With long term demand for energy and base metals increasing worldwide, energy and mining companies are looking for innovative ways to grow at a time of economic uncertainty. From M&A transactions to attracting new capital, many firms are using data rooms to coordinate discussions with potential partners and investors across the world.
To better manage M&A deals and attract financing in innovative ways, leading energy and mining firms are using data rooms to share confidential documents like contract drafts, engineering drawings, and site photos. A properly configured data room plays a key role in coordinating secure communication across internal and external stakeholders such as board members, financers, bidders, accountants, and lawyers.
We asked our energy and mining clients to tell us about emerging trends in their industry, and how they are using virtual data rooms beyond the more traditional uses of M&A deals and corporate financing applications:
EPC firms are increasingly bidding as project sponsors
Engineering, procurement and construction (EPC) firms are more often participating in the development stage as potential partners that can use their balance sheets to help finance projects. This type of sponsorship by EPC firms is a bid to secure a steady source of future revenue, by offsetting some of the start-up costs and operational expenses in capital intensive projects.
A data room provides a space to invite EPC firms to review documents to better prepare their bids, and makes it easier for host firms to invite more firms to participate.
More involvement with government to utilize tax credits and secure grants
Governments worldwide are putting money into projects that support economic growth and employment. The US federal government created the American Recovery and Reinvestment Act of 2009 (ARRA) with a range of alternative financing including credits, guarantees, and cash grants. Incentives are also common at the municipal level, with financing options across “prepaid energy” funding, tax-exempt bond financing, and lease finance structures.
The data room organizes documents for applications, and can provide reporting on what documents have been reviewed.
Renewable energy firms negotiating prepaid power purchase agreements
Many renewable energy firms with limited capital that might have traditionally considered bank debt or private equity are now moving towards prepaid power purchase agreements (PPA) as an alternative low-cost financing structure. A prepaid PPA gives energy firms a long-term prepayment of electric power from off-takers that have access to a low-cost source of funds. This takes the job of securing long-term project financing out of the hands of the developer and puts it into the hands of the project’s off-taker – who negotiates a price discount with the developer in exchange for pre-payment.
An unlimited use data room enables firms to invite participation from as many parties as they choose, so they have a better chance of securing the best deal.