The infrastructure asset lifecycle - 4 phases from idea to disposal

Investors are looking beyond financial close—are you?

In previous editions, I explored the crucial role of a clear vision in launching successful infrastructure businesses.

I have also discussed internal pitfalls to avoid while scaling an infrastructure business, the importance of resourcing the right project development team, and the core skills needed to build your own project development and financing office.

Additionally, I covered five ways to describe your project and using that to define a more strategic approach to project development and risk mitigation.

This edition will discuss the infrastructure asset lifecycle—a critical framework for understanding how infrastructure projects transition through their entire lifespan.

The 4 phases in the asset life cycle are:

• Phase 1: Project Development

• Phase 2: Construction

• Phase 3: Operations and Maintenance

• Phase 4: Decommissioning or Disposal

While Notes on Project Development primarily focuses on Project Development— it is crucial to recognize that the choices made during this phase will echo across the remaining three phases of an asset’s life and impact the attractiveness of the project to investors.

Decisions made during project development will have long-term consequences, influencing everything from construction costs and operational efficiency to the eventual decommissioning of the asset.

Investors conduct rigorous due diligence, on how effectively the future phases of the asset have been considered and protected.

Phase 1: Project development

This Phase has 5 stages

Stage 1: Concept Development

This initial stage is about the exploration of ideas, determining whether they align with the company’s strategic goals and if they should be further pursued.

It moves away from simply having a project idea towards a more structured evaluation of its potential. Key activities and important questions during this stage include:

• Alignment with Company Vision: Does this project strategically fit with our organisation's long-term goals and objectives?

• Market Analysis: What is the current state of the market? Is there a genuine need for this infrastructure? Is there sufficient room for us to enter and potentially grow? What slice of the potential demand can we realistically aim for?

• Stakeholder Identification: Who are the key stakeholders, both internal and external? Who will genuinely benefit from this project? Beginning to anticipate these stakeholders’ needs, interests, and expectations is crucial from the outset.

• Preliminary Investigations: What broad locations or routes should we initially investigate for the project, very rough estimates of capital expenditure

The goal of concept development is to move away from vague ideas and begin to assess the fundamental viability and strategic fit of the project before significant resources are committed.

Stage 2: Early Stage

Building upon the conceptual foundation, the Early Stage focuses on assessing the project's viability from multiple perspectives. Feasibility studies alone are not enough; the aim is to determine if the project can genuinely succeed in the long term. Important questions to address include:

• Demand and Offtake: Which specific clients are ready and willing to commit to using the infrastructure (offtake)? What is the project's realistic revenue potential? What can the market realistically pay for the services or outputs? Are there any existing regulations or terms that might limit or define pricing?

• Location and Route Specificity: Where is the exact location or route for the infrastructure project? Securing suitable land/property agreements, deeds, or leases will become important.

• Optimal Design and Technology: What is the optimal technical design for the project to meet the identified needs efficiently and cost-effectively? What is the expected lifespan of the key technologies and assets involved? Are these technologies and assets readily available locally or will they need to be sourced internationally?

• Resource Requirements: What operating resources and tools will be necessary to meet the anticipated demand? Where will the ongoing operating and maintenance supply and support come from?

• Cost-Benefit Balance: What is the initial capital expenditure (CAPEX) required to build the proposed design? What is the optimal balance between the cost to operate and maintain the infrastructure and the potential for revenue growth?

• Project viability: Can revenues cover costs consistently? Is there a funding shortfall? What is the residual cash flow after all costs are covered?

The outputs of this stage include updated design considerations, CAPEX estimates, project operating model, and project viability assessment.

Stage 3: Mid-Stage

The Mid-Stage of project development shifts towards formalising agreements and ensuring compliance with necessary regulations and stakeholder expectations. The theme here is protecting the project by addressing potential risks and establishing a solid contractual framework. Key questions and activities involve:

• Risk Identification and Mitigation: What are the perceived risks associated with starting and continuing the project? What gaps in project viability still need to be addressed?

• Government and Community Support: Do we require support from the government to close any identified viability gaps? Are there alternative ways to address these gaps? How do we minimise potential negative impacts on the host environment and local communities? What social and developmental opportunities and benefits can the project offer – (detailed E&S impact assessment)

• Contractual Framework: What clauses are necessary to secure rights, assign obligations and rewards, and establish mechanisms for resolving disputes in contracts with all relevant parties, including offtakers, suppliers, and contractors?

• Permits and Licenses: Securing all the necessary licenses and permits required for the project to proceed and be deemed compliant with the regulations.

• Title and documentation: Securing suitable land/property agreements, deeds, leases, property rights etc.

The main goal of the Mid-Stage is to proactively identify and mitigate potential risks and establish a robust contractual foundation for the project's success.

Stage 4: Late Stage

The Late Stage of project development focuses on:

• Confirmation of project structure: exact parties fulfilling which role in financing operating and governance of the project, clearly delineated. SPV setup to ring-fence project and its assets if project financed.

