions of all the project stakeholders and obtaining all the necessary approvals.

Deliverables:

The approved new rates model served as the basis for the project feasibility report containing the calculations of the project’s investment budget, profitability and payoff rate. The Client, encouraged by the Government of St. Petersburg and backed financially by VTB Bank, built and commissioned the heat pipeline which allowed to cover the deficit of heating power in Primorsky district of St. Petersburg and provide extra capacity for rapidly developing heat distribution network in the Northern part of the city.

Media coverage:

rbc.ru

rosteplo.ru

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