Checklist Main Areas

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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) Regulatory, legal

11) Taxation

12) Foreign Exchange

13) Insurance

14) Financing

15) Comprehensive risk analysis: technical or economic

16) Dispute resolution

klist Main Areas http://www.powerprojectfinancing.com/checklist_main_

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1) Developer/Sponsor/Promoter Profilea) Biographies of principals, experience in:

i) Private non-utility power plant developmentii) Project finance, lending, equity investmentiii) Legal: corporate, securities, regulatory

iv) Engineering: power plant, permitting, designv) Government relations, legislation, regulatoryvi) Operations and maintenance of power plantsvii)Managing projects of similar size and costviii) Energy economics, tariffsix) Insurance, taxes, business administration

b) Prior and current projectsi) Backgroundii) Role, nature of involvementiii) Results

c) Experience in countryd) Corporate information

i) Annual Report, Ownershipii) Financial statementsiii) 3d Party information: industry reports, press

2) Project statusa) Status of key agreements

i) Permits

ii) Concession agreementiii) Project award from competitive bidiv) License from governmentv) Site controlvi) Status of most critical arrangements:

(1) Power purchase(2) Fuel supply(3) Engineering, Procurement and Construction (EPC)

b) Schedule to complete developmenti) Tasks, timing, cost

ii) Responsible partyiii) Milestones, Deadlines

c) Support for projecti) Localii) Regionaliii) Nationaliv) Utility

3) Economicsa) 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 usedv) 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 financingvi) Reserves funding, build-up, draw-downs, financing overhauls

vii)Taxation, foreign exchange effect

b) Documentation of power pricing:i) Contracts: signed, negotiated, or proposedii) Forecasts: internal or 3d partyiii) Regulated tariffs

c) Documentation of operating expenses:i) Contracts: signed, negotiated, or proposedii) Forecasts: internal or 3d party

iii) Prior projects, comparable projectsiv) Industry standards

d) Disposition/refinancing/transfer

4) Power salesa) Sales to utility

i) Minimum take, take-or-pay, merchantii) Competitively awarded, negotiatediii) Creditworthiness of utilityiv) Supply proposed relative to utility size


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v) Track record honoring IPP contractsvi) Susceptibility to political influencevii)Privatization, ownership structureviii) Economic growth in region

b) Sales to local industryi) Minimum take, take-or-pay, merchantii) Competitively awarded, negotiated

iii) Creditworthiness of industrialiv) Alternate power purchasers

c) Interconnection, transmissioni) Penalties, timing, deliveriesii) 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 supporti) Payment guarantees, letter of credit

ii) Implementation agreementiii) Escrow, lock-box accounts

5) Engineering/Feasibility Studya) Site suitability

i) Zoningii) Local support

b) Fuel procurementi) Source, distance, transport

ii) Interconnection, on-site handling

c) Proposed design, technology, costi) Equipment efficacy, track recordii) Cost, financing implication

d) Fuel and electrical interconnectioni) Existing or new interconnectionii) Ownershipiii) Responsibility to build and maintainiv) Dedicated or shared

e) Environmental impact, need for study, exemptioni) Requirements for legal compliance, financingii) Local support impact

f) Power purchaser load profile:i) Seasonal fluctuationii) Daily fluctuationiii) Dispatching, curtailment, notice, interval

g) Water supply and dischargei) Source, specificationii) Discharge specification


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iii) Permitting process, control

h) Ash disposal for solid fuel projectsi) Disposal, salesii) Composition, change in fuel effectiii) Governing regulations

i) Emissions controls, options, costi) Standards used

ii) Scrubbers, precipitators, fluid bed

j) Maintenance schedule, overhauls, sparesi) Prevailing standards in country

k) Other site mitigationi) Buildingii) Forestationiii) Noise abatement

6) Fuel Supply, Hydrology, Wind Resourcea) For hydro or wind projects:i) Flow dataii) Number years historyiii) Data source

b) For thermal projects:i) Fuel contract, term, supplyii) Specificationiii) Supplier creditworthinessiv) Alternate suppliersv) Coordination with other contracts:vi) PPA, availability force majeurevii)EPC, equipment suitabilityviii) O&M, e.g., gas clean-up, coal washingix) Heat content, measurement, billing and payment

