Asper delivers results of its study on the financing and benefits of the Mijnwater project in Heerlen

Alice Dupuy
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the 07-05-2020
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2877

As part of the commercialisation work package, the team at Asper Investment Management have developed a case study of the Mijnwater 5th Generation Heating and Cooling (5GDHC) project in Heerlen. The goal of the case study is to identify the key risk and reward characteristics of the asset class and identify a strategy to attract large-scale investment to D2Grids pilot projects, and future 5GDHC projects across NW Europe.

Mijnwater was established in 2005 as a joint venture by the Municipality of Heerlen and a local housing developer. Today, the Mijnwater network serves 330 connection points and delivers 50,000 GJ of heating a cooling per year. Going forward, Mijnwater have identified additional demand of c. 400,000 GJ that can be connected over the next 5 years, drastically increasing the scale of the network.

Our assessment of this business plan has resulted in several findings which we have presented in contrast with conventional district heating assets:

The first notable finding is that 5GDHC networks have a more elongated capital expenditure profile; investment into assets is primarily driven by new connections, rather than high upfront costs as experienced in conventional. This minimises the level of investment required before high visibility of revenues is achieved – minimising the level of capital at risk.
Secondly, the use of heat pumps to ‘step-up’ temperatures results in exposure to electricity markets, rather than more volatile and less liquid markets for biomass or waste; as would be the case for conventional heating. Furthermore, 5GDHC offer optionality with storage vessels, flexible temperatures, and access to low temperature sources, all allowing for the network to efficiently manage demand and supply across heating and cooling over both short and long timescales, resulting in lower costs of supply and ultimately higher profit margins.
Further findings, as well as a technical assessment of the key components of the investment thesis can be found in the case study.

Asper is beginning work on the next stage of the commercialisation work package, which involves developing a financial model to quantitatively assess the economics of 5GHDC network for investors, operators and end-users.

>> Download the case study <<