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Checklist For Developing and Financing a Power Project

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) Regulatory, legal

11) Taxation

12) Foreign Exchange

13) Insurance

14) Financing

15) Comprehensive risk analysis: technical or economic

16) Dispute resolution

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

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

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

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

j) Maintenance schedule, overhauls, spares

i) Prevailing standards in country

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

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
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) Regulatory, legal

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

11) Taxation

a) National: corporate, JV, or partnership

b) Depreciation treatment,

c) Tax holidays

d) Local, regional

e) Value Added Tax

f) Withholding taxes

g) Tax treaties

h) Other fees, levies, import duties, etc.

12) Foreign Exchange

a) Source of hard currency

b) Country Creditworthiness, F/X reserves, balance of trade, PPP methodology

c) Fluctuation of exchange rates, historical, projected

d) Project reserves

e) Repatriation

f) Convertibility

g) Risk management strategy

i) Hedging

ii) Insurance

iii) Hard currency payment

13) Insurance

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

14) Financing

a) Development budget and source of funds

i) Tasks

ii) Timing

iii) Responsibility

iv) Cost

v) Expectations of participants

b) Project description & documentation

c) Financial structure, equity contribution

d) Participants benefits, risks

e) Market research confirming financing strategy

f) Timetable

15) Comprehensive risk analysis: technical or economic

a) Credit risks

i) Power Purchaser

ii) Fuel Supplier

iii) EPC contractor

iv) Insurance company

v) O&M contractor

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) Dispute Resolution

a) Governing law

b) Mediation

c) Arbitration

d) Track record in country