Imagine a project with 10 million euros in capex, where all the time spent on financial analysis is devoted to recalculating the financial leverage n times, varying it from 10:90 to 30:70, with thethe goal of reaching the holy grail of a NPV close to 0 (or a WACC of 0.55%, as required by current regulations for projects with public funding) and making the project appealing to the public administration.
Then imagine talking to the investor and discovering that they have a maximum of 100,000 euros in equity to put into the project. The rest remains to be seen. Or imagine the opposite scenario. The investor brings a consortium with them, and they have enough equity to fully cover the investment’s value.
Shall we consider another scenario? Let’s imagine the investor already has a preliminary agreement with the relevant banks, and they’ll contribute 5 million. Let’s also factor in a timing variable. Between the design phase and construction, the timeline will span at least 3 years of development.
At this point, it makes a difference whether the bank provides the funds immediately or upon completion of the work. It makes a difference whether the operator has the equity right away or must raise it along the way from the rest of the consortium. It makes a difference whether the public grant arrives immediately, at the Sal stage, or upon completion of the work.