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Orchid Digital Diligence

Our pragmatic approach to due diligence is 360°. We combine documentary, digital, and cyber methods tools to obtain relevant data and facts for clients to make timely and smart decisions and as part of our scope of expertise.

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We have been involved in international business and deal making for decades and observed first hand that the conventional due diligence approach typically used by many law firms, reviewing documents provided by a party with interests different from the client, is simply insufficient.

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Our diligence team includes attorneys, engineers, business, digital and technical experts working together on the ground and in the air to provide comprehensive coverage for the client. Contact us for more information about Orchid Digital Diligence including virtual site visits.

Sample Assignment: 360º Due Diligence
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Sample Assignments: 360º Due Diligence

Background: Orchid’s investigation on business partners, active diligence on claims of development status and projects assets led clients to evaluate realistic outcomes of investment and entering into purchase agreements.

Scope of Work A:

  • Investigated the management team of the development company seeking to sell two greenfield power projects to SK E&C and alleged development status of projects
  • Uncovered legal problems between management team and equity fund investors’ allegations of embezzlement, litigation
  • Performed documentary due diligence of project contracts; questions arose about incomplete records and misleading statements made by management team
  • Identified gaps in corporate records and investor information; high risks not possible to mitigate
  • Client decided not to go forward with acquisition and projects were never built
  • Principles of management team found guilty of embezzlement

Scope of Work B:

  • Orchid evaluated USA petrochemical project for private petrochemical trading company in China for equity investment and long term offtake
  • Orchid investigated Board of Directors claims of energy experience and found serious misleading claims affecting reliability and credibility
  • Orchid attended international conference in China for client and observed major inaccurate statements made by USA company about project status and feedstock supply
  • Discovered several concerns relating to the management team, investors, funding sources; issues that would be a fatal problem for Chinese company under USA federal and state laws
  • Client did not go forward with investment or offtake discussions based on risk of fraud and project would not be completed

Sample Assignments: Connections and Networks

Background: Orchid advised several organizations and institutions regarding promotion of cooperation and investment with American companies, and education on the USA oil and gas supply and value chain: Ministry of Economic Affairs, Industrial Research Technology Institute, Taiwan-USA Industrial Cooperation Promotion Office, Taiwan Business Weekly.

Orchid's Role:

  • Reviewed organizations/institutions’ goals and mission; advised on industry insights, adjusted goals
  • Arranged meetings with international and domestic companies involved in upstream oil and gas, midstream gas, petrochemical development, regulators and government agencies, equity investment, drilling and oilfield services, for investment and partnerships
  • Arranged site visits for officials to witness and learn unconventional drilling techniques in Texas
  • Prepared presentations on the USA energy industry with focus on upstream natural resources, pipelines, LNG, and petrochemical projects; commercial, market, legal and regulatory considerations
  • Prepared clients for meetings and engagements with American companies, counterparts, and partners
  • Prepared interview questions for clear communications and answers on accurate data for reports
  • Prepared final report and recommendations for clients on next steps, key insights, and potential business opportunities

Sample Assignment: Critical Industries

Background: A private PRC brand name company in the Chinese electronics industry hired Orchid to assist on securing USPTO patents and advise on international market entry in USA, Europe, Japan, and Korea. Prior to hiring Orchid, the client interviewed major law firms in China and USA for IP work, however, was unable to progress for several reasons.

Orchid's Role:

  • Reviewed client’s existing patent portfolio in China and conducted internal due diligence on company’s process and procedures
  • Advised management team on all matters and issues relating to legal and regulatory, commercial, market, and potential customers
  • Worked with client’s personnel in China to train on international business cultures
  • Selected external legal counsel in China and USA for IP work, negotiate engagements, manage communications, services, billings
  • Keep client informed of industry and market changes impacting commercial strategies
  • Assist client on English translations of contracts and presentations at international conferences
  • Introduce client to potential partners and customers in USA

Orchid's Deliverables:

  • Working with external IP counsel, filed patent applications in USA and EU in 2016, USA patents received in 2016
  • Prepared strategies on IP, licensing, and marketing
  • Prepared client for international exhibition and launch at Infocomm at Beijing International Exhibition Center

Sample Assignments: Renewable Energy

Background: Orchid represented major Asian wind turbine manufacturers and development companies on multiple assignments in Asia, USA, and Europe. Check out Orchid Group Services. Our roles range from legal and regulatory adviser to helping clients find the right partner or investor, projects, and site locations.

Scope of Work A:

  • Introduced client to landowners, potential partners and customers, identified projects
  • Investigated third parties and offered projects to protect client from fraud
  • Performed the legal, regulatory, commercial and financial due diligence on projects
  • Prepared joint development, shareholder agreements; advised on power sales and interconnect agreements
  • Supported client in negotiations and meetings with regulatory agencies, independent system operators, advised on operating protocols and transmission issues
  • Selected USA law firm for detailed site control work and land related issues

Scope of Work B:

  • Introduced client to large landowners and regional developers for project acquisitions and joint ventures
  • Advised client on key differences in regional power markets, local business cultures and USA companies active in each region
  • Arranged and supported client in meetings with ISO’s and keep client informed on laws, regulations and transmission tariffs
  • Assisted client on local business cultures and applicable local ordinances governing wind development and construction
  • Advised client at meetings with landowners and local officials for potential leasing and development

Sample Assignments: Power (LNG)

Background: Our experience in LNG covers decades working with companies in USA, Korea, China, Japan, and Taiwan in multiple roles. Orchid Group are experts on work such as market studies and LNG analysis. In addition, we represented multinational corporations on investment in LNG liquefaction projects and securing access to the China LNG market.

