Business plan certification

The certification of a Business Plan (hereinafter “BP”)  is the analysis of the feasibility of a project under the financial and economic profiles. The Italian law “Codice degli appalti” (D. lgs. 50/2016) states that these activities also be required in Project Financing operations (art. 183) where the Business Plan is called Piano Economico Finanziario or “PEF”.

Project Financing

Project Financing (also “PF”) is a kind of financing aiming at public utility projects. It is used for financially independent projects, characterized by high financial profile and by the possibility to divide risks among the various subjects participating in the operation. PF starts from a private subject on a property belonging to a public body (sports facilities, cemeteries, hospitals, kindergartens etc.). Private subjects are doing the first construction phase of the work and then its completion, during which the public body will recover the cost paid and then will reacquire the work.

The Business Plan

For private subjects running to win the implementation and following management of the project, what is crucial and provided for by the law, is presenting a set of project documents, among which the financial economic plan of the project itself.

Business Plan is mentioned by article 153 of Codice degli appalti as a fundamental element in the assessment of the proposal, since it recalls requirements and basic conditions creating the economic financial balance of investments and of management throughout concession period.

In particular, BP aims at:

  • Assessing the economic convenience of an investment project and its capacity of reimbursing the debt made for its implementation;
  • Estimating the profitability of the project made;
  • Justifying the amount of tariffs or fees proposed, besides any need for public contribution.

As a consequence, the certification of Business Plans is crucial, since it verifies BP economic and financial sustainability, in particular for its capacity to generate cashflows suitable for financing remuneration and to make shareholders happy.

How to arrange a Business Plan for certification

First step to prepare a BP is building the following schemes:

  • Profit and Loss forecasting :it refers to project profitability, that is whether it can produce an adequate economic flow in the concession period in the way it has been presented.
  • Balance sheet forecasting: it describes the company at the end of each financial year of the project in terms of assets and liabilities. It shows sources of capital and its use suggesting the investment made by the company inside the project.
  • Cash Flow forecasting : it represents monetary inflows and outflows that will come from the activity of the project. By comparing flows, it shows any monetary balance of the investment.

The following data should be considered in this context:

  • Time framing (year of construction, year of end of construction, year of end of concession, etc.);
  • Technical/operational hirings (investment costs);
  • Operational management data (operating income, operating costs,  utilities, tariffs etc);
  • Hypothesis for financial management (interest rate, credit lines, margins on interest rate, banking fees, discount, financial structure, public contribution etc.);
  • Fiscal input (tax percentage, depreciation rates and criteria );
  • assumptions on reserves (statutory reserve, cash reserve, cash reserve to serve the debt);
  • hypothesis about working capital (average time for payment and income).


Business Plan Certification consists in all those activities aimed at assessing the ability of the project to generate cashflow which can guarantee debt reimbursement and venture capital remuneration, and therefore the creation of public work with private equity.

Such verification activity must be based on:

  • the price asked to the Public Authority by the promoter for concession assignment;
  • the price the promoter is willing to pay to the Public Authority  for creating or transferring rights;
  • the fee the promoter is willing to pay to the Public Authority;
  • duration of concession;
  • expected time to complete the work and and go-live with activity;
  • the financial structure;
  • cost/revenue and timing proposed and cashflow generated by the project.

Certification letter is therefore the document certifying the overall consistency of the Business Plan according to:

  1. the overall value of the investment
  2. the maximum time expected to complete the work and and go-live with business activity
  3. the duration of concession agreement
  4. cost structure and elementary revenue in the BP

the financial structure of the operation as stated in BP, including the analysis of bankability profiles of the operation according to the debt reported in the financial-economic plan

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