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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