Scope of Work A:

  • Represented client and project company in meetings with decision makers of major creditworthy LNG buyers in China and Taiwan
  • Secured expressions of interest from top level decision makers in China to form strategic alliance with USA natural gas companies
  • Obtained offers from China decision makers to introduce distributers and end-users to client for additional LNG quantity offtake
  • Prepared monthly updates of China market and detailed report for client on natural gas and LNG industry reform, long term LNG purchase and sale agreements in negotiations, regasification terminal project construction and delivery schedules

Scope of Work B:

  • Select and review liquefactions projects in North America for China LNG company
  • Interviewed decision makers with USA developers and reviewed data on company and project
  • Reviewed gas supply and value chain for upstream investment, midstream options, and reliability
  • Investigated potential partners for client to determine best fit, along with development status realities
  • Trained client’s management and staff in China on USA gas physical and financial markets, applicable federal and states laws and regulations
  • Advised on investment and partnership structures, ownership and operations
  • Prepared and presented detailed report on available projects, investment potential, recommendations and risks to decision makers in China

Sample Assignment: Power (SK E&C)

Background: SK E&C hired Orchid to lead commercial and legal due diligence on the potential acquisition of 100% membership interests in two greenfield combined cycle power plants in ERCOT.

Orchid's Role:

  • Investigated the project, development status, and management team track record
  • Performed documentary due diligence of project contracts (land, EPC, water, permits/licenses, interconnection/transmission), joint development
  • Reviewed tax and corporate records, consents, resolutions, sources and uses of funds, investment documents
  • Provided an overview of the US power market and ERCOT zonal and nodal markets, revenue hedging options, financial model
  • Provided an overview of the US natural gas market with emphasis on supply for project
  • Reviewed the project gas sourcing plan and provided feedback on options to procure gas
  • Reviewed the power marketing plan and provided input on hedging and power sales options

Orchid's Deliverables:

  • Feasibility report on development company and project, contracts and agreements, investigation of management team, permits/licenses status, site control, environmental/geotechnical, corporate records, use of investment funds
  • Analysis of power market and sales, hedging options, interconnects/transmission, energy management

Sample Assignment: Power (KOSEP)

kosep

Background: Korea South-East Power Co. (“KOSEP”) was considering the acquisition of a greenfield CCGT project in Pennsylvania within the PJM market and hired Korea Ratings (“KR”) to assess the feasibility of the project. On behalf of KOSEP, KR hired Orchid to lead due diligence from on the ground.

Orchid's Role:

  • Orchid oversaw the development of a power market simulation of the PJM market.
  • Engaged a third party legal adviser and managed the legal review.
  • Provided an overview of the US power sector and the PJM market.
  • Provided an overview of the US natural gas market with emphasis on the Marcellus Shale.
  • Reviewed the project gas sourcing plan and provided feedback on options to procure gas.
  • Reviewed the power marketing plan and provided input on hedging and power sales options.
  • Orchid reviewed all contracts, permits and licenses for potential issues.
  • Critical problems were identified by Orchid. Project never constructed due to these issues. Developer eventually went bankrupt.

Orchid's Deliverables:

  • A report on the project covering power sales, gas procurement, regulatory and permitting issues, identifying risks and proposing mitigation
  • The power market simulation output and scenarios
  • Identification of any fatal flaws

Case Study: #2 Commercial Advisory

xemc

Background: Chinese wind turbine manufacturer, XEMC, approached Orchid to advise it on a brownfield wind power project in California that the firm was considering purchasing and re-powering with its own turbines.

Orchid's Role:

  • Orchid essentially acted as “financial advisor plus” for XEMC, filling some of the traditional roles of a financial advisor but leveraging our extensive industry experience to go beyond that role.
  • Orchid developed and maintained the financial model for valuing the acquisition.
  • Orchid led due diligence on the project with a particular emphasis on regulatory issues.
  • Orchid directed the third party legal adviser on the project.
  • Orchid supported XEMC in developing the documentation necessary for securing financing from Chinese lenders.
  • Orchid advised on and led negotiations with the seller.
  • Orchid also advised on other matters pertinent to the transaction as XEMC required.

Orchid's Deliverables:

  • Financial model and analysis
  • Overall pricing and negotiating strategy development
  • Development and maintenance of project plan & work schedule
  • Preparation of materials for approvals and financing

Case Study: #1 Commercial Advisory

kosep

Background: Korea South-East Power Co. (“KOSEP”) was considering the acquisition of a greenfield CCGT project in Pennsylvania within the PJM market and hired Korea Ratings (“KR”) to assess the feasibility of the project. On behalf of KOSEP, KR hired Orchid to lead due diligence from on the ground.

