ESAI conducts economic and financial feasibility studies for a variety of energy projects. These studies are typically designed to (1) provide a high level economic and financial appraisal of a proposed new energy facility or the purchase of an existing facility for senior management or investor groups; (2) support the project development team with ongoing evaluations of changes in the market or competitive environment that would affect the value of existing or contemplated assets.

ESAI provides these services for electric generation and transmission projects, for petroleum refiners worldwide, and for liquefied natural gas projects.

ESAI's Project Evaluation Service studies are considered amongst the most comprehensive, rigorous and insightful asset valuations in the industry. We use a "bottom up" approach, analyzing a plant and/or new project in detail and placing the analysis in the context of its regional market, zone, and power pool. We synthesize the engineering, economics and finances of the plant to arrive at conclusions that can support a variety of needs, from high-level Board of Director discussions to due diligence requirements.

Past projects have included refinery acquisitions in Asia, Africa, and North America; combined-cycle gas turbine, hydro facilities, heavy fuel oil steam turbines and repowerings. In the transmission arena, projects have included a variety in the Northeast and in Canada, and include AC and DC configurations. ESAI has also worked with gas and coal producers on long-term contracts and securitization programs.

A typical Feasibility Analysis includes:

• Clear, concise summaries and recommendations targeted at senior management and Boards of Directors · Comprehensive Net Present Value (NPV) calculations based on 20-year forecasts of a unit's revenue streams, including:
  • Wholesale energy market revenue, based on ESAI's forecast of regional energy prices (and in electricity) Locational Marginal Prices at the unit's node
  • Capacity market revenue
  • Ancillary unit revenues such as steam (if applicable)
  • Cogeneration revenue (if applicable)
• High, Low and Expected scenarios
• 20-year price forecasts for the region, pool, zone and unit node based on ESAI's proprietary oil, gas, and electricity pricing models.
• Energy market outlook that draws on ESAI's staff of seasoned analysts and cutting-edge analytical capabilities
• International analysis: where necessary (oil, LNG), ESAI applies it existing, ongoing analysis of global oil and LNG market prices to the project's economics.
  • Regional levels: where necessary (oil, LNG), ESAI applies it existing, ongoing analysis of regional oil and LNG market prices to the project's economics.
• National level: in oil, gas, and electricity, prices reflect significant regional variations. ESAI is capable of detailed "basis" analysis in the oil and natural gas markets.
• Power markets present special problems:
  • Power Pool level: How will the pool's generation mix evolve over the next 10 years? How much capacity will actually be built? Which transmission projects will be implemented and how will they impact pool flows?
  • Zone: What is the zonal supply-demand outlook? What is the zonal grid topology? How will congestion evolve over the next 10 years?
  • Unit: What will the unit's capacity factor be over the next 10 years? Will it be subject to mitigation? Which units compete with it and what are their cost structures?
  • Capacity market outlook, including the impact of FERC's SMD, the "demand curve" concept and locational capacity markets
  • Dispatch analysis that quantifies how the unit dispatch will change in response to major pool outages, fuel price changes, new capacity, the unit's bidding strategies and competing plants' bidding strategies
  • How will the unit's economics be affected by FTRs (PJM's terminology) and Congestion Revenue Rights (FERC's terminology)

For more information on ESAI's power services, contact Thomas Sutro at 781.245.2036 or tsutro@esai.com.