Guidelines for Preparation of the Initial Project Proposal
General Guidelines
This document is provided as a guide for preparation and submission of an initial
Project Proposal – high level overview of a project, business venture or technology
development and the opportunities it presents and the risks it entails. The guideline
should be used for project proposals and applications for CTI PFAN support including
applications to a Clean Energy Financing Forum (CEFF).
The guidelines have been designed to be as inclusive as possible. Accordingly,
dependent on the type of project and its development status, not all aspects of thisguideline will be relevant. Developers should attempt to provide available information to
relevant areas in as much detail as possible / appropriate and available at the time ofsubmission.
The emphasis of the Project Proposal should be on the presentation of a concise andcredible plan that can quickly and easily be understood and evaluated by reviewers.
Based on appraisal of the Project Proposal, CTI PFAN may offer to provide support andadvice to Developers (Project Promoters) to further develop their project and structure
their financing proposal for introduction to investors / financiers. Part of this work willconsist of the preparation of a bankable business plan and the development of a highquality Investment Pitch Presentation. The Projects can be supported individually as
Special purpose vehicles (SPV) or support can be for the Company itself if it seeks
investment for multiple projects or its core business ventures.
Format, Structure & Contents of the Proposal
Project Developers can choose their own format and structure of the Project
Proposal to best suit the requirements of their project. Whatever format andstructure is chosen, Developers should include as much of the requested
information contained in this guideline as possible. Developers may choose toprovide any additional information that they consider useful and not covered in thisguideline. These guidelines may be used in conjunction with the aide memoire
http://www.cti-pfan.org/upload/resources/file/PFAN_FinancingCheckList.pdf which
provides an exhaustive check list of the sort of information required.
Developers are advised to be factual and realistic. Avoid unrealistic claims, jargon andhype. Document your claims and proposals where possible and provide quantifications
and supporting data, using diagrams, charts and graphics where appropriate.
Project Proposal Length / Data Volumes & Organisation of Information
Section lengths are provided as indications only. The total Project Proposal should notexceed 20 pages including the cover page, contents, charts, and tables. Page setup,spacing, font size and type face are at your discretion but the document should bereader friendly. A maximum of 3 annexes may be used to provide additional

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information (e.g. the cash flow model) provided that these do not exceed a further 20
pages of written information or the combined data volume limit.
The total data volume of the files submitted to CTI PFAN (Project Proposal + Annexes)
should not exceed 20 MB. Reviewers will only consult annexes if they are referenced in
the main proposal text and clearly labelled / identified. The Project Proposal should
contain all relevant information on the project. Do not provide links to websites andonline information. Project reviewers can only consider information provided in the
Proposal.
Project Proposals which exceed the guidelines on length and data volumes or areorganised or formatted such that they are difficult to read may be marked down or
simply disregarded.
Acceptable File Formats-

The Proposal Document and any other text based documents should be provided
in WORD or PDF format;
Cash flow & financial models should be provided in EXCEL format. Do notconvert excel files to PDF or copy large excel sheet extracts to Word;
The Project Data Sheet should be provided as an EXCEL file. A
template for the Project Data Sheet can be downloaded at
http://www.cti-pfan.net/resources.php?id=11.

Files submitted in other formats than identified above may be disregarded.
Confidentiality
CTI PFAN respects the confidentiality of all developers' project proposals and otherinformation supplied. Proposals will not be copied for any purposes other than foranalysis and evaluation of the project in respect of potential induction into the CTI PFAN
development pipeline and / or participation in a CEFF. As a matter of convention andpracticality, confidentiality agreements are not signed in respect of the receipt andanalysis of Project Proposals. Developers may choose to include the following optional
disclaimer on the cover sheet of their submissions, recognising that it is not a legallybinding agreement:“This project proposal is confidential and is presented to CTI PFAN solely for the
purpose of evaluation of the project for potential induction to the CTI PFAN
development pipeline. This proposal may not be reproduced or redistributed in whole orin part. By accepting a copy of this plan, the recipient agrees not to reproduce ordisclose the contents of this plan to third parties without the prior written consent of its
authors. “Upon acceptance of the project for the Development Pipeline or for participation in a
CEFF, developers may request confidentiality and non-circumvention agreements to benegotiated and signed between the Developer and the respective assigned PFAN
Consultant.
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1. Executive Summary (1/2 – 1 Page)
Introduce the project with regards to the scope of the project (energy generation,
distribution, energy efficiency etc.), where it is located, who is involved and thecommercial rationale for implementing the project. Highlight the market opportunity andthe benefits of the proposed technological / business idea.
Provide a brief history of the project, including a timeline of activities undertaken orcompleted to-date.
Outline the amount and type of investment / financing being requested, how theinvestment will be used, what the possible exit strategies will be for external investors,
and what the critical next steps are to realise your project.
Briefly summarise the principal outcomes of the project:Commercial & Financial Returns (IRR / RoC / EBITDA / Payback Period etc.)
Other Economic Benefits (GHG Reductions / CER values etc.)
Social & Developmental Benefits

