Project Feasibility and Financing Checklist

7/27/2019 Project Feasibility and Financing Checklist

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Level 25, 88 Phil li p Street, Sydney, Austral ia-2000

Phone: + 612-8211-0590

E-mail: info@learnprojectfin ance.com

Project Feasibility and Financing Checklist

www.learn ro ectfinance.com
http://www.learnprojectfinance.com/http://www.learnprojectfinance.com/


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www.learnprojectfinance.com , Phone: +612-8211-0590, email: [email protected], Level 25, 88 Phillip Street, Sydney, Australia-2000

Overall experience, knowledge and skill set of Developer Team (including consultants)

Management of a Tender/Bid process Experience in managing development of projects of similar size and cost Project financing and equity investment experience Experience with relevant technology and design process. Experience with operations and maintenance of similar projects Experience in managing government relations including managing required legislation and regulatory changes (where necessary) Knowledge of industry economics, trends and influencing factors Local knowledge e.g. legal environment, permitting and approval processes, securities legislation, regulatory requirements etc. Specialist expertise e.g. insurance, tax structuring etc.Prior Experience

Background/location of projects (developing/developed countries) Role and nature of involvement ResultsExperience in Country

Past projects in Country Results and relationships with key stakeholders including government agencies Reputation in CountryCorporate information

Annual report Ownership Financial statements 3rd Party information: industry reports, press

DEVELOPER PROFILE


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Project Award Process

Timing Competition Transparency Bid Evaluation Criteria e.g. local content requirementsStatus of key agreements, approvals etc.

Critical Permits , Approvals and licences Concession /Off-take Agreement Implementation/Support Agreements from government Site Availability and Access Status of critical agreements:

1. Revenue Agreements2. Input Supply Agreements e.g. Fuel3. Engineering, Procurement and Construction (EPC) Agreement

Schedule to complete development

Tasks, timing, costs Responsible party Milestones DeadlinesSupport for project

Local Regional National Other e.g. local government owned utilities

PROJECT STATUS


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Site Suitability

Zoning and prior use (e.g. soil contamination risks) Access to site Interconnection to utilities and third party infrastructure Local supportEnvironmental impact & impact control

Need for study, exemption Requirements for legal compliance visual amenity, noise abatement, waste disposal and soil impact, emissions etc. Requirements for financing (e.g. involvement of multilaterals such as the World Bank) Technology options for mitigation of environmental impacts , standards and costsProposed design & technology(see also Equipment on next page)

Off-taker Requirements daily, seasonal demand variations, technical life versus off-take obligations, ramp up/ramp down characteristics and costs Performance track record /reliability Costs capital and operational, Maintenance schedule, overhauls, spares Technical/regulatory compliance over long termInput procurement (e.g. fuel)

Input source and size of reserves, distance, transport, quality of reserves, access to alternate sources of supply Interconnection, on-site handlingThird party infrastructure/ interconnection

Existing or new interconnection Ownership of interconnection Responsibility to build and maintain Dedicated or sharedWaste Disposal

Disposal method Potential for sales of waste product Composition of waste products and impact of change in input supply specifications/quality Governing regulations

TECHNICAL FEASIBILITY


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Operational Characteristics

Performance Track Record Scalability Efficiency Reliability Availability Environmental Characteristics: Emissions, water needs, water discharge, noise, visual impacts etc.Cost, payment schedule, delivery schedule and deposits

Negotiated or competitive bid Pricing and payment terms, variations to price Delivery Schedule Additional Costs e.g. Import duties Physical delivery and transportation considerations Eligibility for ECA Financing SupportGuarantees, Creditworthiness for guarantees

Performance warranties Creditworthiness of supplierFitness for Purpose

Maintenance requirements Maintenance expertise required Sensitivity to input quality Performance and operational sensitivity to environmental conditions e.g. ambient conditions.

EQUIPMENT


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Financial Projections

Non-recurring costs: Development cost Financing-related costs Construction costs

Annual cash flows Revenues

oOff-take ProductoBy-productsoWaste Products

Operating expensesoInput Costso

LabouroAdministrationoInsuranceoFees

Benchmarks for above assumptions including any risk adjustments. Taxation (local, regional, national, value add, import duties, tax holidays etc.) Financing cash flow assumptions

Equityo Return requirements for comparable projects, investments

Debto Comparable debt financing terms including refinancing assumptionso Adjustments for credit quality, market conditions and risk variations

Lease financing terms and pricing Reserves funding, build-up, draw-downs Future Capex / Maintenance Expenses Foreign Exchange, Interest Rate and Inflation assumpt ions Affordability in local market

PROJECT ECONOMICS


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Off-take Arrangements

Contract type: Minimum take, fixed take, fixed price, variable price Contract status: Signed, negotiated, or proposed Competitively awarded, negotiated Creditworthiness of Off-taker Payment Guarantees and Credit Support Supply proposed relative to Off-taker size/requirements Track record of Off-taker in honouring Off-take contracts Susceptibility to political influence Ownership and privatization risk Alternate purchasers Economic growth in regionMerchant Arrangements Demand and Supply dynamics; Quantity and Price Forecasts, internal or independent 3rd party Regulated tariffs Degree of Risk diversification (multiple buyers) Regulatory and industry trends Competitive positioning (short and long term) Marginal Cost Analysis Break Even Analysis Financing Implications Overall Economic trendsConsistency with other contracts