Orchid's Role:

  • Orchid oversaw the development of a power market simulation of the PJM market.
  • Engaged a third party legal adviser and managed the legal review.
  • Provided an overview of the US power sector and the PJM market.
  • Provided an overview of the US natural gas market with emphasis on the Marcellus Shale.
  • Reviewed the project gas sourcing plan and provided feedback on options to procure gas.
  • Reviewed the power marketing plan and provided input on hedging and power sales options.
  • Orchid reviewed all contracts, permits and licenses for potential issues.
  • Critical problems were identified by Orchid. Project never constructed due to these issues. Developer eventually went bankrupt.

Orchid's Deliverables:

  • A report on the project covering power sales, gas procurement, regulatory and permitting issues, identifying risks and proposing mitigation
  • The power market simulation output and scenarios
  • Identification of any fatal flaws

Case Study: #2 Market Research

Background: The Electricity Generating Public Company Limited wished to bid on the sale of a 49% stake in an 1800 MW CCGT in South Korea and needed an adviser to forecast power market prices and advise on issues related to LNG supply agreements and a terminal use agreement.

Orchid's Role:

  • A report on the project covering power sales, gas procurement, regulatory and permitting issues, identifying risks and proposing mitigation
  • The first step was providing client with an overview market report explaining in detail how the Korean power and gas markets operate, identifying risks and looking at evolution in market regulation and policies.
  • The second step was due diligence on all commercial agreements related to the project and production of a red flag report.
  • The third step was running a market simulation and developing the analysis in report form. We ran ten cases in total.
  • Finally, we advised client on issues related to LNG market risk, and provided input on mitigating risk in the transaction documents.

Orchid's Deliverables:

  • Price forecasts for LNG and power in South Korea through 2046
  • Base case plus nine sensitivities
  • Full reporting on the market as well as analysis of simulation result
  • Risk analysis and mitigation strategies

Case Study: #1 Market Research

Background: A confidential client was required by the lenders to two of its gas-fired power projects to demonstrate the competitiveness of its LNG supply agreements. Orchid Group was engaged to conduct the study.

Orchid's Role:

  • Orchid was engaged in 2018 to develop an outlook for new LNG contract prices over the next ten years.
  • The purpose of the work was to demonstrate to the lenders to client’s power projects that their LNG supply agreements would be competitive over the life of the loan.
  • We began by looking at historical supply/demand in LNG markets against evolving long-term contract price trends.
  • From there, we developed an outlook for global LNG supply and demand over the next 10 years.
  • Against the outlook, we assessed the trend for new project financial investment decisions and challenges facing the development of new projects.
  • Finally, we developed an expected price formula outlook for years 1-5 and years 6-10.

Orchid's Deliverables:

  • Powerpoint report incorporating historical analysis, the outlook and pricing expectations
  • Report was delivered to client’s lenders to satisfy obligations under the term loan agreements

Case Study: Deal Origination

Background: Energy Initiative Japan (EIJ), a Japanese developer of solar projects hired Orchid to lead the sale of a portfolio of greenfield solar projects developed under the Feed-in-Tariff (FIT) established under the “Act on Special Measures Concerning the Procurement of Renewable Electrical Energy by Operators of Electric Utilities” in Japan.

Orchid's Role:

  • Orchid was engaged by EIJ to assist them in preparing the materials required to attract long-term investors in their portfolio of solar projects, approach investors and support concluding a transaction.
  • We worked with EIJ to understand the details behind the projects and to prepare the necessary materials for a data room including the financial model.
  • We identified high potential investor groups, prepared a teaser document and engaged the targeted buyers.
  • Throughout the investor review process, we managed relationships and facilitated the timely completion of due diligence.
  • We worked with EIJ and the preferred bidder to move towards the close of an SPA.
  • As a result of the process, Sonnedix of France acquired the projects.

Orchid's Deliverables:

  • Origination of potential investors
  • Preparation of teaser materials
  • Coordination of data room preparation
  • Management of the transaction process

Case Study: Strategy Consulting

doosan

Background: Doosan Heavy Industries (DHI) was eyeing the United States as their key market for selling wind turbines, but wanted to understand whether they could compete there, what models were most competitive the logistical network required for them to compete in the USA. They hired Orchid to help them work through developing market entry strategy.

Orchid's Role:

Orchid provided DHI with a comprehensive package complete with strategic options for entering the USA.

  • Detailed overview of the US market and outlook for wind growth
  • Trends in wind turbines in the USA including guarantees, O&M and other issues
  • Outlook for incentive programs
  • Issues related to financing wind projects
  • Regulatory overview
  • Competitor analysis
  • Strategic considerations
  • Customer willingness to embrace new wind turbines
  • Desired product offering
  • Marketing presence & organization
  • Manufacturing
  • Transport logistics

Orchid's Deliverables:

  • Detailed slide deck covering all issues in scope
  • Interim presentations and final executive committee presentation
  • Generic financial model for USA wind project
  • Financial projections “potential size of the prize”