Conducting Infrastructure Due Diligence

When To Use

Evaluating an infrastructure asset (toll road, airport, port, power plant, water/wastewater system, broadband network) for acquisition, concession bid, or refinancing
Assessing condition and remaining useful life of physical assets before capital commitment
Reviewing regulatory and permitting frameworks for greenfield or brownfield projects
Conducting pre-close DD for PPP/P3 transactions or infrastructure fund investments
Evaluating environmental liabilities, community impact, or social license risks tied to an asset

Asset description: asset type, location, age, original construction specs, and current operator
Financial model / base case: projected revenues, O&M budgets, capex reserves, and debt service coverage
Concession or contract documents: concession agreement, offtake/PPA, EPC/O&M contracts, government support agreements
Technical reports: independent engineer (IE) reports, condition assessments, traffic/demand studies
Regulatory filings: permits, licenses, tariff orders, rate-case history, environmental compliance records
Insurance program: current policies, loss history, and pending claims
Environmental / social data: Phase I/II ESA reports, EIS/EIA, community engagement records, land acquisition status
Title and real property: ownership chain, easements, rights-of-way, encroachments

Define workstreams aligned to key risk categories:

Technical / Engineering: physical condition, design adequacy, deferred maintenance backlog, remaining useful life, seismic/climate resilience
Regulatory & Permitting: current permits and expiration dates, pending proceedings, tariff/rate-setting mechanism, political/sovereign risk [VERIFY jurisdiction-specific regulatory bodies and approval timelines]
Environmental & Social: contamination history, remediation obligations, emissions compliance, community opposition, resettlement or land acquisition disputes
Legal & Contractual: concession terms (duration, handback conditions, termination triggers), EPC/O&M contractor performance, step-in rights, lender consent requirements
Financial & Commercial: demand/traffic risk, revenue model sensitivity, counterparty creditworthiness, capex waterfall adequacy

Assign each workstream an owner, timeline, and materiality threshold for flagging findings.

Review IE report for asset condition ratings; cross-check against O&M logs and capital expenditure history
Identify deferred maintenance items and estimate cost-to-cure vs. remaining concession or hold period
Assess lifecycle capex needs — compare sponsor's base case assumptions against IE recommendations
Evaluate technology obsolescence risk (e.g., toll collection systems, generation equipment, signaling)
Check climate/natural hazard exposure: flood zones, seismic classification, wildfire risk, sea-level rise projections [VERIFY local climate adaptation requirements]

Map all required permits and licenses; confirm current status and renewal timelines
Identify pending or anticipated regulatory proceedings that could affect tariffs, rates, or operating authority
For PPP assets: review government payment mechanisms, availability payment formulas, and termination compensation clauses [VERIFY sovereign immunity and dispute resolution forum]
Assess political risk — changes in government policy, re-nationalization precedent, local content requirements
Confirm compliance with sector-specific regulations (e.g., FERC for US energy, OSHA for construction safety, FAA for airports) [VERIFY applicable regulatory regime by jurisdiction]

Review Phase I/II ESA findings; quantify known or potential remediation liabilities
Check emissions permits, discharge limits, and compliance history against current regulations
Evaluate community and stakeholder sentiment — review public comment records, media coverage, pending litigation
For greenfield: confirm EIA/EIS approval status, land acquisition completion percentage, and resettlement plan adequacy
Assess ESG alignment with investor mandates (GRESB score, TCFD disclosure readiness, IFC Performance Standards)

Abstract key terms from concession agreement: duration, handback conditions, performance benchmarks, force majeure, change-in-law protections
Review EPC contract — liquidated damages adequacy, warranty periods, defects liability
Evaluate O&M contract scope, KPIs, penalty/bonus mechanisms, and termination-for-convenience provisions
Assess counterparty credit: offtaker/government creditworthiness, guarantor standing, political risk insurance coverage
Confirm lender consent and intercreditor requirements for any change of control or refinancing

Compile workstream findings into a consolidated risk register with severity (high/medium/low) and likelihood ratings
Quantify material risks in financial terms — impact on IRR, DSCR, and equity value
Identify deal-breakers vs. mitigable risks vs. acceptable risks with pricing adjustments
Prepare a DD summary memo suitable for investment committee presentation

Produce a structured DD report containing:

Executive summary with go/no-go recommendation and key risk flags
Workstream reports (technical, regulatory, environmental, legal, financial) with detailed findings
Risk matrix mapping each identified risk to severity, likelihood, mitigation strategy, and responsible party
Condition precedent / closing checklist items flowing from DD findings (e.g., required consents, remediation escrows, insurance endorsements)
Appendix of source documents reviewed, site visit notes, and expert interview summaries

Every material finding is traced to a source document or expert opinion — no unsupported conclusions
Financial impacts are quantified where possible; qualitative risks include a clear rationale for severity rating
All jurisdiction-dependent points (permit regimes, regulatory bodies, environmental standards) are marked [VERIFY]
Concession/contract abstracts have been cross-checked against the actual executed documents, not summaries
Handback and termination provisions are stress-tested against downside scenarios
Report distinguishes between confirmed findings and areas requiring further investigation
ESG/community risk section reflects current investor standards and is not treated as a checkbox exercise