Financial close refers to the point at the end of the procurement phase where the PPP contract has been signed, any conditions precedent for financing are met and financing is in place so that the Project Company can commence construction. This subsection 3.1.1 provides guidance on the transition to construction for both greenfield and brownfield projects, acknowledging that on some brownfield projects, the construction and operations periods may start concurrently.
Because the transition to construction occurs at the beginning of the project, it has potential to substantially influence the long-term success of the project, either positively or negatively. The Procuring Authority should plan for the transition thoroughly to ensure that the construction phase has a strong and uninterrupted start. A well managed transition can also highlight any weaknesses in the contract drafting, enabling them to be rectified at the operational level before they escalate into disagreements, which can lead to, delays and disputes.
EXAMPLE Transition planning The Project Company on the Qiaoxi District Central Heating project in China was required under the PPP contract to provide heating services no later than the date of commencement (allowing one third of the usual days needed). By arranging for the storage of additional fuel, and by a number of the Project Company's equity investor's experienced maintenance employees providing assistance in advance, the Project Company was able to carry out the transition without interruption to the services. For more information, see the Qiaoxi District Central Heating Case Study. |
SUBSECTION STRUCTURE This subsection provides guidance on managing the transition from financial close to construction. The key elements of successfully managing the transition are summarised below and detailed in this subsection under the heading 'Guidance': A. Focus on setting up an effective contract management team B. Ensure adequate resourcing is employed for sign off on design and other documentation C. Work closely with the Project Company with respect to any delays in land acquisition D. Ensure good resettlement practices are adopted where land acquisition affects local communities F. Engage with other relevant government agencies early to ensure potential delays are mitigated In addition, the Attachment (Financial close to construction checklist) to this subsection sets out a template checklist that can be followed by a Procuring Authority when managing a transition from financial close to construction. |