Third Party Infrastructure: Timing of completion, access and capacity availability on third party interconnecting infrastructure. EPC: Plant completion timing and performance criteria versus delivery obligations under Off-take Input Supply: Pass-through of price changes and input availability to Off-take obligations O&M: Pass-through of expense/cost changes in Off-take price

Revenue Sources and Agreements


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Contractor

Qualifications e.g. similar projects completed Availability of experienced staff/team for the project Experience in country where project is located Industrial relations record Creditworthiness of ContractorContract Terms

Type of Contract - Fixed price, date certain, turn-key, Wrap-around, subcontractor warranties , assignability of subcontracts Payment schedule and payment triggers , exclusions Foreign Exchange components/adjustmentsPerformance Testing

Output , Efficiency, Availability Completion Certification Process - duration of test, testing standards, independence/disputes Warranty period Defects Liability PeriodGuarantees, Liquidated Damages, Bonuses

Performance Guarantees Output, Efficiency, Availability, Reliability Adequacy of Liquidated Damages for under-performance /delay Adequacy of Credit Support to back guarantees Overall Liability Caps Calculation and funding of bonus paymentsConsistency with other project agreements and financing

Timing of Completion, Process of Completion Certification, Performance Parameters vs. Off-take Contract provisions Pass through of CPs, Force Majeure, Change of Law provisions to Off-take. Training of Operator, Essential SparesInsurance

Adequacy of proposed insurance package and interface with Operations phase insurance

CONSTRUCTION CONTRACT


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Confirmation of Resource/Quality

Source of data and quality Independent verification of amount and quality EPC, equipment compatibilityContract Terms

Term vs. Off-take Term Commencement Amount per period (min/max), banking of excess for future use Interruptibility and stockpile/reserve requirements Specification and variability Measurement, billing and payment Pricing and quality adjustments to priceSecurity of Supply over term Supplier creditworthiness Alternate suppliers Dedication of specified resourcesGuarantees, Liquidated Damages, Bonuses

Performance Warranties Adequacy of Damages for non-delivery Adequacy of Credit Support to back guaranteesConsistency with other project agreements and financing

Pass through of price changes to Off-take. Commencement, ramp up/downTransport Arrangements including Third Party Infrastructure

Transportation including third party infrastructure requirements New infrastructure required and timing for completion

INPUT SUPPLY CONTRACT


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Operator Qualifications & Experience

Overall, local experience With specific technology Industrial relations record Specialist expertiseContract Terms

Fixed Compensation Variable Compensation Cost pass-throughs Performance Requirements Guarantees Incentives, penalties and liquidated damages Caps on liability Overall Consistency with Off-take Contract and EPC Contract

Corporate/Partnership/Trust Depreciation treatment Tax holidays Local, regional taxes Value Added Tax /GST Withholding taxes Tax treaties Other fees, levies, import duties, etc.

OPERATION & MAINTENANCE CONTRACT

Taxation


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Source of hard currency Country Creditworthiness, F/X reserves, balance of trade, PPP methodology Fluctuation of exchange rates, historical, projected Project reserves Repatriation Convertibility Risk management strategy

o Hedgingo Hard currency tariffo Tariff adjustments

Construction

Builder's all-risk policy Delay in Start Up Insurance Marine Cargo and Marine Delay in Start Up Insurance Property and casualty Workers' compensation Auto insurance Project Errors and OmissionsOperations

Operator All Risks Business interruption Property and casualty Workers' compensation Auto insurance Political risk insurance

FOREIGN EXCHANGE

INSURANCE


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Corporate / Ownership

Foreign investment Approvals Local ownership requirements/approvals On-going ownership requirements Reporting and ComplianceSite and Security

Property rights Land law Collateral law, liens, security, foreclosure regulations Title insurancePermitting

Local, regional, national Assignability of permits and licencesGovernment Support Implementation Agreement Letter of Support Track record of foreign investmentRegulatory Considerations

Key bodies Environmental, Industrial, Competition and Trade Practices, Corruption Reporting & Compliance Regulatory trends and direction Legal framework and environment Availability of PRI Cover

LEGAL & REGULATORY


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Credit Risk

Off-taker Input Supplier EPC contractor Insurance company O&M contractor Guarantor sConstruction Risk

Cost over-run Delay PerformanceMarket Risks

Price Demand Revenue / Expense divergenceOperating Risks

Plant performance output, efficiency, availability, reliability Excessive operating expenseEconomic Risks

Foreign Exchange Interest Rates InflationPolitical Risks

Currency Inconvertibility War and Insurrection Expropriation including creeping expropriation Breach of undertaking

KEY RISKS


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Legal Risks Inadequate legal framework

Legislation Case law Administrative law Regulation

Dispute resolution Governing law Mediation Arbitration Track record in country

International, state, provincial jurisdictionContract Mismatch Risk

Force Majeure Change of LawThird Party Risk

Infrastructure Performance

KEY RISKS


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Funding Sources

Domestic Banks International Banks Infrastructure Funds Pension Funds Regional & Global Multilaterals Export Credit Agencies Participants GovernmentState of Financial Market Development

Local bank market Capital markets Swap markets and FX markets Commodity hedging Other hedging instruments Availability of PRI Cover Precedents of similar financingsMarket Conditions

Market Liquidity local, global Market Capacity Appetite of International LendersFinancing Terms

Market precedents Tenor Gearing & Cover Ratios Margins Covenants & Security

FINANCING

Documents

Project Feasibility and Financing Checklist