Meaning and transaction use
Chapter 9 of the EBRD PPP Regulatory Guidelines Collection, hosted by the World Bank PPP resource, describes PLCR using project-period CFADS discounted at the cost of debt, a debt-service reserve and the relevant loan balance. It identifies project-specific financing and risk factors when assessing ratios. [S1]
Proposed review method: mark both the debt maturity date and the project end date on the cash-flow model. Calculate the numerator consistently with those dates and show the contribution from the period after loan maturity. Review the actual repayment schedule and periodic liquidity alongside the lifetime measure.
Worked example
Illustrative assumptions only. Debt outstanding is USD 10 million. Remaining project CFADS is USD 5 million at each of the next three year ends. Use a 10% annual discount rate and no reserve. The assumed loan matures at the end of year two; the project continues through year three.
Scroll the table horizontally to view all columns.
| Cash-flow period | Present-value calculation | Rounded amount |
|---|---|---|
| Year 1 | 5,000,000 / 1.10 | USD 4,545,455 |
| Year 2 | 5,000,000 / 1.10^2 | USD 4,132,231 |
| Year 3 | 5,000,000 / 1.10^3 | USD 3,756,574 |
| Project-life present value | Sum using unrounded values | USD 12,434,260 |
| PLCR | 12,434,260 / 10,000,000 | 1.24x |
Using the same assumptions through year two gives a loan-life present value of USD 8,677,686 and coverage of 0.87x. The year-three cash supports PLCR after the assumed loan maturity. Investigate the maturity funding requirement directly; the 1.24x lifetime ratio does not establish on-time repayment.
Proposed transaction review process
Confirm dates and debt
Set the valuation date, remaining project term, maturity date and debt balance.
Reconcile CFADS
Tie revenue, operating costs, taxes and required expenditure to the chosen definition.
Apply the methodology
Document discounting, reserve treatment, cash-flow timing and any terminal assumptions.
Test repayment pressure
Review delayed receipts, lower output, higher costs and the actual debt-service schedule.
Evidence checklist
Project cash-flow model
Dated CFADS, assumptions register and operating-contract references.
Debt schedule
Outstanding amounts, interest conventions, amortisation and maturity obligations.
Project-life evidence
Concession or contract expiry, asset life and any extension assumptions.
Calculation policy
Discount rate, eligible reserves, test dates, thresholds and model-review record.
Decision framework
| Situation | Proposed action |
|---|---|
| A large share of value arises after loan maturity | Assess the repayment or refinancing requirement at the actual due date. |
| The model assumes an unapproved extension | Show the contractual term and a separate clearly labeled extension scenario. |
| Reserve cash appears in multiple places | Reconcile the balance and forecast releases to remove duplicate counting. |
| Coverage changes materially with operating costs | Trace the cost assumptions to the O&M contract and downside case. |
Common errors to check
- Mixing cash-flow and debt balances from different calculation dates.
- Using a project term unsupported by the relevant contract.
- Treating a lifetime ratio as proof of each scheduled payment.
- Applying an assumed universal minimum without the lender's actual criteria.
Review project-life and maturity coverage
Bring the dated CFADS model, debt schedule and project-term evidence to a financing review. Quantify the contribution of later cash flows and identify any funding requirement at maturity.
Discuss the transactionPrimary references and editorial scope
- EBRD PPP Regulatory Guidelines Collection, Volume II, 2024: Chapter 9, page 102
Project-life CFADS, discounting, reserve and debt-balance conventions; project-specific assessment. Reference checked 17 September 2026.
General modelling education. The example is hypothetical and rounded for display. The cited methodology is a reference; the applicable financing documents determine contractual tests. Review steps are proposed methods.
General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.
