Providers of infrastructure need to understand and minimize the whole life cost by optimizing the combination of the initial capital cost and the ongoing operational costs. Both the initial construction costs and the maintenance and replacement costs must be accurate. For transportation-type infrastructure, this can mean repairs following accidents or replacing segments worn out from heavier traffic volume than envisioned during the design process.
For building-type infrastructure, these costs might include plant replacement, though additional savings can be realized by periodically re-commissioning buildings where the additional operational costs can often pay for themselves through substantial energy savings.
Providing lender’s technical advisor
Cash requirements for construction projects can be burdensome for projects of this scale and, as part of the need to raise capital either from private equity or public financing, lenders will often require cash expenditure profiles from planning through end-of-life of the infrastructure.
Faithful+Gould provides lender’s technical advisory services around the world, protecting our clients’ interests on complex infrastructure transactions...
Covenant agreements for an independent third party to verify construction costs, for cash flow scheduling and to provide technical due diligence, may also be required. The lender’s technical advisor leads the effort to manage these issues from a third-party perspective. Faithful+Gould provides lender’s technical advisory services around the world, protecting our clients’ interests on complex infrastructure transactions procured through countless forms of Public Private Partnerships and alternative finance structures.
Technical due diligence can extend into several areas, from providing design reviews, commercial review of the owners’ contract documents and lenders’ terms and conditions to review of the contracts used to appoint and manage the contractors building the project.
Expanding a versatile tool
Design reviews are performed at several design stages and are a key component of the technical due diligence, making certain that the design meets project needs. For a publically-funded project, this could be a series of specifications that the owner requires before payments can be made. If payments are to be made throughout the life of the project, there are frequently penalties if the infrastructure doesn’t operate as required. To ensure efficiency, specialist engineers and designers must be selected, coordinated and managed so the design reviews don’t add to additional construction costs because of a difference of professional opinion in how something should be designed or built even if the proposed design meets the requirements.
Design reviews are performed at several design stages and are a key component of the technical due diligence, making certain that the design meets project needs.
Throughout the construction process, contractors will submit requests for payment and will want to make sure they are cash flow positive, while the lenders will not want to distribute cash before the contractors have earned their payment. A technical advisor can help assess the earned value and act as a mediator in any disputes between parties.
Adapting for value
A project financier may decide that they do not want to hold a financed asset for its entire life and will want to dispose of it in the future. In these cases, the lender’s technical advisor can help develop a plan to manage the lifecycle of the asset so it can be disposed for maximum return.
Faithful+Gould has a proven track record in lender’s technical advisory as well as other advisory roles for Public Private Partnerships or alternative finance infrastructure transactions. Whatever the need, our experience and expertise can provide value for infrastructure projects.