2. Value Proposition and Business Model (2-3 Pages)
This section should include the detailed description of business model, project structure
if available, and commercial rationale for the project. Key elements for consideration
include:
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Commercial rationale: market opportunity being exploited by the project
Key contractual relationships, counterparties and stakeholders: who does what
and why
Inputs & inbound logistics: how does the project source its inputs (fuel sources /feedstock supply / suppliers / transport to the project)
Outbound logistics: how does the project make delivery of its goods or services
to clients
Key Contracts: supply agreements, off-take agreements, power purchaseagreements together with their underlying parameters and assumptions (eg feedin tariffs) and their negotiation status (agreement in place, negotiations ongoing,
yet to be started, etc.)
Marketing: how does the project market / sell its business offering (sales /customers)

This section should include preliminary information on how the management wishes todevelop the business and should include all relevant phases of project development &implementation:

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

Development Phase: this covers the time up until financial closing and should
outline what needs to be done and detail the plans for achieving the sameConstruction / Implementation Phase

Start of Business / Operations Planning: the operational plan should include
details with regards to day to day business operations, scheduling, manpower
distributions and supply chain planning

Expansion / Growth Strategy: to the extent that rapid business growth andexpansion is anticipated, information on growth strategy and expansion plans
should be provided, and financial analysis provided later in this Proposal shouldreflect these details



Exit Strategy (if and where applicable)

Existing agreements, ongoing discussions, contracts or MOUs with any of the key
parties should be identified in the Project Proposal. Necessary contractual
arrangements, both existing and outstanding, should be clearly indicated together with aprognosis for when such arrangements are expected to be concluded. These factors
allow an assessment of the overall business implementation readiness.
3. Management & Manpower Structure (1/2-1 Page)
Introduce the proposed management / project team, their backgrounds and what theybring to the project. The structure of the management team should also reflect the scaleand complexity of the project or business. Important issues to consider:

Organisational Structure: the proposed company / project management andorganisation structure should be clearly presented, including, where possible, thenames of personnel selected and the allocation of roles and positions.

Management Roles and Responsibilities: highlight what each of the senior
management members will contribute to the project development, implementationand operations. Don’t just provide their title / function but describe what their roles
and responsibilities are.

Management Expertise and Credentials: Provide profiles of key management andpersonnel involved in the project development and implementation. Information on
relevant work experience, contributions and skill sets critical to the success of thebusiness / project should be provided. Brief CVs may be provided as an annex.

Manpower Distribution: businesses with complex operations or large manpower
requirements should be well thought through and presented in a concise manner. It
is important to ensure that assumptions for this section are realistic and achievable.
It is also important to demonstrate that appropriate skills are available in the local

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Page 4 of 12market and that management has a plausible strategy for identifying and securing
key personnel.
Partnerships: Introduce and describe the roles of key partners, and othercompanies and institutions involved in the development and implementation of the
project. Partners could include joint venture firms, consortium members, equipment
and / or raw material suppliers, off-takers of finished goods, development partners,
technology suppliers, contractors or others critical to business operations. Partners’
relationships to the project and the developing entity should be clearly presented
and explained. Do not repeat / duplicate information already provided in theBusiness Model section.

