AD guide smoothes due diligence process

A new guide designed to help people secure funding for biogas plants has been produced by the Anaerobic Digestion and Biogas Association (ADBA).


The Due Diligence template, developed in association with WRAP and Compass Renewables, provides a simple way for developers to check they have provided all the information banks and other financiers need before financing AD. It explains what investors would like to see in a business plan and gives a simple way to check where the information they need can be found.


It is hoped it will reduce the cost and complexity of the due diligence process and help people raise the finance required for AD. The template is broken down into several main sections, as shown below, although the level of detail required will depend on the size of the individual project.



Your background



A key factor in the success of any new venture is the person or business driving it. The first part of the due diligence process requires users to give background to their proposal, a business justification for why funding is required, how AD will fit with the core business and any experience individuals or colleagues have had with AD or project management.



Site and regulations



This section requires giving specific details about the site, including its location, previous use, ownership and any surveys that have been done already – e.g. geotechnical survey of ground conditions, grid connection assessment.


It also covers the regulatory requirements for planning and environmental permitting. In terms of planning, ADBA advises people to outline whether the site is in open countryside, greenbelt, a conservation area, or an area subject to other statutory designation (such as AONB, SSSI). They should state whether planning permission has already been obtained and if so, whether any conditions are attached to it.


The environmental permitting section covers areas such as the types of feedstock to be used, feedstock storage, retention times, and whether any environmental permits have been obtained to date. Any conditions associated with permits should be identified and copies of supporting evidence attached. At this stage it is also worth identifying any other risks associated with the proposed site and an idea of total costs incurred to date.



Project build/ design



Here details of those who will actually deliver the project should be included, covering companies involved in the design and build of the plant, suppliers of plant and equipment, sponsors, project managers and any other specialists involved. ADBA advises outlining what agreements or contracts have been signed and providing information on quotes and insurance in place.


A business case for the development should be included, showing a financial overview and justification for any assumptions made – e.g. electricity pricing, operating costs, maintenance costs throughout the life of the plant.



Finances



This section requires a more detailed financial analysis of the proposal, showing a full breakdown of the forecasted project costs, income, payback, assumptions made, sensitivity analysis and other such factors.


It should include details of any other equity partners involved and explain how the project will be funded, including borrowing and grants or other support such as Feed-in Tariffs or Renewables Obligation Certificates.


The developer should have undertaken a risk assessment and included the results in the due diligence. This should cover an explanation of the most significant risks to the project and how they can be mitigated.



Managing the plant



Explain how the plant will be managed and highlight any relevant experience of other members of the management team. Developers should explain how time will be divided between running the plant and other business activities.


A more detailed feedstock strategy should be included, covering types and alternatives available, tonnages required, suppliers, and security of supply – are contracts in place and what terms are attached to these?


Health and safety should also be covered in this section, with an assessment of the existing staff skills and any training that may be required and what health and safety policies have been put in place.



Digestate



There should be a strategy for all outputs from the plant, covering land available, additional equipment that may be required to process digestate, plus licensing or certification needed, possible revenues and alternative options for digestate disposal.



Gas utilisation



This should cover the total amount of electricity to be generated at the site each year and how it will be used, including details of any Power Purchase Agreements in place, consumption on-site, etc. Where heat from the plant is also going to be used through Combined Heat and Power generation, developers should also include details of extra kit required, where the heat will be used and any contracts in place.


Other proposed uses for gas that have been examined should also be acknowledged, such as injection to grid or use as vehicle fuel.


ADBA has also published a list of current financial schemes available to AD projects. Both documents can be downloaded at www.adbiogas.co.uk