How do the CI Vehicles Work?
Whether new to the CIF or having utilized the CI Advisory Platform services, once a project is deemed to have reached the mid-stage of preparation by an interested CI Vehicles partner it becomes eligible for consideration for the remaining preparation activity investment. Relative to the funding/investment needed to get to mid stage, this is typically a much larger amount, often in the range of US$0.5 to 2 million depending on the type and scale of the project. It is the amount needed to secure the key agreements, major studies performed by consultants (e.g., the Environmental and Social Impact Assessment [ESIA]) and the resulting approvals and permits, land and rights-of-way, etc. that are needed for the project to be “shovel ready”, such that it is attractive to construction financing investors.
The definition of mid-stage preparation is not exact,
but generally consists of having started and/or identified the major preparation work items needed prior to attracting construction financing, which are informed through the project’s feasibility study stage. These include:
Evidence of continued government support
Suitable evidence showing support for the project from all/other levels of government (federal, state/provincial, and local municipal) in terms of both (i) publically committing to assist the preparation, acceptance, and promotion of the project, and (ii) being willing to consider and negotiate financial guarantees for the project, where appropriate.
Draft project agreements
These should be in a form that demonstrates that the promoter understands which ones are needed and the major issues that needs to be addressed for each to be bankable, but do not yet require significant professional legal involvement/crafting.
Intermediate Financial Model & Associated Analysis
Showing that the promoter understands the key financial mechanics of the project and the associated inputs, but which may require additional detail, complexity, confirmation of inputs as determined by detailed study, etc. At this point, the model should reasonably demonstrate that there will be sufficient financial returns to both equity investors and debt lenders.
Draft Technical Assessment
Identifying and assessing the key (but not necessarily final) technology and design elements that will be employed, including an operating and maintenance plan.
ESIA Scope of Work
Typically following from a feasibility-stage desktop assessment of the environmental and social issues raised by the project, the scope of work that will need to be completed to (at a minimum) obtain associated permits/approvals, local community acceptance, as well as the project’s SDGs. In order to attract and maximize the breadth and quality of investors to the project, the ESIA should be completed to internationally accepted standards (i.e., those of the World Bank/IFC).
Identification and Status of Required Permits and Approvals
A listing and current status of all known approvals required from federal, state/provincial, and local municipal levels of government. This includes approvals directly within the promoter’s control (e.g., a municipal promoter requiring approval from its own council).
Identification and Status of Land/Rights-of-Way
A listing/mapping and current status of all known land needed for the project, whether to be leased or purchased, including basic legal title/ownership information, the status of any negotiations with the owner, and identification of/planning around any other existing legal interests in the land (e.g., mortgage providers, utility rights-of-way, etc.).
In addition to the above project preparation assets, as part of the project’s development planning and for assisting with determining how the CI Vehicles can assist, they should be accompanied by:
- A project development plan, consisting of:
- A detailed list of all the project development items that are specific to the project that need to be achieved prior to financial close to attract construction finance investors.
- A project development (and perhaps construction) schedule for all such items.
- A (remaining) project preparation budget for all such items, which generally indicates how much investment is being requested of the CI Vehicles.
- An organizational chart showing the relationship of all entities currently involved/with interest in the project to date (including any third-party advisors, consultants, or investors) as well as the agreements/contracts with those participating entities.
The CI Vehicles will proactively monitor projects as they enter and proceed through the CIF. Once a CI Vehicle determines that a project of interest has reached mid-stage preparation and is satisfied with its due diligence, it will engage with the promoter to determine whether a development financing arrangement is desirable to both parties. Generally, the CI Vehicles look to secure a development fee for their investment to be paid by the contruction/long-term investors and will exit the project at financial close. The CI Vehicles share the risk with the promoter in finding and securing the investors.