First of Kind, Financing Advanced Bioenergy Pt 3: Dealing with Deal Breakers

Biofuels Digest
February 27, 2011
By Biofuels Digest special correspondent Tim Sklar

Part 3-Dealing with Deal Breakers. How financial modeling can be used in quantifying risk and identifying “Deal Breakers”

In Part I of this three part series titled “On Identifying Risks”, discussions were included that focused upon the high-risk nature of advanced bio-refinery projects, why financing is hard to obtain what can be done to improve the odds.

In Part 2 titled “On Quantifying Risks” a summary of due diligence inquiries that project developers can expect to be subjected to is presented along with a list of typical concerns potential financial backers have with respect to perceived risks. In addition, a set of bio-refinery specific “what if” questions are included, because many of them will be asked.

It was hoped that the material included in Part 2 will ultimately be used as a useful guide in assembling information and in conducting analyses that will be needed when preparing loan requests, applications for loan guarantees, investment memoranda and prospectuses.

In Part 3 titled “Quantifying Risk Using Robust Financial Models”, insights are presented as to the how financial modeling can be used in quantifying risk and identifying “Deal Breakers”. In the sub-section titled “The Anatomy of a Model”, a detailed description is given of the computational framework used in the financial model. Another sub-section describes how to use this model.

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