Business Models
About Vuselela Energy

Vuselela’s business models are highly flexible and offer the target clients a range of options to suit their individual requirements. In each case Vuselela will participate in the economic upside of the SPV regardless of the model chosen. Most prominent are:

  • Co-Investment Model
  • Build Own Operate & Transfer Model (BOOT)
  • Energy Conversion Agreement Model (ECA)

 

Co-Investment Business Model

The Co-Investment model is not Vuselela’s preferred model but because of the opportunity for equity ownership will be considered at the client’s election.

Under this model, Vuselela Energy will co-invest in the equity of the SPV in return for a share in the dividends as well as the CERs earned from the establishment of the plant. A special purpose vehicle (SPV) will be incorporated as the owner of the co-generation plant.

Vuselela Energy and the project host will be co-participants and co-investors in the operating entity and will each provide their respective proportions of capital required for their equity share in establishment of the plant.

Vuselela and the project host will share all risk in and revenue from both electricity and CER sales in proportion to their respective shareholding in the SPV.

Features of the Co-Investment model include:

  • Vuselela will be appointed as the SPV’s owner’s engineer and will procure engineering services from external EPCM contractors.
  • Land and utilities will be made available to the SPV at zero cost.
  • An “over-the-fence” supply of waste energy will be provided to the SPV at zero cost.
  • The electricity generated by the SPV will be supplied to the project host at a competitive rate as a quid pro quo for the free supply of waste energy.
  • CERs will be shared between Vuselela and the project host in relation to their shareholding of the SPV.
  • Vuselela will assume full responsibility for carbon asset management activities for the duration of the crediting period.
  • Implementation and operation will be entrusted to Vuselela Energy on a remunerated basis.

 

Build Own Operate & Transfer Model

Vuselela Energy will be the “Owner” and “Operator” of the plant for the contract period, after which ownership is transferred to the project host.

Vuselela will therefore provide the full capital requirement for the establishment of the project and be responsible for its operation and maintenance.

Fundamental to the BOOT model is the establishment of a Power Purchase Agreement (PPA), which complicates regulatory, legal and financial aspects of the venture since penalties on both sides need to be negotiated and agreed prior to financial close. The BOOT model is therefore not Vuselela’s preferred model.

This scenario includes the following features:

  • Vuselela will provide the full Capital Investment for establishment of the plant.
  • Land and utilities will be made available to the SPV at zero cost.
  • Over-the-fence gas supply will be provided to the SPV at zero cost.
  • The electricity generated by the co-generation plant will be supplied to the project host or exported to the grid at benchmark market pricing under a PPA.
  • All revenue from sales of electricity will accrue to the SPV, whether or not the power is used on-site or exported into the national grid
  • Certified Emission Reductions (CERs) will be shared between Vuselela and the project host on a mutually agreed and economically viable basis.

Vuselela will assume full responsibility for the Carbon Asset Management activities.

 

Energy Conversion Agreement Model

Under this model, Vuselela Energy will finance the SPV and provide an energy conversion service to the host company for a monthly or quarterly payment.

CER participation is based on a sliding scale wherein the host is allowed to select the percentage of CERs for their portfolio that underpins the contractual “effective electricity price”

Vuselela will build and operate the SPV co-generation plant to the project host for a period of at least 10 years (CDM crediting period) after which the project host may elect to take full ownership of the plant at fair value or extend the ECA period.

Vuselela will therefore provide the full capital requirement for the establishment of the project and be responsible for its operation and maintenance for the contracted period.

This model includes the following features:

  • Vuselela will provide the full Capital Investment for establishment of the plant.
  • Land and utilities will be made available to the SPV at zero cost.
  • An “over-the-fence” supply of waste energy will be provided to the SPV at zero cost.
  • The electricity generated by the SPV will be supplied to the project host at zero cost.
  • Vuselela will receive a pre-determined regular payment regardless of operating and supply conditions.
  • CERs will accrue to Vuselela and the host at pre-agreed levels.
  • The supply of free waste energy and return of free electricity can be considered similar to a toll treatment arrangement with a lease of equipment.
  • ECA payments may have significant tax benefits to the project host.
  • Vuselela will assume full responsibility for the carbon asset management activities.

It is worthwhile to note that because of the complications introduced by a PPA under the BOOT arrangement, Vuselela in principle has been promoting the ECA model to all the target clients with excellent results.