4. Technology (1-2 Pages)
Briefly introduce / describe the technology solution used in your business model.
Standard commonplace technologies, which are already commercialised or in
deployment phases (e.g., anaerobic bio-digestion, gasification, biomass pelletisation,hydro, wind, etc.) do not require detailed introduction / description. More important are
the following aspects:Technology choice: available choices of technologies and their suppliers toachieve the business / project objectives should be discussed and compared; givethe reason for your technology choice;Technology supplier: the decision on the choice of technology and technology
supplier/s should reflect the technology comparisons made in the previous section.
Provide the reason for your choice of technology supplier and explain how you
arrived at the choice (e.g. tender process). Explain the nature of the relationshipbetween the supplier and the business / project if appropriate;Commercial Impact of Technology Choice: explain whether the technology will bepurchased, leased, licensed or rented. Outline the commercial implications of thetechnology for the business model and the value chain; detail the impact of thetechnology on the cost structure and the revenue streams of the business.

These aspects should be discussed and explained in appropriate detail.

If the project constitutes in itself the development and commercialisation of a newtechnology then the technology, its benefits, drawbacks and differences in comparison
with existing technologies should be presented and clearly explained. In the case of any
proprietary technology please elaborate the efforts undertaken to protect and secure theaccruing intellectual property and the opportunities for commercially exploiting it.
Technologies should be described in plain simple terms that are readily understandable
to a layman.

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Do not provide beginners’ guides on technologies. CTI PFAN project reviewers areexperienced financing practitioners in the clean energy space and have practicalexperience with most common clean technologies. Only completely new technologies orenhancement of existing technologies will require more detailed technical presentation.

5. Market Analysis (1-2 Pages)
This section should include analysis of the economic potential of the business as well as
the competitive and regulatory threats and opportunities, supported with accurate andappropriate market information, available data, quantitative forecasts and plausible /reliable projections.
In most cases the following areas should be explained in the Project Proposal:Policy & Regulation: the Proposal should summarise the regulatory environment inwhich the project is situated and analyse relevant policy for threats and opportunities
which might affect the business negatively or positively.

Market Sizing: the Proposal should provide a clear explanation of the addressable
market for the project, including details on the approach taken and assumptions
made.



Competition Analysis: this section should provide an analysis of companies /projects / businesses with similar or competitive offerings as the proposed business.
Conversely, other companies or initiatives that complement the business can beelaborated upon. Possible disruptive strategies / technologies should be identified
and described as appropriate.

Competitive Advantage Analysis: developers should highlight the competitive
advantage of their business. This could also include competitive strategies thecompany might adopt to create or protect barriers to entry.

A suggested framework to address the above is Porter’s Five Forces or the SWOT
Analysis.
CTI PFAN’s work with investors has demonstrated that Competition Analysis andCompetitive Advantage Analysis are of high interest to investors and financiersparticularly where the project involves young technologies and in business segments
where the development pace is very fast.
6. Proposed Investment / Financing Structure (1-2 Pages)
The Investment proposal should be for a commercial investment which provides areturn on capital to the investor and / or which pays a rate of interest to a lender on a
debt which is repayable on agreed terms. The proposal may include grant or subsidised
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components, but the investment opportunity should be structured as a commercial
proposition. CTI PFAN will not consider proposals which are structured primarily as
grant requests,
This is a key section of the Proposal which should detail and elaborate the nature andamount of investment that the Developer is looking for. It is important that this section isclear and explicit.
As an absolute minimum this section should provide details on:
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Total investment cost of the whole project;
The investment amount being sought from the investor / bank; this is the socalled ask amountWhether the investment is targeted as equity or debt (or other instrument e.g.
mezzanine finance / convertible debt); Project Proposals may include investment
targets for both equity and debt components; whether you are seeking local
currency or foreign currency investments;
What amount the Developer will invest from his own funds (including amounts
already invested and amounts to be invested); this is the Developers’ skin in thegame and can include amounts for sweat equity and non-cash contribution. Most
investors and banks will require that Developers have significant exposure in
their projects through cash and non-cash contributions; CTI PFAN will consider
proposals for 100% financing but they will likely be ranked lower than projects
where the developers make own financing contributions;
Other sources of financing that will be made available and their terms andconditions: e.g. debt finance / banks / development finance/ mezzanine finance /equity providers / grants / equipment finance / leasing / hire purchase); state
whether the amounts have already been invested / are committed / requested /identified as possible;
Projected returns for equity holders (as appropriate);
Projected rates of interest and anticipated repayment schedules for debt holders;
Anticipated period of investment and payback periods;
Estimated project execution timelines and estimated costs during construction
period including rolled-up interest costs.
The Investment / Borrowing Vehicle: what is the legal entity (private limited
company / public company etc.)?