• Finalising Agreements: Solidifying risk mitigants in agreements with main off-takers/clients, strategic resource supply, Engineering, procurement and construction (EPC), operations and maintenance (O&M), concession agreements, long term leases etc, transferring to or in the name of SPV.

• Detailed Planning: This includes refining the technical design, updating CAPEX estimates, finalizing the operating model, and on that basis, drafting a financial model. Developing a comprehensive Project Implementation plan, including a practical and informed construction schedule

Stage 5: Financial Close

Financial Close marks the culmination of the project development phase.

Achieving financial close typically requires:

• Completing investor due diligence and credit risk assessments: Investors will engage their own external advisors, engineers, and legal counsel, to independently verify the information provided by the project sponsors, identify any potential issues, and to confirm the quality and accuracy of all data, claims, and contract representations.

• Finalisation of Financing Agreements: Signing all loan agreements, equity subscription agreements, and other relevant financial documents.

• Satisfaction of Conditions Precedent: Meeting all the conditions that lenders and equity investors require to be fulfilled before the financing becomes available.

• Commencing drawdown: Ensuring that the committed funds are now accessible for construction.

Financial Close signifies that the project has successfully navigated the complex development process and is now ready to move into the construction phase.

You will notice a recurring theme.

All project development is future-focused.

It is about showing how an asset that doesn’t exist yet, will be built, operated and protected.

Understanding the remaining phases and their implications on developing the project and attracting finance, is essential to completing phase 1.

Also important to highlight that post-financial close, investors closely monitor performance during the subsequent phases because these phases deliver the asset itself and the value expected from it.

Phase 2: Construction

Once financing is secured, construction should begin.

Completion of this phase creates the assets that eventually generate the profitability, returns and benefits sought by investors, sponsors, and stakeholders.

Investors and project sponsors closely monitor:

• Budget & Schedule Compliance: Keeping costs controlled and mitigating delays.

• Quality Control: Ensuring the asset meets design and regulatory standards.

The effectiveness of the EPC contracts negotiated during Phase 1 is tested here. A well-negotiated contract with a qualified and reputable EPC minimizes completion risks and ensures that the asset is delivered as planned.

Phase 3: Operations & Maintenance (O&M)

Once built, the infrastructure moves into its longest phase—operations. Here, revenue generation begins, and the asset must be maintained efficiently to ensure longevity.

The strength, enforceability, and effectiveness of the strategic resource supply contracts, offtake agreements, and PPP (including concession) agreements tested in this phase.

The quality of the operations and maintenance expertise that secures the cashflows that will meet debt obligations and return expectations of equity investors is validated here. Their capacity and plan for execution will the thoroughly assessed.

Key areas of focus include:

• Revenue Generation: Ensuring contracts (offtake agreements, concessions, etc.) are enforced and revenues are collected and managed effectively.

• Operational Efficiency: Managing costs while maintaining service quality.

• Maintenance Planning: Preventative and corrective maintenance to extend asset life and prevent major disruptions to operations ( barring force majeure)

Phase 3B: Corporate Financing Activities

During the O&M phase, additional financial structuring, and capital raising may occur, due to:

• Expansion or Refurbishment: to attract large capital outlays to scale capacity beyond initially financed or to upgrade or refurbish assets to maintain service levels.

• Mergers & Acquisitions: Transferring ownership or bringing in new investors, as an exit strategy, or expanding capital base,

• Refinancing: Restructuring debt for more favorable terms.

These activities extend asset value, and can provide additional returns for investors, demonstrating the capacity to support these activities is also attractive to investors.

Phase 4: Decommissioning or Disposal

Eventually, every asset reaches the end of its useful life.

Even if not directly required under the agreements, the environmental studies and impact mitigation plans completed during the project development phase will require clear considerations for safe, environmentally friendly asset disposal or decommissioning.

Proper planning ensures:

• Safe Dismantling & Environmental Compliance: Adhering to safe and international best practices and standards.

• Residual Value Assessment: Determining if parts of the asset can be resold or repurposed.

• Regulatory closure of the Asset: Completing any final contractual and regulatory obligations, when disposing of the asset.

Even if decommissioning isn’t an immediate concern, investors expect project developers to consider it upfront as part of long-term sustainability planning. Many investors are concerned about reputational risks even from events occuring after exiting a project.

Bringing It All Home

Think and plan far into the future.

Don’t only think about how to create the asset.

Imagine the middle and the end also.

The infrastructure asset you develop today will exist for decades.

Investors want to know that you’ve considered the full lifecycle—not just how to develop it, but how to construct, operate, and ultimately retire the asset.

When presenting your project for investment, your ability to demonstrate foresight across all four phases can determine how successfully you attract capital.

You have to look beyond financial close.

Investors back projects that show strong risk management, sustainable revenue models, and long-term operational viability.

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