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Outsourcing Ownership, Operation and Management of Industrial Facility Power Plants for the Purpose of Reducing Future Risk and Capital Requirements of the Corporation
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For many industrial corporations, the availability of funds for maintaining and modernizing Central Utility systems is becoming more and more difficult to obtain. Total return on investments in facility infrastructure generally does not tend to meet rates of return offered through up-grade to manufacturing parts of the facility. Many Facility Managers are faced with the situation of having utility infrastructure that has exceeded normal expected useful life of the major equipment components and is operating inefficiently. In addition, current and future regulatory requirements for operating such facilities are placing increased burdens on the staff who may not be able to acquire the skills required in the daily intricacies of operating and regulating such facilities. Industrial facilities have be capability to pursue partnerships with private companies for the purpose of owning, operating and modernizing these central utility facilities. Further, large district energy and un-regulated subsidiaries of investor owned utility companies are actively pursuing the purchase and operation of large energy systems from various industrials. If pursued properly, competitive forces in the market place offer specific economic advantages to the institution to receive guarantees for items ranging from the cost to construct and expand the facilities to guarantees for fuel efficiency, future operating costs, energy supply and cogeneration system performance. The status of electric deregulation may also significantly increase the value of the plant to an outside investor/operator. In many instances, energy and operating efficiency improvements may actually be sufficient to fund a majority of the potential modernization and operation. This presentation will deal with methods of how to allow market forces to work to the advantage of the industrial facility owner and how to structure a process to competitively procure such partnership contracts. This paper is based on the experience gained with the privatization of central utility systems for the University of Minnesota and the University of Maryland, College Park.
Sebesta, J. J.; Schubbe, T. (1999). Outsourcing Ownership, Operation and Management of Industrial Facility Power Plants for the Purpose of Reducing Future Risk and Capital Requirements of the Corporation. Energy Systems Laboratory (http://esl.tamu.edu). Available electronically from