Shale gas development has created a substantial increase in the supply of natural gas and a decrease in its price, making gas-fired generation in the United States a highly attractive alternative to existing coal-fired generation. The opposite situation exists in Europe, where coal and renewable generation currently is crowding out gas. In addition, new environmental regulations and tightening environmental constraints regarding CO2 emissions exert enormous pressure on utilities to re-evaluate coal-fired power generation. Finally, the acceleration of renewable technologies (solar and wind) is changing market dynamics. FTI Consulting Power Market experts are well-versed in helping utilities repower their coal assets. We offer expertise in power plant asset management, including finance, operations, commodity and risk management (former utility chief executives, chief financial officers, chief operating officers and presidents). With all this knowledge, skill and competence within one firm, we can move fast to help clients develop strategies and make decisions quickly.
Our Service Offerings
Power plant construction, expansion/modernization of existing plants and fuel conversions are large, complex and expensive projects. Post-project disputes arise between vendors and owners around missed schedule commitments, cost overruns and unmet performance guarantees. Because many of our energy professionals joined FTI Consulting from the utility and construction industries, we understand the construction issues involved, have negotiated many favorable results and often have provided expert witness testimony. We also provide risk mitigation services during construction, acting as the owner’s representative to manage costs, schedules and plant performance during the project phase in order to avoid post-project disputes.
In recent years, the Federal Energy Regulatory Commission (“FERC”) enforcement has become very active in investigating and initiating claims of market manipulation against both generating entities and traders operating within wholesale energy markets. Defense of these claims requires detailed understanding of independent system operator and regional transmission organization market rules, the ability to ramp up quickly to obtain and analyze data pertinent to such claims, credibility to speak with FERC staff to dispute claims before they become public, insight into regulatory strategy developed over years of experience and deep connections within the industry. FTI Consulting experts have been called on in many major enforcement cases over the past five years.
Often, policies are written that include all participants when some should be excluded. For example, the Environmental Protection Agency (“EPA”) recently set new emissions rules for coal-fired plants. One rule stipulates that if more than one plant is owned, an owner can average the emissions impact for the company over all plants owned. Single-plant owners clearly are disproportionately affected by such a rule. FTI Consulting works with clients to ensure that the EPA fully understands the impact of new rules on stakeholders. We have direct experience working at the EPA and are well-versed in the process of policy creation and compliance modification. In Europe, FTI Consulting experts, to ensure a balanced approach, help policymakers design new capacity market schemes that meet the needs of all types of plants.
In a highly regulated industry like gas and electric utilities, it is critical that the market participants’ position on numerous issues be heard and understood. Before joining FTI Consulting, many of our Strategic Communications specialists worked for utilities, the EPA, Ofgem in the United Kingdom, the CRE in France and various other regulatory agencies and have expertise in how regulations are developed and modified. We work continuously with appropriate government agencies to ensure that our clients’ best interests are being met.
Because of stagnant growth, some utilities are looking for ways to grow through acquisition or to restructure through divestment. This strategy presents many challenges such as finding the right value, anticipating issues like changing fuel prices, and making modifications to environmental policies and demand patterns. FTI Consulting Energy professionals help clients step by step through the transaction process, including market scans, review of the potential for antitrust issues, and economic and financial analyses of future fuel pricing and power demands. Depending on the type of transaction — acquisition or divestment — we help clients apply for and win approval from regulatory agencies like the Federal Energy Regulatory Commission.
The two factors driving restructuring today are the reduced price of natural gas, which has caused distress for coal-fired plants in the United States and gas-fired plants in Europe, and the continued tightening of environmental constraints on emissions in the United States. In Europe, changes in renewables support; for example, the recent change in solar/wind subsidies in Spain, have led to significant financial restructuring. FTI Consulting Energy professionals, some drawing upon their experience as a former president or chief operating officer of a utility or power plant, understand the mechanisms by which prices are established in markets. We are adept at developing future fuel price curves and projections. And we leverage our knowledge of legislative processes to help regulators and legislators shape the next generation of policies and regulations.
Strategic & Business Consulting
Responding to new regulatory requirements or low-growth market conditions, utilities face daunting challenges and options in order to survive. What capital investments, financial restructuring, lender negotiations and rate-setting policies will be required? What are the economics of converting from coal to gas or exploiting solar, wind or microgrids? The Utility specialists at FTI Consulting draw upon their experience with the regulatory agencies and utilities, as well as deep economic and financial expertise, to help utility clients develop a strategy and business plan for future operations.
Utilities often are called upon to produce a historical review of their operations. But records frequently are lost or misplaced, and the manpower to identify and assemble relevant information isn’t always available. FTI Consulting has forensic historians in our Energy group who are expert at conducting research and assembling from disparate sources a cogent story or picture of past operations. This is extremely useful in cost recovery claims, providing financial analysts and accountants with the necessary historical perspective. It also helps experts develop financial models that provide a logical basis for assigning costs, thus producing the most fair and equitable resolution possible.
The success of a restructuring, merger, acquisition, carveout, spin-off or divestiture may depend on how quickly management voids can be filled once the transaction is completed. The seasoned Energy professionals with C-level experience at FTI Consulting are prepared to fill the void when client companies face leadership, financial or operational challenges. On a moment’s notice, our experienced and credentialed senior executives assume C-level roles, providing the leadership and strategic decision-making ability to maintain momentum, establish corporate priorities, build morale and provide critical continuity. Our C-level executives serve in the following roles: chief executive officer, chief operating officer, chief financial officer, chief restructuring officer, controller and treasurer.