Veolia, a partner for infrastructure financing, construction and operation
Veolia has developed and delivered the entire range of infrastructure financing models (corporate or project finance) for our clients’ industrial utilities projects in engineering, construction and operations related to water, energy, waste management as well as the integration of multiple utilities and services into special or sigle purpose contracts.
With access to global scale engineering, project management and financial expertise it is no wonder that Veolia have a strong history in delivering expert assistance to our clients who are looking for ways of achieving optimal operations and capital allocation.
It is often the case that Investment in infrastructure and utilities only becomes a priority when there is a potential impact on production. This can lead to sub-optimal capital planning, rushed procurement and exposure to avoidable project risks. Veolia have engaged with our client companies to bridge the financial and technical gaps that exist for infrastructure and utilities capital projects management leading to a capacity to tailor our approach to complex needs both financial and technical. Evolving financial rules, tax systems and costs of capital require significant internal expertise while access to funding sources and experience in operating and funding models facilitates confidence and smooth transitions and communications.
Accounting consideration - Impact to Balance Sheet
Financing infrastructure or utility assets can take several forms depending on the funding options, with accounting consequences, e.g.: Capital Lease, Structures (asset on balance sheet), Operating Lease Structures, Service Agreement Structures (potentially asset off balance sheet with IFRS rules to fulfil), Joint Ventures…
For each new project, 2 main options may be considered:
1. Customer invests
Veolia offers Design Build Operate (DBO) contracts models as an alternative to client funded Engineering Procurement and Construction (EPC) model. DBO models help mitigate operational risks and deliver higher value to the client, while facilitating the procurement process.
In a DBO, the whole project delivery is executed by Veolia integrating the capabilities of our engineering team with the experience of our operations team with a strong focus on Performance ownership over the life of the project with simplified customer driven performance targets such as Capacity, Effluent Quality, Availability.
2. Customer does not invest
Either Project Financing is set up with equity partners (potentially including the Customer and Veolia). A Special Purpose Company (SPC) dedicated to the infrastructure project is created. Veolia executes the works, delivers the plant operation and maintenance and holds the performance guarantee.
Or Veolia finances the whole project (DBOOM or BOT) and the customer acquires the service either on a unit basis rent upon start of operation or a fixed fee with variable charge for usage.