Checklist Main Areas

Checklist Main Areas
http://www.powerprojectfinancing.com/checklist_main_areas.htm
Checklist For Developing and Financing a Power Project May 2006
1) Developer/Sponsor/Promoter Profile 2) Project status 3) Economics 4) Power sales 5) Engineering/Feasibility Study 6) Fuel Supply, Hydrology, Wind Resource 7) Equipment 8) Engineering, Procurement, and Construction (EPC) 9) Operation and Maintenance 10) 11) 12) 13) 14) 15) 16) Regulatory, legal Taxation Foreign Exchange Insurance Financing Comprehensive risk analysis: technical or economic Dispute resolution
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1) Developer/Sponsor/Promoter Profile
a) Biographies of principals, experience in: i) Private non-utility power plant development ii) Project finance, lending, equity investment iii) Legal: corporate, securities, regulatory iv) Engineering: power plant, permitting, design v) Government relations, legislation, regulatory vi) Operations and maintenance of power plants vii) Managing projects of similar size and cost viii) Energy economics, tariffs ix) Insurance, taxes, business administration b) Prior and current projects i) Background ii) Role, nature of involvement iii) Results c) Experience in country d) Corporate information i) Annual Report, Ownership ii) Financial statements iii) 3d Party information: industry reports, press
2) Project status
a) Status of key agreements i) Permits ii) Concession agreement iii) Project award from competitive bid iv) License from government v) Site control vi) Status of most critical arrangements: (1) Power purchase (2) Fuel supply (3) Engineering, Procurement and Construction (EPC) b) Schedule to complete development i) Tasks, timing, cost ii) Responsible party iii) Milestones, Deadlines c) Support for project i) Local ii) Regional iii) National iv) Utility
3) Economics
a) Financial projections
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i)
Non-recurring costs: (1) Development cost (2) Financing-related costs (3) Construction cost
ii) Annual cash flows (1) Revenues (a) Electricity (b) Steam (c) By-products (d) Tipping fee (for waste to energy) (2) Operating expenses (a) Fuel (b) Labor (c) Administration (d) Insurance (e) Fees iii) Pre-financing economic evaluation (1) Risk adjusted comparison iv) Benchmarks used v) Financing cash flows, assumptions (1) Equity (a) Comparable projects, investments (b) Upside, downside, tax-related (2) Debt (a) Comparable debt financing (b) Credit analysis (3) Lease financing vi) Reserves funding, build-up, draw-downs, financing overhauls vii) Taxation, foreign exchange effect b) Documentation of power pricing: i) Contracts: signed, negotiated, or proposed ii) Forecasts: internal or 3d party iii) Regulated tariffs c) Documentation of operating expenses: i) Contracts: signed, negotiated, or proposed ii) Forecasts: internal or 3d party iii) Prior projects, comparable projects iv) Industry standards d) Disposition/refinancing/transfer
4) Power sales
a) Sales to utility i) Minimum take, take-or-pay, merchant ii) Competitively awarded, negotiated iii) Creditworthiness of utility iv) Supply proposed relative to utility size
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v) Track record honoring IPP contracts vi) Susceptibility to political influence vii) Privatization, ownership structure viii) Economic growth in region b) Sales to local industry i) Minimum take, take-or-pay, merchant ii) Competitively awarded, negotiated iii) Creditworthiness of industrial iv) Alternate power purchasers c) Interconnection, transmission i) Penalties, timing, deliveries ii) Coordination with other contracts (1) EPC: plant completion versus obligation to deliver power (2) Fuel: pass-through, fuel availability effect on PPA obligations (3) O&M and other expenses: pass-through in power price d) Payment support i) Payment guarantees, letter of credit ii) Implementation agreement iii) Escrow, lock-box accounts
5) Engineering/Feasibility Study
a) Site suitability i) Zoning ii) Local support
b) Fuel procurement i) Source, distance, transport ii) Interconnection, on-site handling c) Proposed design, technology, cost i) Equipment efficacy, track record ii) Cost, financing implication d) Fuel and electrical interconnection i) Existing or new interconnection ii) Ownership iii) Responsibility to build and maintain iv) Dedicated or shared e) Environmental impact, need for study, exemption i) Requirements for legal compliance, financing ii) Local support impact f) Power purchaser load profile: i) Seasonal fluctuation ii) Daily fluctuation iii) Dispatching, curtailment, notice, interval
g) Water supply and discharge i) Source, specification ii) Discharge specification

