preparing-infrastructure-investment-cases

# Preparing Infrastructure Investment Cases

## When To Use

- Building an Investment Committee (IC) memo for a greenfield or brownfield infrastructure asset
- Preparing materials for a PPP/concession bid or direct equity investment
- Structuring a recommendation for infrastructure debt (project bonds, bank facilities, mezzanine)
- Documenting an infrastructure opportunity in a pipeline or deal-screening context
- Updating an existing IC case with revised assumptions or post-due-diligence findings

## Inputs To Gather

- **Asset profile**: sector (transport, energy, digital, social, water/waste), geography, development stage (greenfield/brownfield/operating), asset description, and concession or license term
- **Transaction structure**: equity vs. debt sizing, capital stack (senior debt, mezz, equity, subordinated facilities), proposed entry valuation or bid price, and co-investor or consortium details
- **Cash flow model or assumptions**: revenue drivers (availability-based vs. demand-based), contracted vs. merchant exposure, O&M cost structure, capex schedule, escalation/indexation mechanisms, and base/downside/upside scenarios
- **Regulatory and permitting landscape**: sector regulator, tariff-setting methodology, required permits/licenses, political risk considerations, and change-in-law protections [VERIFY jurisdiction-specific regulatory framework]
- **Risk register**: construction risk (EPC terms, liquidated damages, completion guarantees), demand/volume risk, counterparty credit, FX/interest rate exposure, environmental/social, and force majeure
- **Return targets**: fund-level return hurdle (gross/net IRR, equity multiple, cash yield), benchmark comparables, and GP/LP alignment provisions
- **ESG and impact metrics**: climate alignment, emissions profile, community impact, alignment with taxonomies (EU Taxonomy, GRESB, SDGs) [VERIFY applicable ESG disclosure standards]

## Workflow

1. **Frame the opportunity** — Summarize the asset, sector thesis, and strategic rationale. State whether the investment is availability-based (contracted, government-backed) or demand-based (merchant/volume risk). Identify the fund strategy fit and ticket size relative to fund capacity.

2. **Map the regulatory environment** — Outline the concession/license framework, tariff or rate-setting regime, and key regulatory bodies. Flag any pending regulatory reviews, elections, or policy changes that could affect returns. Note change-in-law, stabilization, or step-in rights. [VERIFY current regulatory status and upcoming review periods]

3. **Structure the capital stack** — Present the proposed financing structure: senior debt (tenor, pricing, covenants, DSCR locks), any mezzanine or subordinated layers, and equity contribution. Include gearing ratios and compare to sector benchmarks. If a PPP, detail the government contribution or viability gap funding.

4. **Build the base case financial summary** — Present key outputs from the cash flow model: project IRR, equity IRR, cash-on-cash yield, DSCR profile (minimum, average, lock-up), payback period, and terminal/residual value assumptions. Show sensitivity tables for the 3–5 most impactful variables (e.g., traffic volume ±10%, construction cost overrun, interest rate shifts, inflation divergence).

5. **Assess and tier risks** — Organize risks into categories: construction, demand/revenue, counterparty, regulatory/political, FX/macro, environmental, and force majeure. For each material risk, state the mitigation mechanism (EPC wrap, insurance, hedging, reserve accounts, government guarantee, step-in rights). Assign a residual risk rating (high/medium/low) after mitigation.

6. **Benchmark and compare** — Provide comparable transaction data: recent infrastructure deals in the same sector/geography, entry multiples (EV/EBITDA, EV/MW, price per lane-km), and achieved returns. Note where the proposed deal sits relative to peers and fund return thresholds.

7. **Summarize ESG and impact** — Quantify where possible: estimated CO₂ avoided, jobs created during construction/operations, community benefit commitments. Map to relevant frameworks (EU Taxonomy eligibility, GRESB score drivers, SDG alignment). [VERIFY fund-specific ESG reporting requirements]

8. **Draft IC recommendation** — State the clear recommendation (invest/pass/conditional), the proposed terms (entry price, equity commitment, key conditions precedent), and any outstanding due diligence items or conditions that must be satisfied before close.

## Output

The final IC investment case should contain:

- **Executive summary** (1 page): asset, thesis, structure, return profile, recommendation
- **Opportunity overview**: sector context, asset description, transaction history
- **Regulatory and political analysis**: framework, risks, protections
- **Financial analysis**: capital structure, base case returns, sensitivity/scenario analysis with tables
- **Risk matrix**: categorized risks with mitigations and residual ratings
- **Comparable transactions**: benchmarking table with key metrics
- **ESG and impact summary**: quantified metrics, framework alignment
- **Recommendation and conditions**: clear invest/pass with conditions precedent and next steps

## Quality Checks

- All return metrics (IRR, yield, multiples) are internally consistent and tie back to the cash flow model
- Sensitivity tables cover at least construction cost, revenue/demand, interest rates, and inflation
- Every material risk has an identified mitigation; residual risks without mitigation are flagged for IC discussion
- Regulatory analysis references specific statutes, regulators, and review timelines — not generic statements [VERIFY all cited regulations are current]
- Comparable transactions use recent data (within 24 months) from the same sector and geography where available
- Assumptions are explicitly labeled; no inferred data is presented as confirmed — mark uncertain inputs with [VERIFY]
- Capital structure ratios (gearing, DSCR, LLCR) are benchmarked against lender market standards for the sector
- ESG claims are supported by quantified data or third-party assessments, not aspirational language