7) Equipmenta) Operational characteristics

i) History in power applicationii) Efficiency

iii) Reliabilityiv) Availabilityv) Environmental: emissions, water needs, water discharge, noise, visual

b) Cost, payment schedule, delivery depositsi) Negotiated or competitive bidii) Import dutiesiii) Physical delivery considerations

c) Guarantees, creditworthiness for guaranteesd) Financing considerations, export credit, vendor


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e) Technology, suitability for remote servicei) Maintenance expertise requiredii) Fuel sensitivityiii) Sensitivity to heat, moisture

8) Engineering, Procurement, and Construction (EPC)a) EPC contractor:

i) Qualificationsii) Experienceiii) Creditworthiness

b) Contract terms:i) Fixed price, turn-keyii) Wrap-around, subcontractor warranties

c) Guarantees, bonuses, penaltiesd) Insurance, retainagee) Construction schedule, penalties, damages

f) Performance testingi) Outputii) Heat Rateiii) Availabilityiv) Duration of test, standards, deratingv) Warranty period

g) Start-up, training


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9) Operation and Maintenancea) Operator qualificationsb) O&M Contract:

i) Fixed Compensationii) Variable Compensation

iii) Pass-throughsiv) Percent of revenuesv) Incentive, penalties

c) Coordination with power purchaserd) Guarantees, financeabilitye) Spares, parts delivery

10) Regulatory, legala) Site control / right to develop / land use

i) Property rights, Land lawii) Collateral law, liens, security, foreclosureiii) Title insuranceiv) Environmental liabilityv) Assignability

b) Permitting: national, local, cityc) Corporate compliance

i) Government approval for local partnerii) Foreign Corrupt Practices Act compliance

d) Environmental compliance & impact

e) Government agency involvementi) Environmentalii) Foreign Investmentiii) Utility regulatory

f) Implementation Agreementi) Full-blown IAii) Support letter

11) Taxation

a) National: corporate, JV, or partnershipb) Depreciation treatment,c) Tax holidaysd) Local, regionale) Value Added Taxf) Withholding taxesg) Tax treatiesh) Other fees, levies, import duties, etc.

12) Foreign Exchange


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a) Source of hard currencyb) Country Creditworthiness, F/X reserves, balance of trade, PPP methodologyc) Fluctuation of exchange rates, historical, projectedd) Project reservese) Repatriationf) Convertibilityg) Risk management strategy

i) Hedgingii) Insuranceiii) Hard currency payment

13) Insurancea) During construction

i) Builder's all-risk policyii) Property and casualtyiii) Workers' compensationiv) Autov) Construction/performance bondvi) Cost overrun/delay of completionvii)Project errors and omissions

b) During Operationi) Efficacy, business interruptionii) Property and casualtyiii) Workers' compensationiv) Autov) Political risk, foreign exchangevi) Cost overrun/delay of completionvii)Project errors and Omissions

14) Financinga) Development budget and source of funds

i) Tasksii) Timingiii) Responsibilityiv) Costv) Expectations of participants

b) Project description & documentationc) Financial structure, equity contribution

d) Participants benefits, riskse) Market research confirming financing strategyf ) Timetable

15) Comprehensive risk analysis: technical or economica) Credit risks

i) Power Purchaserii) Fuel Supplieriii) EPC contractoriv) Insurance companyv) O&M contractor


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vi) Guarantor

b) Construction risksi) Cost over-run or Delayii) Performance

c) Market and operating risksi) Revenue/Expense divergenceii) Plant performance

iii) Excessive operating expenseiv) Off-taker performancev) Competition

d) Financial risksi) Interest rate riskii) Foreign exchange riskiii) Inflation

e) Political risksi) Expropriationii) Change of law

(1) National(2) State(3) Tax-related(4) Environmental

f ) Legal risksi) Inadequate legal framework

(1) Legislation(2) Case law(3) Administrative law(4) Regulation

ii) International, state, provincial jurisdiction

16) Dispute Resolutiona) Governing lawb) Mediationc) Arbitrationd) Track record in country


Checklist Main Areas

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