An assessment of a production assets pool development (Feasibility studies)

Competence area: Strategy, Investment

Industry/sector: oil and gas

Year of completion: 2014 - 2015

Client: GazpromTeploenergo, Russia

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Project background:

The Client, a Gazprom subsidiary, contracted Investorium to explore strategic alternatives for developing a group of production assets operating in the same industry, producing one and the same product line and located in the same region, but being at different stages of their life cycle (an operating up-to-date enterprise, obsolete production facilities, and a new unfinished high-tech production plant). The task was to determine the most economically-sound option for further development of the said assets with the consideration of strategic, investment, financial and economic factors, as well as those related to raw materials supply and outbound logistics.

Scope of work:

The Investorium project team analyzed the profile market and the strategic position of the production assets in the context of the market competition and industry development trends. The project team considered the sufficiency of the raw materials base, calculated the relevant weight of the logistics component in the cost of the product, and gauged the competitive environment and the possibility of exporting the products.

Based on the available options, it was advised that the Client should merge all the above assets into one production complex operating on the basis of the common business model, the core of this model being the new high-tech production facility as the most powerful and modern production asset. As another sensible alternative, the joint production complex could also include the Client's other assets, which are not directly involved in the production, but provide services that are essential for the production complex to function. One such asset is the up-to-date 18 MW heating power plant that provides heat and electric power for two out of the three production facilities, and the logistics hub at the nearest railway junction where consignments of finished products were formed for shipment by rail.

Deliverables:

Based on the thorough analysis, the Investorium team proposed, as the most economically feasible option, merging the assets into one industrial complex as described above, and drew up a business plan for developing the said production complex which involved finding a co-investor/partner in order to transform the merged production facilities into a major regional player with exports capability. The proposed approach was approved by the Client’s top management and submitted for review by the Client’s Management Board. Investorium's business plan was utilized as a basis for investment decisions concerning the said group of assets.

Media coverage:

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