Translating equity and debt into viable assets

Commercial strategies must be well considered, researched and be able to be delivered.

In a nutshell, that's Enthalpy's view on any strategies to convert shareholders' equity and lenders' debt into economical and technically viable business assets.

Too many times, Enthalpy has seen enormous engineering effort go into studies or projects - only to find that the commercial strategy has been founded on ill-conceived and poorly thought-out implementation approaches, contracting plans and contracts.

Instead, the principles underlying commercial strategies should be like any other investment criteria: They must be fit for the purpose and able to be delivered by the parties.

Prescriptive definition

Enthalpy considers a number of criteria need to be achieved in order for a feasibility study to be considered bankable.

Criteria include:

• Generally optimised
  A study should achieve a final stage, with technical and commercial aspects having generally been optimised.
• Unlikely to vary
  A project should not be likely to vary materially, following a commitment to the project.
• Stand alone
  Resources, process technology, scope, quality, costs and time parameters should all be able to stand alone in their description of a project.
• Trackable basis
  All aspects of the study report should be capable of being tracked back to validated and fundamental calculations.
• Control baseline
  There should be a control baseline that can be used during management of a project.
• Independent engineer
  Any study should be able to be audited, reviewed and signed-off by the lender's independent engineers.
• Risk allocation
  There should be sufficient allocation to allow a project's equity and debt providers to assess and allocate the risks of implementing and operating the project.
• Loan basis
  Finally, the study should be capable of forming a project establishment document under loan agreements entered into by debt providers.

Enthalpy believes the commercial strategies adopted by a project or acquisition must meet the needs of the equity and debt providers - not the project implementation parties.

Enthalpy has had extensive experience in evaluating, analysing and selecting commercial strategies in conjunction with developers, lenders and their advisors.