Below is a further elaboration of key aspects and considerations of this section from theperspective of an Equity Ask and a Debt Ask
a. Equity Ask
Investment Vehicle: what corporate structure or entity is the investor investing into?
This should be apparent from the Business Model / Project structure;

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Page 7 of 12Investment (Ask) Amount: what is the investment amount? How does thiscompare to the Developers’ contribution to the business? What is the Developer’s
contribution amount?

Valuation: what share in the business is the investor receiving as consideration for
his investment? On what basis has this been calculated? Justify and explain any
discounts or premiums assumed.

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Financing Leverage: what is the ratio of total equity to total debt? How will the debt
be raised? Is it already committed? From which institutions? At what rate of interest
and on what repayment terms?

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Use of Funds: what items will the investment funds and specifically the investors’
funds primarily be used for? Schedules of capital expenditure and operational
expenditure, and assumed timings of financing requirements should be provided.
Provision of a Source and Application of Funds table / schedule is recommended.

Returns: what returns can the investor expect and over what periods? It willprobably be useful to express these returns as Equity IRRs, RoI, RoC or othersimilar indicators. Equity cash flows should also be provided in the financial model toreflect the investment flows from the investor’s perspective.

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Investment Conditions & Expectations: The Project Developer’s expectations /requirements of potential investors’ obligations, rights and benefits, in terms of board
and management representation, burden of time, other commitments, dividend rights,
payout options, preferential treatment etc. should be outlined.

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Exit Strategy: the proposed timeline of the business investment is an importantpiece of information for investors. Accordingly, as far as possible the exit strategy forthe investor should be clearly constructed around this timeline. To increase theflexibility of the proposal, possible multiple exit points can be suggested and can for
instance include, industry sale, buy back by developer, IPO etc. Some investments
may also be structured as annuity type deals based on long term cash stable flows.



Investor: what type of investor(s) is being targeted and why? Philanthropic investor,
impact investor, development fund, institutional investor, private equity, venture
capital, strategic investor, industrial investor, carbon investor etc. CTI PFAN covers
a wide range of investment interest and appetite including all of the above.

b. Debt Ask

Borrower: who or which corporate structure or entity is the borrower? Who is thebank / debt provider lending to? This should also be apparent from the businessmodel / project structure;

Borrowing (Ask) Amount: what is the amount of debt requested?

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Page 8 of 12Financing Leverage: what is the ratio of total debt to total equity? How will theequity be raised? From which investors? Are the equity providers alreadycommitted? If yes, what are the terms of their investment?

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Use of Funds: what items will the lenders’ funds primarily be used for? Schedulesof capital expenditure and operational expenditure, and assumed timings offinancing requirements should be provided. Provision of a Source and Application ofFunds table / schedule is recommended.

Terms & Conditions: what is the requested / proposed rate of interest and period ofborrowing? What are the proposed repayment terms? What security / collateral isbeing offered? Debt cash flows should also be provided in the financial model toreflect the investment flows from the investor’s perspective. These may calculate
and show appropriate indicators such as EBITDA, interest cover ratios, loan life
cover ratios etc.

Financing Institution: what sort of lending institution is being targeted and why?
DFI, development bank, commercial bank, other. CTI PFAN covers a wide range ofdebt providing institutions including all of the above.

7. Financial Analysis (1 – 2 Pages + Annexes)
The purpose of this section is to analyse and highlight the economic viability andattractiveness of the business / project. It should include:A brief description / introduction of the financial model developed to represent yourbusiness model / business and investment requirements. This is important especiallyfor more complicated models such that reviewers can easily understand andnavigate the model.

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A summary of key assumptions used to create the financial model and explanation
why these assumptions were made (unless this has already been explained inanother section of the Proposal). As a guide, assumptions should include, but are
not limited to, the following categories:- CAPEX Assumptions;- Operating Expense Assumptions;- Revenue Assumptions;- Operating Volume Assumptions;- Financing Assumptions (cost of capital, interest rate etc.)

A summary of the key outputs of the financial model – these can be expressed as
key indicators or summarised as headline line items (see also the sections on Cash
Flows below). This should include indicators for both equity and debt:

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- For Equity investments appropriate indicators include: Equity IRR, Return on
capital Employed, Return on Investment, Dividends Payable, Net Profit, Net
Tangible Assets, Payback Period.
- For Debt investments appropriate indicators include: Gross Profit, EBIT,
EBITDA, Interest Cover, Debt Service Cover Ratio, Loan Life Cover Ratios.


