Dominovas Energy Corp. (fka DNRG)

[Alinea818]

READ pg.12 "Power Africa defines four project stages in a typical power project as described in Exhibit 7" Classifying Power Projects by Stage of Developmen

Very detailed - Loads of great information & insight




Stage 1 to stage 4, exactly what the PATT App describes will take 4 years (with the lengthiest being Stage 4, "Project Construction & Completion"). Stage 3, part A "Project Structuring" DNRG looks to be mostly completed? Stage 3 part B "Financing" DNRG should be totally completed with S3 PB (I say this do to Eric M. Fesh and his departure from Dominovas Energy as CFO unless Dom hires a NEW CFO)



The nepad report: AFRICA POWER VISION CONCEPT NOTE & IMPLEMENTATION PLAN from Vision to Action


http://www.nepad.org/sites/default/files/documents/files/Africa_Power_Vision_Concept_Note_%26_Implementation_Plan.pdf



Review Technology and Project Agreements

• Review and evaluate the technical aspects of the project and any risks inherent in the technology it will employ (integration, scale-up, etc.).

• Review the project’s permitting and licensing status (tax, tariff , customs, duties, fiscal, and regulatory framework) that could potentially cause delays in construction.

• Review and evaluate draft project agreements and counterparties. All project agreements must be financeable; this is necessarily dependent on reviewing a complete set of financing agreements. Among other things, the creditworthiness of the off-takers/power purchasers needs to be examined, and whether a guarantee of the host government and/or other credit enhancement features are contained in the project agreements.

Review Financial Model and Apply Stress Tests and Sensitivity Analysis


• Advise and assist in the preparation on and review of financial forecasts and a model for the project showing projected revenues and cash flows under a range of business and financial assumptions. These would include building a lender’s base case and sensitivity cases, which will then also be stressed tested under a variety of financial assumptions (different changes in capital expenditures (CAPEX), operating expenditures (OPEX), price, volume, operating efficiency scenarios, etc.). The financial model is a spreadsheet used to evaluate the project’s economics by analysing cash inflows and outflows during the construction on and operations phases from the perspective of each of the project’s stakeholders: project developers, the host government, and banks.

o The project developers need to determine their investment/funding requirements and expected economic returns.

o The host government needs to determine its “government take” (i.e., revenues received by the project) and any associated regulatory costs for monitoring the project. Any tax incentives the host government is prepared to give the project developers need to be examined, such as lower tax rates (income, dividends, interest, royales, etc.), tax holidays, value added tax (VAT) exemptions, import duty exemptions on services and/or equipment, production and investment tax credits, accelerated depreciation, etc.

o The banks need comfort that the debt will be serviced with a margin of safety in compliance with the covenants contained in the project agreements, i.e., the debt service coverage ratio (DSCR).
To do this, a “base case” (a forecast of future cash flows) must be developed. Then stress tests and a sensitivity analysis must be performed on the financial aspects of the project. These tests and analyses are used to evaluate different economic cases/scenarios and their impacts on the project’s financial performance and ultimately, on the tariff . They show the impact on the project’s financial performance and tariff by changing one or more assumptions if they differ from what was previously assumed: CAPEX, OPEX, fuel prices, inflation, construction on period, loan term, interest rate, etc. The debt capacity of the project can then be determined against minimum DSCRs under down-side scenarios. Then the project’s IRR is calculated and a comparison made with the equity returns that are available on alternative investments whose “riskiness” is similar to that of the project. This analysis also helps the host government in pricing concessions to private contractors.


Develop Optimal Capital Structure

• Develop an optimal target capital structure based on the project’s strengths, on bankable terms most favorable to the project developers (yet still acceptable to qualified lenders and the host government). This structure would include appropriate equity support, guarantees, capital structure, cash flow waterfall, security interests, and other appropriate credit support from the project developers, and the project’s contracts and equipment suppliers, as may be necessary or desirable by the lenders until all completion tests are met to the satisfaction on of the lenders to enable the project to revert to limited recourse or non-recourse operational status going forward.


Phase II: Prepare Offering Materials

Review Availability, Type, and Cost of Finance

• Review potential external funding markets for the project and recommend selected sources of finance, with a comparison of their relative advantages and disadvantages, including factors such as cost, ease of execution, likely covenants and other restrictions, size and appetite for the different types of risks, etc.

Prepare Comprehensive Offering Memorandum


• Assist the project developers in preparing marketing materials (including an offering memorandum) describing the project and the financing opportunity to be used in discussions with lenders in order to establish their interest to participate in financing the project.