Midland Cogeneration Venture

A relentless quest for operational improvements and efficiency gains led to strong improvements in both sales and margins at Midland Cogeneration Venture (MCV), a major electricity supplier in the state of Michigan in the United States.

MCV was the first investment made by EQT Infrastructure I, a fund launched in the autumn of 2008. In May 2009, the fund acquired the gas-fired cogeneration company in cooperation with Fortistar, a US investor specializing in gas-fired cogeneration and green energy. EQT Infrastructure and Fortistar acquired 70% and 30% respectively in MCV.

MCV is one of the largest gas-fired cogeneration power plants in the United States, with a capability of producing up to 1,633 megawatts of electricity and up to 1.5 million pounds per hour of process steam for industrial use.

Directly following the acquisition, the board put in place a detailed strategy to improve efficiency, reliability and plant capacity with the implementation of an extensive operational improvement program, making it MCV’s core strategic focus. A proactive maintenance program to enhance reliability and cost control were executed and a significant amount of maintenance was planned to be carried out in-house, rather than outsourced to third parties.

Technical projects to improve energy conversion efficiency and increase capacity included doubling the energy conversion efficiency of the steam turbine and minimizing operation of energy-inefficient package boiler systems. The installation of major equipment upgrades also led to greater efficiency and higher capacity.

Adjustments to the major power purchase agreement were negotiated to allow MCV greater day-to-day control of how to optimize its power delivery obligations. This has led to increased operating margins and a greater ability to sell non-contracted power generation into the merchant power market.

During EQT’s ownership, MCV also began to develop a 640 megawatt expansion of the facility, which will enable it to expand its electricity and steam service to existing customers and potentially provide these services to additional customers.

In total, the measures to increase capacity and efficiencies led to sales rising 27% and EBITDA 49% during the ownership period between 2009 and 2012.

A key resource for MCV, made available by EQT’s ownership role, was access to highly experienced members of the Industrial Network, many of them ex-ABB executives. For example, EQT Industrial Advisor Ulf Berg, Board Chairman of MCV during EQT’s ownership period, was head of ABB Power Generation in the US and responsible for MCV’s construction up to its 1990 commencement of commercial operation.

MCV’s electrical capacity represents approximately 10% of the power consumption for Michigan’s Lower Peninsula and the majority of MCV’s generation capacity is sold under a long-term power purchase agreement with Consumers Energy Company. In addition, MCV sells steam and electricity to The Dow Chemical Company and steam to Dow Corning Corporation.

MCV was sold by EQT Infrastructure to Canadian infrastructure investor Borealis Infrastructure in December 2012.

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