A Checklist of Due Diligence Considerations for a Project Financing

Abstract

Every project finance transaction presents its own risks and areas of needed due diligence. This checklist is designed to provide a general, yet inclusive, list of areas that should be considered as the project is developed and financed. The Project Sponsor 1. Who are the project sponsors, what are the ownership interests in the project company, and what is their financial status? 2. Are any of the project sponsors governmentally owned? multilateral or bilateral agencies? 3. What experience does each project sponsor have with the development, construction, start-up, and operation of similar projects? in the host country? 4. What will each project sponsor contribute to the project? equity? development experience? construction and start-up expertise? technology? operating abilities? host-government experience? 5. What management control does each of the project sponsors have in the project company? What are the vote allocations? Is there one partner with veto power? 6. What are the income, loss, and capital contribution allocations of the partners? 7. What limited recourse liability does each project sponsor have? construction cost overrun? others? Does each have the creditworthiness to perform their obligations? 8. What rights does each project sponsor have to sell its interest in the project company? 9. What restrictions do the laws of the host country place on equity ownership of the project? The Project Site – Physical and Geographical 1. Where is the project site located geographically? 2. What is the terrain on which the site will be developed? 3. What is the terrain of access roads, fuel storage areas, and other important elements of the project? 4. Consider the implications of mountains, valleys, deserts, wetlands, rain forests, jungles, swamps, rivers, lakes, flood areas, and other geographic and topological characteristics.