Reaching Financial Close

After the government and the preferred bidder have signed the PPP contract (sometimes known as commercial close, there are usually several additional steps before financial close occurs and project implementation can begin. The PPP contract includes completion of all or some of these elements as conditions precedent, which must be met for the contract to become effective.

PPP contracts often specify a final date by which the contract terminates, and/or a bid bond is forfeited, if the conditions precedent are not met. Failing to specify requirements and stipulate a period for financial close can hold up project implementation for years.

Finalization of financing agreements

Financing agreements are often not finalized until after the contract has been awarded. In most cases, interested lenders are identified at the proposal stage. However, before those lenders will commit to provide finance, they often carry out detailed due diligence on the project and PPP agreements. There are risks associated with this process—lenders may require changes in the PPP agreements before agreeing to finance the project, or financing terms may change from what was assumed in the proposal. One way to mitigate these risks can be to ask for firm financing commitments at the proposal stage (an underwritten bid)—but this can be difficult and expensive to procure, and risk reducing competition.

Finalization of project agreements

The preferred bidder will need to finalize and sign all project agreements and contracts with other parties in the PPP structure—for example, sub-contractors and insurers.  

Implementation agency obligations

The implementing agency will also have tasks to fulfill, such as finalizing permit and planning approvals, commencing or completing project land acquisition, and securing final approval from relevant government entities. Detailed contract management protocols and manuals are often also developed during this period.

Financial close

Financial close occurs when the all project and financing agreements have been signed, all conditions precedent on those agreements have been met, and the private party to the PPP can start drawing down the financing to start work on the project.


Learn More

    • 2014
    • European Investment Bank (EIB)

    The EPEC PPP Guide

    The European PPP Expertise Centre (EPEC) has published several versions of its Guide to Guidance over the last few years. The Guide to Guidance is principally aimed at public procuring authorities considering the use of public-private partnership (PPP) arrangements. Given the positive feedback it has received, EPEC decided to turn the Guide to Guidance into a webtool rebranded as the EPEC PPP Guide. The aim of the EPEC PPP Guide is to give users easy access to regularly updated PPP guidance and allow them to interact with the EPEC team (e.g. propose new guidance, rate the EPEC PPP Guide).  

    • 2013
    • Graham Vinter, Gareth Price, David Lee

    Project Finance: A Legal Guide

    This book examines and gives guidance on the more important legal and commercial issues that arise in the course of project financing. Written in a simple and informative style, this book explains current market practice and how various techniques are used and adapted in a range of different sectors, from large cross-border upstream oil and gas projects to small to medium sized PPP projects.

    • 2007
    • E.R. Yescombe
    • Oxford University

    Public-Private Partnerships: Principles of Policy and Finance

    This book reviews the general policy issues which arise for the public sector in considering whether to adopt the PPP procurement route, and the specific application of this policy approach in PPP contracts. This book also offers a systematic and integrated approach to financing PPPs within this public-policy framework. A section on due diligence can be found in Section 6.5.

For legal and regulatory resources go to PPPIRC

Explore PPP Cycle