R.

Kannan
MODULE - 12
ROLE OF CONSULTANTS

(Reputed advisors bring credibility
to the project)
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Role of Consultants
a) Environmental Consultant (Appointed by company):
To study Environmental Impact Assessment, Emission, Ash disposal
Liquid disposal and impact of project on ecology, noise, etc.
b) Lenders Engineer:
Review of all technical matters including design, technology, EPC
contracts and their scope, fuel handling, equipment reliability, investment
costs, adequacy of liquidated damages, output, availability and efficiency
Review of all agreements including EPC, schedule of procurement /
construction, environmental and safety aspects, maintenance
programmes
Review of adequacy of spares, overall technical evaluation for lenders,
monitoring of project costs, oversee training of people, project
management and assessment of O&M operator
Review of training given by contractors and testifying degree of
physical/financial completion of the project
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Certifying payments to contractors
Certificate of test results / completion
Hazop study
Site suitability
Reasonableness of completion schedule
Availability of inputs
Project management structure
Technical risks / mitigation
Certifying profitability assumptions

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c) Financial Advisor to the project (criteriaexperience
Banks, Investment Banks, Management
Consultants)
Financial advisors provide credibility to projections /
past record
Review of feasibility study
Financial structure
Sources of debt and equity
Preparation of financial Model
Advice on financial side of project contracts
Preparation of information memorandum
Role of Consultants (contd.)
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Selection of finance sources and advise on
documentation
Options of financing, structuring based on lenders
feedback
Negotiation with lenders
Appropriate time to approach market / pricing of equity
Advising on fee structure
Marketing the project to lenders / investors
Currency / tax / offshore companies
Role of Consultants (contd.)
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Role of Consultants (contd.)
d) Lenders Counsel:
Review of all project contracts / security documents / guarantees
Conducting legal due diligence
Drafting of finance and security documentation
Compliance with all acts, regulations and obtaining permissions. Lawyers
concentrate on problems / shortcomings and never balance this against positive
factors
Lawyers need to be familiar with project finance structures, contracts, credit
enhancements and if required international transactions
e) Insurance Consultant (Appointed by Lenders):
Review of project documents with respect of risks covered, premium rate,
insured values, liability limits, assignment mechanism, adequacy and
appropriateness of contracts / subcontracts
Compliance of insurance provisions / requirements
Assist in availing insurance for advance loss of profit (loss of revenue due to
delay in commissioning)
Insurance audits / compliance with financial agreements
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Role of Consultants (contd.)
f) Owners Engineer:
Owners engineer performs all the acts of lenders
engineer in addition to
Work as a coordinator between Owner and technical consultants
Assist in negotiation of EPC contracts, monitor capital costs, certify
performance tests
Review budgets / revenues, O&M cost, annual maintenance programmes
Assist in discussions with Central Electricity Authority , lenders, review
test procedures, represent owners in all key discussions, equipment
inspection
Supervision of EPC contracts
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g) Market / tax consultants (cross border deals)
h) Specialists
Traffic consultants (Roads)
Reserve Consultants (mining)
Reservoir Consultants (Oil reservoir report / cost and
time of extraction) and
Wind pattern consultants (wind power)
Role of Consultants (contd.)
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Who are the advisors
a) Financial
- Investment / Merchant Banks
- Commercial Bank
- Stock brokers / equity firms
b) Sector advisors
- Insurance, tax, legal, region, leasing, accounting (specialised
companies)
c) Country specialists
- Political risk, dealing with ECA
d) Technical advisors
- Equipment suppliers, engineering design companies and
manufacturers of that product (ABB, Siemens have project finance
teams and investment arms)
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- Any advisor should not be allowed to dominate
negotiations
- The advisor should know the sponsors objectives
and limitations (deal brake). Negotiating and fixing
targets for advisors itself is a task
- Get to know the advisors previous clients and
check with them
- Understand the people who will be actually doing
the work