Project Financing Staying on track By Reg Renner Written and published timelines are essential to keep your biomass project on schedule. A s I sit down to write the seventh ar-ticle in this series on project financing, I can’t help but think about a maga-zine editor’s nightmare—trying to corral novice writers into meeting strict and regu-lar timelines. I don’t know about you, but I tend to work best when I have a timeline. Approaching your biomass project, do you have an 18-month chart with deadlines and benchmarks laid out in a logical flow? My experience is that people spend a lot of time talking about the project and sharing their vision with the team, but rarely share benchmarks that let everyone know whether they’re on track. Why is this important, and what about flexibility and unexpected delays? There can be uncontrollable delays, but your in-vestors and partners need to know there are planned benchmarks. If you are behind schedule, you want to know as soon as pos-sible and make adjustments to get back on track. Consider a finely tuned bobsleigh team. Teams are judged by their start times, interval times, and finish times. The coach, technicians, and drivers analyze these benchmark times and make adjustments to the equipment, team dynamics, and lines of attack. The team runs the course again and checks to see if their strategic changes had the desired effect. In project financing, falling off the pace can be deadly, as you can run out of cash, enthusiasm, and support. Many funders are looking for a finely tuned team that can make the necessary adjustments in a timely manner and stay at the top of the leader board. In this fast-paced, ever-changing industry, you need to know exactly where you are in the timelines and make necessary adjustments. To avoid the pitfall of losing investor i n t e re s t a n d c o n f i d e n c e , i t i s o f u t m o s t i m p o r t a n c e t o b u i l d a re a l i s t i c t i m e l i n e . Talk to others who have built similar proj-ects or ask a funder ahead of time what t h e r e a l t i m e l i n e s m i g h t b e f o r a p p ro v a l . The first question often asked is, ”How l o n g w i l l t h e f i n a n c i n g a p p ro v a l t a k e ? ” This is difficult to answer, as a lot de-p e n d s o n h o w q u i c k l y t h e n e c e s s a r y c re d i t information can be pulled together. A gen-eral rule of thumb is the bigger the dollar amount, the longer it takes. If you have financial statements, business plan, and fuel supply contracts in hand, the fund-ing approval process will go quicker. A $ 1 -m i l l i o n p ro j e c t m i g h t t a k e f o u r t o e i g h t w e e k s f o r a p p ro v a l , p l u s f o u r w e e k s f o r documentation and funding, and that is with all the necessar y fina-ncial information in hand. In addition to funding timelines, you must bear in mind environmen-tal permits, design, engineering, and installation timelines and put them all together so you can focus on multiple tasks simultaneously. One way to build the timeline is to decide when you want the finished product to reach the marketplace. With biomass energy, for example, it is often advisable to be re a d y t o s u p p l y t h e m a r k e t p l a c e f o r t h e fall/winter heating season. Good planning at the start of the project can save tre-m e n d o u s s t re s s a n d d i s a p p o i n t m e n t b y building in contingencies and flexibility. E q u i p m e n t s u p p l i e r s a re o f t e n v e r y b u s y supplying other projects, so sitting down w i t h t h e m a n d m a p p i n g o u t a re a l i s t i c deliver y and installation schedule may b e m o re c r i t i c a l t o y o u r s u c c e s s t h a n n e -gotiating the final purchase price. The o t h e r a d v a n t a g e t o b e i n g p re p a re d i s that you can schedule in suppliers and installers during their quieter times, when pricing can be better and technical trades-p e o p l e a re n o t o v e r w h e l m e d w i t h t h e late-season rush. A s y o u p l a n y o u r p ro j e c t , g a t h e r y o u r team to help plan the to-do lists and put the tasks on a construction timeline like a Gantt chart or Critical Path Method f l o w c h a r t . A l l o w s u ff i c i e n t t i m e f o r d e -lays and setbacks, but build a schedule t h a t y o u c a n re f e r t o a t a g l a n c e t o k e e p t r a c k o f y o u r p ro g r e s s . P u t i n m e a s u r a b l e benchmarks that allow the team to make “Many funders are looking for a finely tuned team that can make the necessary adjustments in a timely manner and stay at the top of the leader board.” necessar y changes as it navigates the twists and tur ns on the bobsleigh track of project development. You do not want to r u n o u t o f c a s h o r i n v e s t o r s u p p o r t b e f o re y o u g e t t o t h e f i n i s h l i n e . T h e re i s n o t h i n g worse than having a financial institu-t i o n w a l k a w a y f ro m t h e p ro j e c t b e c a u s e you missed the window of opportunity. After all, I’m amazed at how quickly two months can go by and it’s time to write another column for Canadian Biomass! • Reg Renner of Atticus F inancial in Vancouver, B C , f i n a n c e s m a ch i n e r y r a n g i n g f r o m b i o m a s s b o i l e r s t o d e n s i f i c a t i o n e q u i p m e n t . W i t h 3 8 ye a r s o f i n d u s t r y ex p e r i e n c e , h e r e c e n t l y h e l p e d s e c u r e carbon of f set credits for four greenhouse clients. E-mail: [email protected]. Canadian BIOMASS 9
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