In 2017, the Finnish power grid Elenia OY was sold by its owners, a consortium of Goldman Sachs Infrastructure Partners, London-listed 3i Infrastructure (3IN.L) and Finnish pensions insurance company Ilmarinen. The sale was reported to be one of Europe’s biggest infrastructure deals of 2017.  We were asked by a bidder to provide key advice on the Finnish regulatory model as applied to Elenia by the Finnish regulator, the Energy Authority (EA).     

The mechanics of regulation and ‘softer risks’

 Our advice centred on explaining how the key parameters of Elenia’s regulatory model were established, to drive Elenia’s revenues. We boiled down the regulatory model to its key components, helping the bidder to understand the critical drivers of value arising from economic regulation in Finland.  We also used our understanding of trends in regulatory economics across Europe to advise on how Finnish regulation might evolve in future – including projecting scenarios for the allowed cost of capital and other revenue parameters.

Our advice covered not only the mechanics of regulation but also evidence and opinion on ‘softer’ risks.  For example, the specific context of historical power outages due to severe storms in Finland has implications for how regulation has evolved, and for what we would expect to see in the future.  

 Putting a price on it

We worked closely alongside multiple other advisors throughout all phases of the transaction.  The bidder drew on our analysis as inputs to its financial modelling, helping to establish a price it was willing to offer.  Our work allowed the bidder to achieve a deep understanding of the risks associated with the investment opportunity.