Banking on a Biogas Project Financing a biogas project at any time can be a risky business, writes TheBioenergySite Senior Editor, Chris Harris.
There are uncertainties from the planning stage to getting the project up and running and then ensuring that it will run viably.
At this present time there are even more variables to throw into the equation as the global economic situation lurches from one crisis point to another.
However, there are certain risk assessments that both the project developer and the financier can take to ensure the minimum danger and the greatest possible chance of success.
Speaking at the recent European Biofuels Conference and Exposition in the UK, John Barker, the corporate agribusiness manager for HSBC bank said that as a lender they would have to consider a series of areas to ensure a solid business venture was being proposed, before committing themselves to a biogas venture.
He said that first the bank would look at the credentials of the person at the head of the venture to assess whether the person had a good track record and also had the right might and balance of skills to make a project work.
He said that the venture had also to be shown to be well researched and prepared and both the project leader and the bank had to have a common view of what was intended to be achieved.
Mr Barker added that the construction risks also had to be taken into consideration - whether it was a turn key contract, whether it was a fixed price contract and whether there were likely to be any cost overruns.
He said that banks would not want to finance a project and then find that halfway through the client was returning and asking for more money because the project was not being built on time.
To ensure this does not happen, the standing and the credentials of the contractor have to be scrutinised carefully and guarantees have to be given to ensure that the required performance is achieved.
Mr Barker said the bank will also...