A techno-economic viability study is the lender’s first line of defence against a project that looks bankable on paper and fails on the ground. Commissioned before sanction, it tests the technical assumptions, the cost estimate and the revenue model independently of the promoter’s own consultants.

What the study covers

  • Technical soundness — site suitability, technology choice, approvals, EPC capability and construction schedule.
  • Cost credibility — a line-by-line review of the capital cost against benchmark rates and recent comparable projects.
  • Revenue defensibility — offtake arrangements, tariff or pricing assumptions, demand evidence and sensitivity to delay.
  • Debt serviceability — DSCR, IRR and break-even under base and stress cases.
The five questions a credit committee should be able to answer from a TEV report start with the site.
The five questions a credit committee should be able to answer from a TEV report start with the site. Photo: Nicolas Vigier · CC0 · Wikimedia Commons

Five questions a credit committee should be able to answer

  1. Is the project technically deliverable by this promoter, on this site, in this time?
  2. Is the cost estimate within an acceptable band of independent benchmarks?
  3. Which two assumptions does the revenue case depend on most, and what is the evidence for each?
  4. At what point of delay or cost overrun does DSCR fall below covenant?
  5. What must be monitored during construction to protect the lender’s position?

If a TEV report cannot answer these, it has been written for the promoter rather than the lender.

Where the effort in a TEV study goes
  • Technical assessment35%
  • Cost benchmarking25%
  • Market and revenue20%
  • Financial modelling20%

Illustrative split of assessor time on a typical manufacturing project.

Technology, capacity and schedule are assessed before the financial model is opened — the numbers only mean something once the plant is credible.
Technology, capacity and schedule are assessed before the financial model is opened — the numbers only mean something once the plant is credible. Photo: Biswarup Ganguly · CC BY 3.0 · Wikimedia Commons