Chapter 155 Distributed Generation Schemes

Three days after receiving the weapon list, Ramaswamy paid a visit to Oxford Town.

On the surface, it was to discuss weapons. According to Sergei's estimates, the delivery cycle for these items would take at least ten days, mainly because overhauling the Mi-17 rotor hydraulic system was more troublesome than anticipated.

In reality, he came to talk about electricity.

"Regarding the acquisition of Derek's assets, I have already laid the groundwork through the private sector. Within three days, my people contacted four of Derek's secondary distributors in the southern part of Hamilton County, and they are all begging to cooperate."

"Their upstream supply has been cut off." Ramaswamy returned to his previous state, speaking eloquently.

"Additionally, the speed of Jack Harrison surprised me a bit." Ramaswamy pulled a printed federal announcement from his briefcase.

"The Antitrust Division of the Department of Justice officially initiated the federal forfeiture proceedings for Derek Warren's estate yesterday. According to Jack's estimates, the auction will be held within four to six weeks."

"The qualification requirements for participating in the auction have been written by him... in his own words, precise to the point where only Oxford Town Power Company can fully meet them."

Mu Xin took the announcement and glanced at it, unable to help but sigh that the money was truly well spent.

Jack hadn't wasted his time on K Street; he had set the threshold for bidding qualifications quite subtly.

The bidder must possess an electricity supplier license issued by the Ohio State Public Utilities Commission, must have an autonomous power generation capacity of no less than fifty megawatts, and must have a continuous record of power trading within the PJM grid system.

Within a one-hundred-mile radius of Cincinnati, besides Oxford Town Power Company, only two large publicly listed power groups meet all three criteria, and those two would have absolutely no interest in these small distributed assets.

"So the outcome of the auction is already set in stone." Mu Xin returned the announcement to him. "The only question is the final bid."

"Jack estimates the starting bid will not exceed four million. Derek's assets are listed as losses on the books; he hasn't filed a proper tax return in ten years." Ramaswamy shrugged.

"Then there's no suspense left." Mu Xin smiled; he was the one picking up the bargain from Derek's tax evasion.

"There is indeed no suspense through official channels." Ramaswamy put the announcement away and changed the subject. "But Mr. Mu, I came today to talk to you about another matter, regarding how to utilize these assets."

Mu Xin leaned back in his chair; he knew Ramaswamy wouldn't come to see him without a reason.

"Derek's power generation equipment is nothing advanced." Ramaswamy opened his phone and pushed over a few photos.

"Most of them are secondhand Caterpillar diesel generator sets and a few old Solar gas turbines that have been retrofitted, with an average operating lifespan of over fifteen years."

"The maintenance costs are high, thermal efficiency is low, and the emission standards are long outdated."

"The reason he was able to monopolize the market for ten years wasn't because of his equipment, but because of information asymmetry and intimidation. Customers didn't know there were cheaper options, and even if they did, they didn't dare to switch."

"But if we want to make this market sustainable, we can't use Derek's junk."

"What are you trying to say?" Mu Xin was direct.

"Distributed." Ramaswamy drew a hand-sketched diagram on his phone screen; the lines were crooked, but the logic was clear at a glance.

Electricity users in the Cincinnati urban area were marked as dozens of red dots, with the average daily power load marked next to each red dot.

"The biggest problem with the US power grid is centralized power supply—large power plants generate electricity, and it is sent to users through dozens of miles of transmission lines."

"Every time it passes through a transformer substation, there is a loss of three to five percent. If there's a blizzard or an accident, the entire line goes paralyzed."

"The biggest advantage of our gas turbine power generation modules is that they can be dismantled, loaded onto flatbed trailers, hauled to the client's site, and connected to natural gas pipelines or gas storage tanks to generate electricity directly."

"One module set is two megawatts; an ordinary factory doesn't use even half of that in a day."

"Two sets combined make four megawatts, which can cover a small hospital plus a sewage treatment plant."

"As for schools and churches, one module set can power five or six at the same time."

He used his finger to draw a circle on the screen, encompassing all the red dots.

"No need for transmission lines, no need for river-crossing transmission towers, and no need to haggle with PJM over grid connection fees."

"Each power generation module set is an independent micro-power station. Fuel is purchased at the pipeline company's wholesale price, and the generated electricity is consumed on the spot."

"There is no line loss, no intermediate price markups, and no one can tamper with the transmission lines."

"Derek used to rely on cutting off other people's power to maintain pricing power. We won't rely on cutting off power; we will rely on the customers owning their own power sources."

"They don't have to spend money to buy the equipment themselves; we do. The cost of the equipment is factored into the electricity price and amortized over five years."

"After five years, they can choose to continue signing our service agreement or find a new supplier."

"What about the price?" Mu Xin asked.

"Cheaper than Derek's, but a bit higher than the price we currently offer to data centers." Ramaswamy took his phone back.

"Distributed services have additional costs. Each site needs to be equipped with maintenance personnel, remote monitoring needs to be installed, and someone needs to be on duty 24 hours a day to handle sudden malfunctions."

"These are not one-time investments; they are long-term operating costs."

"I've calculated it, and setting the average price between 220 and 230 dollars is quite reasonable."

"The electricity price the customers get will be nearly 100 dollars lower than in Derek's era, but our net profit margin after deducting operating costs will be three percentage points higher than simply selling electricity."

Mu Xin stood up and walked to the whiteboard, where the strategic diagram he had drawn three days ago still remained.

"We currently have twenty gas turbine modules, with a total installed capacity of 400 megawatts."

"One module set is two megawatts; 300 megawatts can cover 150 sites."

"Adding up all of Derek's original clients, there are about 230 end-users."

"More than 60 percent of them have an average daily power demand of less than 500 kilowatts. Theoretically, we only need to deploy 50 to 60 sets of modules to cover over 80 percent of Derek's original client base."

"The remaining capacity can be sold to new clients. There are at least 30 small manufacturing enterprises in Hamilton County that haven't expanded production because electricity prices are too high."

Mu Xin, combining this with Victoria's analysis, quickly stated the current situation, which surprised Ramaswamy a bit.

"Mr. Mu, I need you to confirm one thing with me again." Ramaswamy leaned back in his chair with his hands crossed on his lap. "Are we fifty-fifty—no, you lead, I assist."

"The amount of capital needed for the acquisition of Derek's assets and the distributed upgrade... although we have quite a few power generation modules on hand, we still need to double or triple them to cover all the clients."

"Adding in transportation, installation, remote monitoring systems, and building the operations and maintenance team, this budget is not something that can be kept up with by the speed of your electricity sales revenue."

"What's the budget?" Mu Xin asked.

"Preliminary estimates, excluding auction fees, are 30 to 35 million. Adding the final auction transaction price and legal fees, it will require at least 40 million."

Mu Xin returned to the table and sat down. For him right now, 40 million was not a question of whether he could afford it, but a question of how much he could get back after spending it.

"I'll put up the 40 million." Mu Xin said after deliberating for a moment. "But I need you to put in effort on two other matters."