The Financial Advisor should undertake a review of the financial estimates utilised as inputs in the Base Case Model, the building of which is described in Sections 3.7 and 3.8 - Risk Assessment and VFM Analysis. The financial Due Diligence section should analyse the relevant cash inflows and outflows for the Project, the Project NPV, Project and Equity IRR, Equity and Debt structures, and bankability.
The Financial Advisor must ensure that a broad costing estimate has been performed, with all the relevant cost items included from Capex and Opex to provide a comprehensive picture, and conduct a secondary review of the estimates provided. This step is particularly important as inaccurate costing can bias the Value for Money calculation which will, ultimately, be utilised as the primary method of determining whether the project should be procured as a PPP or not. In addition, the Financial Advisor should also consider whether or not the Government Entity can afford to procure the project, in terms of the budget and/or the end user of the services, and must evaluate the Project structure to include appropriate accounting and tax considerations.