Why is a thorough understanding of project budgets of utmost importance to sponsors, lenders, and authorities?
- Project finance transactions are modeled by means of forward-looking cash-flow projections, whereas the funding in respect of corporate finance transactions is based upon actual historical data, primarily balance sheet driven.
- Furthermore, the contractual structure within project finance transactions usually involves the establishment of a Special Purpose Vehicle (“SPV”) to undertake one particular goal (e.g. DBFM) over an agreed time period. The shareholders of the SPV usually belong to larger corporations but are legally independent of their parent companies.
- Moreover, given the fierce competition within the infrastructure sector due to the current macroeconomic situation (e.g. quantitative easing), lenders’ bargaining power has decreased over the years and transactions are often financed by means of limited-recourse loans and thin margin for error.
TA Europe’s multilingual team consists of various engineers, architects and economists, which uses best-practice approaches (e.g. top-down, bottom-up) when it comes to evaluating the adequacy of budgets.
Over the years, TA Europe’s team members were involved in various primary and secondary market transactions within Europe and abroad. Given the diverse background of our consultants, TA Europe is in the position to assess budgets by means of taking into account engineering, statutory and commercial aspects.
Moreover, TA Europe possesses considerable benchmarks when it comes to capital expenditure (“CaPex”), operational expenditure (“OpEx”) and lifecycle / heavy maintenance / reinvestment expenditure (“RepEx”).
Given the team’s wealth of experience when it comes to understanding and challenging budgets, TA Europe can provide cost certainty, limit the risk of cost overruns and even increase the profitability within projects.
If you are involved in a project and have doubts about the proposed budgets, then please do not hesitate to get in touch with our experts.