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iii) Permitting process, control h) Ash disposal for solid fuel projects i) Disposal, sales ii) Composition, change in fuel effect iii) Governing regulations i) Emissions controls, options, cost i) Standards used ii) Scrubbers, precipitators, fluid bed Maintenance schedule, overhauls, spares i) Prevailing standards in country
j)
k) Other site mitigation i) Building ii) Forestation iii) Noise abatement
6) Fuel Supply, Hydrology, Wind Resource

a) For hydro or wind projects: i) Flow data ii) Number years history iii) Data source
b) For thermal projects: i) Fuel contract, term, supply ii) Specification iii) Supplier creditworthiness iv) Alternate suppliers v) Coordination with other contracts: vi) PPA, availability force majeure vii) EPC, equipment suitability viii) O&M, e.g., gas clean-up, coal washing ix) Heat content, measurement, billing and payment
7) Equipment
a) Operational characteristics i) History in power application ii) Efficiency iii) Reliability iv) Availability v) Environmental: emissions, water needs, water discharge, noise, visual b) Cost, payment schedule, delivery deposits i) Negotiated or competitive bid ii) Import duties iii) Physical delivery considerations c) Guarantees, creditworthiness for guarantees d) Financing considerations, export credit, vendor
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e) Technology, suitability for remote service i) Maintenance expertise required ii) Fuel sensitivity iii) Sensitivity to heat, moisture
8) Engineering, Procurement, and Construction (EPC)

a) EPC contractor: i) Qualifications ii) Experience iii) Creditworthiness
b) Contract terms: i) Fixed price, turn-key ii) Wrap-around, subcontractor warranties c) Guarantees, bonuses, penalties d) Insurance, retainage e) Construction schedule, penalties, damages f) Performance testing i) Output ii) Heat Rate iii) Availability iv) Duration of test, standards, derating v) Warranty period g) Start-up, training
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9) Operation and Maintenance

a) Operator qualifications b) O&M Contract: i) Fixed Compensation ii) Variable Compensation iii) Pass-throughs iv) Percent of revenues v) Incentive, penalties
c) Coordination with power purchaser d) Guarantees, financeability e) Spares, parts delivery
10)
a) Site control / right to develop / land use i) Property rights, Land law ii) Collateral law, liens, security, foreclosure iii) Title insurance iv) Environmental liability v) Assignability b) Permitting: national, local, city c) Corporate compliance i) Government approval for local partner ii) Foreign Corrupt Practices Act compliance d) Environmental compliance & impact e) Government agency involvement i) Environmental ii) Foreign Investment iii) Utility regulatory f) Implementation Agreement i) Full-blown IA ii) Support letter
Regulatory, legal
11)
a) b) c) d) e) f) g) h)
National: corporate, JV, or partnership Depreciation treatment, Tax holidays Local, regional Value Added Tax Withholding taxes Tax treaties Other fees, levies, import duties, etc.
Taxation
12)
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Foreign Exchange
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a) b) c) d) e) f) g)
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 i) Hedging ii) Insurance iii) Hard currency payment
13)
a) During construction i) Builder's all-risk policy ii) Property and casualty iii) Workers' compensation iv) Auto v) Construction/performance bond vi) Cost overrun/delay of completion vii) Project errors and omissions b) During Operation i) Efficacy, business interruption ii) Property and casualty iii) Workers' compensation iv) Auto v) Political risk, foreign exchange vi) Cost overrun/delay of completion vii) Project errors and Omissions
Insurance
14)
a) Development budget and source of funds i) Tasks ii) Timing iii) Responsibility iv) Cost v) Expectations of participants b) c) d) e) f) Project description & documentation Financial structure, equity contribution Participants benefits, risks Market research confirming financing strategy Timetable
Financing
15)
a) Credit risks i) Power Purchaser ii) Fuel Supplier iii) EPC contractor iv) Insurance company v) O&M contractor
Comprehensive risk analysis: technical or economic
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vi) Guarantor b) Construction risks i) Cost over-run or Delay ii) Performance c) Market and operating risks i) Revenue/Expense divergence ii) Plant performance iii) Excessive operating expense iv) Off-taker performance v) Competition d) Financial risks i) Interest rate risk ii) Foreign exchange risk iii) Inflation e) Political risks i) Expropriation ii) Change of law (1) National (2) State (3) Tax-related (4) Environmental f) Legal risks i) Inadequate legal framework (1) Legislation (2) Case law (3) Administrative law (4) Regulation ii) International, state, provincial jurisdiction
16)
a) b) c) d)
Governing law Mediation Arbitration Track record in country
Dispute Resolution
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Checklist For Developing and Financing a Power Project May 2006