Staying on track

As I sit down to write the seventh article in this series on project financing, I can’t help but think about a magazine editor’s nightmare—trying to corral novice writers into meeting strict and regular timelines. I don’t know about you, but I tend to work best when I have a timeline. Approaching your biomass project, do you have an 18-month chart with deadlines and benchmarks laid out in a logical flow? My experience is that people spend a lot of time talking about the project and sharing their vision with the team, but rarely share benchmarks that let everyone know whether they’re on track.

Why is this important, and what about flexibility and unexpected delays? There can be uncontrollable delays, but your investors and partners need to know there are planned benchmarks. If you are behind schedule, you want to know as soon as possible and make adjustments to get back on track. Consider a finely tuned bobsleigh team. Teams are judged by their start times, interval times, and finish times. The coach, technicians, and drivers analyze these benchmark times and make adjustments to the equipment, team dynamics, and lines of attack. The team runs the course again and checks to see if their strategic changes had the desired effect.

In project financing, falling off the pace can be deadly, as you can run out of cash, enthusiasm, and support. Many funders are looking for a finely tuned team that can make the necessary adjustments in a timely manner and stay at the top of the leader board. In this fast-paced, ever-changing industry, you need to know exactly where you are in the timelines and make necessary adjustments.

To avoid the pitfall of losing investor interest and confidence, it is of utmost importance to build a realistic timeline. Talk to others who have built similar projects or ask a funder ahead of time what the real timelines might be for approval. The first question often asked is, ”How long will the financing approval take?” This is difficult to answer, as a lot depends on how quickly the necessary credit information can be pulled together. A general rule of thumb is the bigger the dollar amount, the longer it takes. If you have financial statements, business plan, and fuel supply contracts in hand, the funding approval process will go quicker. A $1-million project might take four to eight weeks for approval, plus four weeks for documentation and funding, and that is with all the necessary fina-ncial information in hand.

In addition to funding timelines, you must bear in mind environmental permits, design, engineering, and installation timelines and put them all together so you can focus on multiple tasks simultaneously. One way to build the timeline is to decide when you want the finished product to reach the marketplace. With biomass energy, for example, it is often advisable to be ready to supply the marketplace for the fall/winter heating season. Good planning at the start of the project can save tremendous stress and disappointment by building in contingencies and flexibility.

Equipment suppliers are often very busy supplying other projects, so sitting down with them and mapping out a realistic delivery and installation schedule may be more critical to your success than negotiating the final purchase price. The other advantage to being prepared is that you can schedule in suppliers and installers during their quieter times, when pricing can be better and technical tradespeople are not overwhelmed with the late-season rush.

As you plan your project, gather your team to help plan the to-do lists and put the tasks on a construction timeline like a Gantt chart or Critical Path Method flowchart. Allow sufficient time for delays and setbacks, but build a schedule that you can refer to at a glance to keep track of your progress. Put in measurable benchmarks that allow the team to make necessary changes as it navigates the twists and turns on the bobsleigh track of project development. You do not want to run out of cash or investor support before you get to the finish line. There is nothing worse than having a financial institution walk away from the project because you missed the window of opportunity.

After all, I’m amazed at how quickly two months can go by and it’s time to write another column for Canadian Biomass!

Reg Renner of Atticus Financial in Vancouver, BC, finances machinery ranging from biomass
boilers to densification equipment. With 38 years of industry experience, he recently helped secure carbon offset credits for four greenhouse clients. E-mail: rrenner@atticusfinancial.com.