Project and financing stages

Renewable energy (RE) and energy efficiency (EE) projects follow similar technical and financial development process irrespective of the project type or scale. The development and the financing processes interact and can be repetitive.

From the developer’s perspective, a project goes through the following stages:

• Development, which involves project concept generation, planning and design activities, collection and evaluation of technical, commercial, regulatory, financial and other information required to make an investment decision. During this stage, the following important topics and tasks are addressed and completed:
  • estimation of energy resources or energy savings
  • selection of project location, site or building
  • choosing of technology
  • defining of technical specifications and EE measures
  • evaluation of regulations, permitting, stakeholder interests
  • preparation of conceptual and basic design
  • performing energy audits
  • preparation of planning and budgeting documents
  • assessment of financial and economic feasibility
  • outlining of the indicative deal/financing structure
• Implementation, which consists of detailed implementation design, vendor selection and contracting, construction and installation, commissioning of plant and equipment
• Operations, where the key areas are performance measurement and verification (for EE projects) as well as operations and maintenance services

From the perspective of financing institution, a project has the following stages:

• Pre-financing, which could be further divided into:
• Project origination, focusing on identification of financially viable project opportunities and assessment of their initial data
• Preliminary due diligence, analysing technical and commercial aspects of proposed investment before the principal decision to proceed with the full underwriting process
• Underwriting – the formal process of determining the project’s value and risk leading to a decision to lend or invest. Underwriting encompasses full-scope due diligence, development of financial model with detailed projections, comprehensive risk analysis, investment valuation and assessment of financial returns, decision to finance and proposed key financing terms
• Financial close, which involves final negotiations and transaction structuring, preparation of legal documents, obtaining required approvals, signing and closing of financing agreements
• Post-financing, which could be sub-divided into:
• Administration and Draw down, this includes specific milestones and conditions precedent that have to be achieved, inspected and validated before the funds are transferred to the project
• Servicing, which covers tracking of project performance, monitoring of loan repayments, payments of interest and fees, adherence to other contractual financial covenants.