Project developers do not normally have expertise in the financial packaging of projects, the services of a ININCORP Financial Advisor in doing this would prove valuable for the developers. Among others, the role of the adviser will include the preparation of a Project Information Memorandum (PIM) which should reflect the due diligence efforts of the developers. The aim of the activity at this stage is to attain a financial close with terms that are agreeable to both the developers and lenders.

INFORMATION MEMORANDUM

a. Project summary

• brief history of the project
• list of major parties involved
• location
• technology used
• energy output
• total costs

b. Overview of financing plan, sources and uses of funds

• description of overall financing plan breakdown of costs (use of funds)
• plant hardware
• construction cost
• development cost
• external fees (lawyer, financial adviser, etc.)
• interest costs during construction
• contingencies source of funds
• planned debt, equity
• other funds such as subordinated debt/grants (list)

c. Term sheet

• loan structure
• amount to be borrowed
• time over which borrowing will occur (draw down period) to fund construction
• loan repayment/interest rate (conservative rate should be used) - key coverage ratios, covenants, default conditions

d. Description of development plan

• development plan/schedule
• technology
• environmental issues -construction details
• operation
• site attributes
• permits and licenses
• resource availability
• electricity interconnection
• fuel supply
• waste disposal, etc.

e. Description of the principal contracting parties

• relationship of parties involved and roles
• brief financial statement of each party

f. Summary of major project contracts

• normally produced by developer’s legal adviser
• highlights of each major contract

g. Summary of risks

• review of all considered principal risks and description of how these risks have been mitigated
• completion risks (cost overruns, etc.)
• need for experienced operator
• completion bond (from the contractor)
• effect of increase in interest rate
• secure, long
• term market for the project output
• new technology (plants with similar technology operating elsewhere, availability, capacity)
• protection from defects in technology

h. Summary of principal licenses and permits

• list all the permits needed for construction and operation of the project
• status report on each license/permit should be provided indicating those obtained (with conditions) and the expected timing for approval for those yet to be obtained

i. Financing evaluation

• cash flow projections
• how the project will repay debt under different scenarios (changing external and internal factors)

CHECKLIST FOR SUCCESSFUL FINANCING

• The project is sponsored by experienced and reputable developer(s).
• A satisfactory feasibility study and financial plan have been prepared.
• The cost of raw materials to be used in the project is assured.
• Supply of energy at reasonable cost is assured.
• A market exists for the products (electricity, other by-products) or services to be produced.
• Product Flow systems are sufficient (to connect to the grid).
• Adequate infrastructure (roads, water, etc.) is or will be available.
• Experienced and reliable contractor.
• Experienced and reliable operator.
• Management personnel are experienced and reliable.
• Use of proven (well-demonstrated) technology.
• Well-structured agreements (fuel supply, power purchase, etc.)
• Adequate cash flow, acceptable debt service coverage.
• Electricity sales price risks in market are addressed.
• Availability of all permits and licenses.
• Country and sovereign risks are acceptable.
• Currency and foreign exchange risks are addressed.
• Adequate and timely equity contributions by sponsors.
• Project and assets have value as collateral.
• Satisfactory appraisals of resources and assets have been obtained.
• Proof of adequate insurance coverage.
• Force majeure risk is addressed
• Completion and cost over-run risks are addressed.
• Project offers adequate ROE, ROI and ROA for the sponsors and investors.
• Inflation and interest rate projections are realistic and from reliable sources.
• Environmental risks are manageable.
• Proper due diligence on joint venture partners and agreements that makes sense.
• Review report of the independent engineer.