EXAMPLE OF DUE DILIGENCE INFORMATION REQUEST

The following list is provided as an example of the type of information that the Authority may request to complete its due diligence analysis. Actual due diligence information requests may significantly differ from that shown below.

1. Scope of Construction - This may include a detailed description of the scope of construction along with a general arrangement diagram of all facilities to be built on site.
      

2. Construction Estimate - For the scope of construction shown in Item 1, a detailed construction cost estimate in CSI (Construction Specifications Institute) or similar standard format is often required so an independent cost engineer selected by the Authority can confirm the construction estimate. A copy of the site’s geotechnical related reports and studies are occasionally requested since geotechnical characteristics of a site often have a significant bearing on construction costs.
      

3. Total Budget - Total project budgets are required for virtually all due diligence analyses. Budget breakdowns may include previous costs; construction costs; engineering design and construction support services (i.e. A & E services budget); construction management services; owners costs related to construction (professional services for legal, accounting, financial functions, travel, staff time charged to construction); change reserves; startup or commissioning expenses; interest during construction and prior to receipt of revenues for borrowed funds; funds for interim operation (utilities and facility upkeep); and any other funds considered necessary for successful completion of the project.
      

4. Schedule - The development schedule for construction and initial operation of the project is an integral part of any due diligence analysis.
      

5. Business entity and participants - A description of the corporate entity that will be leasing the project from AIDEA is required for all due diligence analyses. This description should include, among other items, ownership and a balance sheet, as it would exist at the time the Authority would enter a lease and user agreement and before construction of the project. The Authority may request that the project developer show the sources from which funds will flow to the corporate entity, any credit support offered to lending institutions, and present accompanying financial information to show that the funds are available. The information will be the basis of the Authority’s review of the credit of the project participants. Any additional information that the project developer wishes to present as to credit strength will help with the credit analysis.
      

6. Sources and uses of funds - Generally, a description of how and when the Authority’s funds will be spent is required for most due diligence analyses. This often requires providing a breakdown of sources and uses of funds for the entire project through startup.
      

7. Other equipment under lease - If the project developer intends to have equipment under lease, the due diligence analysis may require review of the status and nature of the lease contracts for operating equipment. Often helpful is a review of the lease documents or, if they are unavailable, other information on which the Authority can rely that describes the terms and conditions for use of the facilities. If there are other facilities necessary to complete a project or system, including infrastructure to access the project, a description and status of these components is helpful and often required.

8. Land/Permits - Most due diligence analyses require the project developer to provide a map and legal description of the land on which the project will be sited. Also required is documentation concerning site ownership such as title or lease documents. Environmental assessment reports or relevant permits are also reviewed.

9. Security - A description of the financial security the Authority will have in the project it will own should be provided. The Authority will need to know what its creditor status will be in relation to other creditors. What type, if any, of credit enhancements the project developer is recommending. A discussion of the money other parties have at risk in the project and the security of their investments is often required.

10. Market Analysis - Most due diligence analyses require the project developer to provide a description of the product or services offered by the proposed facility, an explanation of the market for the products/services, and how the project will serve its intended market. If possible, the project developer should provide reasonable confirmation of the likelihood of securing a market for the product or services offered by the proposed facility. The Authority may also request the project developer provide confirmation of the anticipated demand (quantity and price) for the various services or products offered by the project. If not in the form of contracts, provide expressions of interest from potential users or markets that anticipate doing business at the costs and prices displayed in the pro forma. Provide a list of potential customers and any written information from intended users or markets regarding their interest in using the facility or product. Identify the competition the project and/or product may face in the market place and how the project developer intends to deal with it.

11. Financial Feasibility/Risk Analysis - Most due diligence analyses require the project developer to provide the latest pro forma for their proposed project. The pro forma may include, among other items, detailed presentations of capital and operating costs, labor, materials, consumables, utilities, and services. Generally, the capital and operating costs are assembled in such a manner to allow comparison with revenues. It is important to demonstrate that the amount of working capital projected is adequate. Useful in the financial analysis is a description of the sources of capital that are available to deal with setbacks should they occur. Project developer should include all assumptions regarding loan rates and rents in their projections. A discussion of how project completion risk will be mitigated is often helpful and may be required.

12. Employment - Recognizing that job creation is a part of AIDEA’s mission, the project developer should provide a breakdown of employment at the proposed project by positions and associated payroll. Also, if applicable, identify the purchases of commodities and services that would be made in the Alaskan economy on an annual basis.