The financial model / cash flow model itself included as an EXCEL spreadsheet inan annex. Do not copy large excerpts of the financial model spreadsheet into the
proposal document or convert to PDF format.

Sensitivity analysis should be provided to understand the impact of changes of key
assumptions on key outputs of the financial model.
The evaluation should be credible and based on conservative projections that are easily
supported.
The Financial Model should present and analyse the project or business from a numberof perspectives, depending on the nature of your investment proposal:
Project / Business Cash Flows & Returns: The cash flows from the project will bebuilt on the assumptions defined in the Proposal and should show the cost andrevenue projections over the life of your project in appropriate periods. The projectedcash flows will form the basis for calculating the financial results. The project cash
flows can be augmented by other statements such as the income statement, thebalance sheet and other relevant financial statements.
This part of the model should include the possible economic returns and the relevant
ratios that will be important in evaluating the overall economic feasibility of thebusiness / project: Project IRR, Gross Profit, Net Profit, Break Even, Payback Period.

Debt Cash Flows (If appropriate): if your Proposal includes a debt requirement
then your financial model should also include the debt cash flows, enabling a
potential lender to evaluate the likelihood of repayment. For debt appropriate
indicators include: Gross Profit, EBIT, EBITDA, Interest Cover, Debt Service CoverRatio, Loan Life Cover Ratios.

Equity Cash Flows (If appropriate): if your proposal includes an equity investment
then your financial model should also include cash flows from the investors'
perspective, enabling a prospective investor to understand and evaluate his
investment. For equity investment, appropriate indicators include: Equity IRR, Returnon capital Employed, Return on Investment, Dividends Payable, Net Profit, Net
Tangible Assets, Payback Period.

The indicators from the above sections of the Financial Model should be summarised in
the Financial Analysis section of the Proposal. Consider using graphs and tables whereappropriate.

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All financial projections should be in US$ at prevailing market rates. Provide local
currency figures in brackets and / or as shadow accounts in the financial model whereappropriate and useful.

8. Risk Analysis (1/2 - 1 Page)
The Proposal should include a risk catalogue identifying the key risks involved indeveloping, implementing and operating the project / business. This catalogue should
identify the nature of the risk, the likelihood of it occurring, the potential impact andpossible mitigation measures.
Typically these risks include but are not limited to:Business Specific Risks: execution & completion risk, counterparty risks,
performance risks. These will seriously affect the project and if they occur may
threaten the whole project;Financial & Economic Risks: cost & revenue risks; interest rate risks; currency
rate fluctuation these will affect the economics of the project but may be mitigatedagainstTechnology Risks: depending on the project this will impact on project economics
and may as well be project threateningCountry Specific – Political & Regulatory Risk

It is important to identify and focus on the key risks connected with your particularbusiness model or industry (particularly if the project is in a closed or captive supplier –off-taker structure) which really imperil the project and threaten to put it out of businessrather than more general or less threatening risks.
To the extent possible, this section should additionally provide a scenario analysis
which models the impact of key risks indicated here.
Consider using graphs or diagrams to show the sensitivities of the financial model.

9. Non-financial Impacts (environmental, social, other) (1/2 - 1 Page)
Summarise and quantify, if possible, the non-financial impacts and benefits of yourproject:
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GHG Mitigation: quantify the annual GHG reduction potential of your project interms of tonnes of CO2 e avoided or annual energy savings in terms of GWhrs andbriefly explain the methodology / assumptions of your calculation;

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Other Environmental Impacts: evaluate your project’s impacts on the environment– both negative and positive. Identify and describe impacts on waste collection andtreatment, water supply and sewage treatment, pollution, emissions reductions,neighbouring eco-systems etc. Summarise results of EIAs if available.

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Development and Social Impacts: evaluate your project’s impact in terms of thesustainable development goals (or millenium development goals – MDGs). Identify
and describe impacts on technology & skills transfer, employment, health, female
empowerment, education, poverty reduction, rural electrification, energy access,water and sanitation. Please quantify your claims as far as possible (e.g. in terms ofjobs created, people / households reached).

10. Conclusion (1/2 Page)
Highlight the chief strengths and benefits of the project / business and summarise why
an investor should consider investing.

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