Indicative phases of the project selection and financing approval process
Based on the opened Call for proposals the Fund shall establish contacts with prospective project developers. The Fund has to be provided with concise information describing the Project and including, among others:
- Short information memorandum with description and visualization of the proposed improvements;
- Expected sources of financing and its utilization;
- Basic financial model;
- Presentation of the promoters / sponsors.
- Pictures of the Project’s location.
The approach of the Fund in selecting projects shall be on a “first come, first served” basis.
In case of positive initial eligibility assessment the Fund will meet the promoters / sponsors and publish summary information on the project on its Internet site. Otherwise, the Fund shall give a prompt feedback to the promoters/ sponsors.
The Fund shall receive, among others:
- More details on the Project;
- Functional financial model with justification of all major assumptions;
- General information for the sponsors / promoters;
- Mobility map of the urban area;
- Timeframe of the Project;
- Full details of existing / proposed municipal involvement and support;
- To the extent applicable, a letter from the respective municipality for the project compliance with Integrated Plan.
- Expected improvement of urban physical environment – i. e. architectural design;
- Reports from external advisors, if applicable.
The Fund will take all necessary steps to formally check the project compliance with the applicable legal framework in terms of necessary permits, licences, etc., requirements according to public procurement and concessions acts, as well as with the Integrated Plan, if available.
In case of positive result from the related analysis, the Fund shall submit an Indicative Term Sheet for Financing.
Promoters / sponsors shall develop and present to the Fund a comprehensive business plan including but not limited to:
- Legal form of the Project;
- Investment budget;
- Market research (demand, supply , prices, competition);
- Forecasted revenues, expenses, balance sheet and cash flow;
- Detailed description of all associated risks;
- Organizational structure;
- Relevant feasibility studies, including but not limited to:
- Environmental impact;
- Proposed urban mobility solutions;
- Building engineering survey;
- Terms of reference for external and/or internal architecture;
- Proposed public opinion survey questionnaire.
To the extent applicable and possible, the Fund shall assist the prospective project promoters / sponsors with templates of, among others, information memorandum, tables with details of eligible project costs, sources and uses of contemplated financing, financial model, scope of works for external technical, legal, social and environmental reports, etc. These templates shall originate from the applicable commercial lending practice of SGEB adjusted to the specific features of the operational and appraisal model of the Fund.
Project appraisal and investment decisions:
The Fund shall assess the project using criteria and processes that are in line with international investment management and lending practices and own policies of the Fund, considering as well applicable external rules (e.g. State Aid), to the extent those are relevant and applicable. All efforts to ensure optimal investment exits from the supported projects upon expiration of the related terms or based on the reasonable judgement of the Fund shall be made.
The Fund assumes risk on the Projects and its investments shall be repaid with the performed debt service by the final recipients or equity remuneration through investment exit. Therefore, the Fund shall invest only in Projects that are technically and, together with the investment of the Fund, economically viable.
For any form of investment, the Fund shall carry out appraisal of estimated business performance based on, among others, the Discounted Cash Flow (DCF) and Debt Service Coverage (DSCR) methods. The Fund will assess investment, operating costs and revenues throughout the project cycle in order to determine (i) the financial return on investment through the financial net present value of the project (NPV) and financial internal rate of return (IRR) and (ii) the debt service capacity measured by the DSCR ratio.
Following standard investment appraisal practice, cash flow forecasts will be estimated for a certain time frame, typically covering the lifetime of the investment made by the Fund, unless the specific features of the project require a longer investment horizon.
Additional analysis shall be made of the related general feasibility of the project, its technical viability and performance and all related risks, including, but not limited to business, structure, market, off-taker payment, construction, social and environmental, legal and documentation, etc.
Special attention will be paid to the social, economic and environmental value created by the Projects. Thus preliminary social impact assessment will also be performed. Through the use of any of the tools of program evaluation or business practice (such as Benefit Cost Analysis or Social Return on Investment) the Fund will aim to determine, to the extent possible, the Project specific output indicators, outcomes and impacts of the investment.
The social impact assessment comprises three major steps: definition of the Project’s social value proposition that is core to its desired social outcomes; quantification of social value by listing the top three social indicators most strongly correlated with desired social outcomes and that can be tracked as part of normal business operations; and monetization of the social impact value the Project aims to create over the next 10 to 20 years. The impact-value chain normally specifies financial, human and other inputs required for operations; activities; measurable outputs produced; and outcomes or changes in terms of the social, environmental or economic issues the Project seeks to address. The Fund would compare the forecasted data, provided by the Project promoters to existing comparables or statistical data (up to the extent it is existing or available), so that it can verify that the preliminary social impact assessment has been done correctly.
Upon performing all necessary analysis the Fund shall take a financing decision.