New Projects without New Technology

When considering the particulars of a new project it is not uncommon for a funder to require that no new technology be utilized in the project.  This has become an ever more discussed topic as many projects look for new ways to be “green” and stay cost effective.

The reliability of any technology used in a project must be well established and proven.  The use of new technology that is unproven increases the lending risk should such a process fail.  After all, lenders expect the cash flows from a project to support the interests of the financing and provide a stable return to shareholders.

Of course, the best way around such a lending risk would be to have the funding guaranteed with a government agency or large company with a high credit rating.  It is, however, the experience of Capital Corp Merchant Banking that such a valid and truthful guarantee is the exception rather than the norm.

Overall, some technology is much more prevalent in one project over another, such as a waste-to-energy plant versus a residential housing development.  Either way, the Due Diligence team, along with the project promoter, must extensively review any technology in the project to properly determine any potential pitfalls to the financial success of the project.


Respectfully,

Capital Corp Merchant Banking