Key success factors in Energy Project Development
This week’s blog covers an interview with Martin Thomas, MBA, owner and Managing Director of mthpower services gmbh, talking about key success factors in energy project development.
Martin has 17 years of experience within the energy industry and more than eight years of consulting experience in international companies such as DOW Chemical, Arthur D. Little, and OMV. His last position held prior to founding mthpower was Senior Vice President of OMV Gas & Power GmbH, building up 1,700 MW of fossil and renewable power capacity in Turkey, Romania, and Austria/Germany, leading a team of 200.
In your opinion, what are important actions to consider when developing energy project on an international level?
Although the energy industry is an international business, different markets behave differently. When going abroad – even within Europe – there are going to be discrepancies comparing the explicit and implicit rules of those markets. Your local network and connections are the key to maneuver within the local coloring.
There is an art in finding the right local partner. In many cases it will show if you have made the right decision further down the line, as it seems there are many people that will promise you everything under the sun, but later down the road it turns out that they cannot deliver on their promises. Claiming to have the necessary connections and access to gatekeepers, in reality, most people tend to oversell themselves as well as their network.
It is problematic to assess beforehand if your potential local partner can offer you the support and connections you need, or if there is a chatterbox sitting across the table. Background information and extended communication can be a good measurement to ensure the quality of a local partner, trying to elaborate, if their story makes sense and is possibly even backed by evidence such as previous successes.
Of course partnering with companies gives you a certain degree of security compared to private individuals. Operating companies can refer to previous projects which they realized or are involved in, and the odds of them being well connected are increased, because they operate on a wider spectrum.
Working together with bigger partners who are for example, stock listed companies or have a long family tradition, operating for many years in such environment, you can be sure that they have a well established network and necessary background which brings stability. When looking into a possible local partnership, a certain degree of political independence is important. When and if the political environment shifts, you need a partner strong enough to swim with the current even when it’s changing swiftly. The stronger and better connected your partner is, the less likely he is to be
Just like a certain degree of maturity and size makes a local partner a more reliable and promising connection, it is easier to approach companies of a certain size if you yourself can underline your knowhow by past accomplishments and prove your connections through things such as experience. As a small company, it is a challenge to successfully establish a partnership with a big association, although there are always a couple of exceptions that prove the rule.
Furthermore is it more difficult to enter a new market as a small company, and you usually need to focus all your resources and efforts on one spot, laying all your eggs in one basket you might say. Building a network is a time intensive process, and to cover more than one country in establishing new connections you would need to be a considerably large company.
Local partners can influence the development of a project heavily. Scheduling for example – which tends to be a difficult issue, because you never seem to cope with the time you planned – can create a huge risk for a project. A time-gap caused by delays could add up to a real worst-case scenario, especially for smaller companies, as this period is often cost intense. Further funds may be needed to further project development, combined with the fact that there are virtually no returns for the company at this stage of the project. Such situations require project developers to have a long breath in terms of financial backing. Identifying a well-organized and highly professional local partner can help to reduce this threat to almost eliminating it depending on the market where the project is developed.
Experience is another key attribute of a local partner. Different markets are often shaped by different cultural backgrounds, resulting in a difference in the perception of time or how you would define words such as ‘quickly’ or ‘urgently’.
As an outsider working in a foreign market, bureaucracy is another challenge where a well-connected and established local partner will be essential. Even if you can manage to obtain the required documents, you are clueless if it is everything you need, or in many cases, if it is even part of what you need. Prerequisites to documents such as agreements or confirmations can be a hurdle. A local partner can support you with providing all the explicit and implicit requirements concerning all your documents, if you can trust his knowhow and expertise.
Unfortunately, positive surprises rarely happen, if at all. So you need a well-connected partner who you can trust, which has the expertise you need and can withstand a certain degree of strain when political or economic shifts occur.
Which core competencies do you see as the most important for developing an energy project abroad and what are areas best to add support from outside your core team?
Personally I think that detailed technical competences are purchased most easily. This level is very homogenous, and geographical differences do not have a considerable impact.
A key success factor is to master country specific diversities. Which requires a certain degree of social competence and soft skills on your part and within your project team, and on the other, through your local partner who illuminates your blind spots.
Being accepted by others within the industry is crucial for a successful project. The ability to adjust to the given local business and cultural environment and to understand how the wind blows can influence any project immensely. Competent management, dealing with all stakeholders involved and managing very complex situations accurately is essential.
Technical knowhow you can buy, but having the right people in your team, which you can trust and who deliver, is crucial.