3.2.3 Reach financial close

Financial close occurs when all the project and financing agreements have been signed and all the required conditions contained in them have been met. It enables funds (e.g. loans, equity, grants) to start flowing so that project implementation can actually start.

Any remaining "conditions precedent" contained in the financing agreements need to be fulfilled before funds can be disbursed. Typically: Guidance 85, 86

• the main permitting and planning approvals have been secured;

• the key land acquisition steps have been achieved;

• the outstanding technical design issues have been clarified;

• any remaining key project and financing document has been finalised and signed;

• all funding approvals are in place; and

• proper registration of the security for the loans has been confirmed.

The Authority will need to confirm that the requirements of all internal approvals have been met. These could include:

• confirmation of the legality of the procurement;

• approval of derogations from any standard contracting terms;

• the value for money check; and

• the affordability check.

The PPP Company and the Authority often need to carry out a considerable amount of detailed work to reach financial close. The effort needed should not be underestimated. The Authority will need to manage its tasks effectively and should seek the support of its advisers.

CHECKLIST: PPP contract and financial close
		To negotiate the PPP contract and reach financial close, the Authority and its team of advisers need to ensure that key questions related to the PPP contract, financing and ancillary agreements have been adequately addressed. For example:
		Has a negotiating team been assembled and empowered to take decisions on the issues pertaining to the PPP contract?

		Have the Authority and the negotiating team agreed a negotiating strategy, including (i) an assessment of the position of the Authority on key issues and (ii) a risk management strategy?

		Have the legal advisers evaluated the marked-up draft PPP contract proposed by the bidders, assessing it against its risk allocation and value for money targets?

		Have the financial advisers assessed affordability, project costs, sources and costs of funding and project bankability?

		Have the negotiations resulted in terms and conditions that vary substantially and materially from the bid offer and therefore could be open to challenge because they are less favourable or could have resulted in the selection of a different bidder?

		Have all the legal and administrative requirements of contract award been complied with?

		Is the final PPP contract still affordable and does it represent value for money?