Design, Build, Finance, Operate & maintenance (DBFO)
Obtain financing to build or optimize a treatment infrastructure
You are convinced with all the benefits of combining Construction & Operation (Design Build Operate model) but:
- You are reluctant to finance, on your own budget, the capital investment (Capex); this can be for various reasons:
- You prefer to allocate your financing capabilities to serve projects that are more in your core business
- You do not want to increase, or need to decrease, your debt levels & ratios… - You need to secure an affordable and predictable tariff/fee for the services that the asset is meant to deliver; tariff/fee is meant to cover
- Fixed component for amortization and financing costs of the asset (new or expansion) + fixed O&M costs (manpower, asset maintenance, …)
- Variable component for variable O&M costs (energy, chemicals, …).
Total or partial financing
1. Full financing
We structure the financing of 100% of the Capex, usually with a “project finance” scheme, as follows:
- Special purpose company (SPC) created for the project
- We provide for SPC’s equity, along with other partner investors
- Equity shareholders secure a long-term debt, usually from a pool of lenders and on a non-recourse basis
2. Partial financing
We structure the financing for a portion of the Capex (still with “project finance” scheme), the remaining portion being financed by a third party, usually provided by you (typically, an International Financing Institution or a Grant provider)
The main benefits of Design, Build, Finance & Operate solution over Design, Build & Operate solution:
- Capex financing is no longer on your balance sheet
- You have a predictable tariff/fee in your budget to pay for the services rendered by the asset
Your main requirements for engaging into a Design, Build, Finance & Operate (DBFO) contract:
- Capacity building: the DBFO is an elaborated collaboration model which requires that you staff well qualified team
- Governance stability: DBFO requires long-term (typically, from 20 to 30 years) in order to optimize the tariff, which requires stability in the governance of your authority
- Stakeholders management: DBFO involves several stakeholders (commercial lenders, international financing institutions or donors, regulatory agencies, non-governmental organizations, …) who need to be managed in good faith and persistently
In a Design, Build, Finance & Operate for a desalination plant, the cost of power to operate the treatment line can represented 50% of the water tariff, which confirms that over the full lifecycle of an asset, Operation & Maintenance costs are frequently the major component.
