Insights
Key Factors in Power and Utility Investments
Posted October 19, 2016 in Articles
Even with the current challenges in the U.S. and global oil markets, oil companies capable of weathering the storm are continuing to invest with an eye toward the future. In addition, many alternative energy companies are viewing the current economic climate as an opportunity. As a result, in many ways, now an exciting time to be involved in the power and utility sector.
10 Critical Considerations When Investing in Energy
Of course, as with any investment, a substantial investment in energy requires detailed planning, careful forecasting and meticulous due diligence. When we work with companies contemplating power and utility investments, here are some of the critical considerations we help them evaluate:
- Laws in the Relevant State or Country – Laws governing natural resource exploration and energy production vary widely around the world, and in the United States even from one state to the next. Environmental, labor, land use, zoning, and even intellectual property laws must be considered as well.
- Materials and Vendor Contracts – From questions of enforceability to maintaining diplomacy in cross-border negotiations, there are numerous unique issues to consider when entering into contracts in relation to power and utility investments. Then, of course, there is the matter of negotiating a deal that meets both your immediate and long-term needs.
- Storage and Transport of Raw Material – If your employees will be dealing with raw material, how will they store it? What methods of transportation are available? In this realm, safety must be a top priority.
- Disposal of Waste Product – Disposal of waste product is an important cost, safety and environmental consideration in the energy sector as well.
- Import and Export Considerations – What materials and products will you need to get into the country where your investment is located? What materials and products will you need to get out? Import and export laws can have significant impacts on operations and profitability.
- Tax Implications of Energy Investments and Production – As with any investment or business opportunity, up-front tax planning is essential. You will want to structure your investment in order to minimize any resulting tax liabilities.
- Infrastructure Availability – In order to determine the amount of investment required, (and the viability of the investment as a whole) you will need to have a clear picture of the local infrastructure. Access to existing utilities and communications options are just two areas that will need to be assessed.
- Source Sustainability – Is the energy source sustainable? For how long? What factors might change these answers, and what can you do to mitigate the risk?
- Market Competition – Who are your main competitors, not just locally but on a global scale? Energy is a worldwide commodity, and technology is making it easier and easier for new companies to compete for market share around the world.
- Regional Considerations – Finally, depending on the global region in which you are seeking to invest, you may need to critically assess the potential influence of any regional conflicts or political factors. Will employees’ safety be at risk? Could bureaucratic issues present long-term (or even permanent) roadblocks? These are issues that often must be assessed with the help of someone who has local, first-hand knowledge of the region’s current geopolitical circumstances.
Contact Mithras Investments about Your Energy Sector Investment
At Mithras Investments, we work with leading U.S. and multinational companies seeking to invest in power and utility markets worldwide. We stay up-to-date on the latest legislative and market factors impacting energy investments, and we work closely with our clients to help them make critical decisions with as much information as possible. To learn more, please call (305) 517-7911 or inquire online today.
