Division (c) Ensuring financial viability (sustainability)

The financial sustainability analysis is based on undiscounted cash-flow projections. It is mainly used to show that the project will have year by year sufficient cash resources at its disposition enabling it to always cover expenditures for investment and operations throughout the entire reference period.

Key aspects of financial sustainability analysis are as follows:

1. (1)

   financial sustainability of the project is verified by checking that the cumulated (undiscounted) net cash flow is positive (or zero) on an annual basis and over the entire reference period considered;

2. (2)

   the net cash flows to be considered for this purpose should:

   • take into account investment costs, all (national and EU) financial resources and cash revenues and operating and replacement costs at the moment they are paid, repayments of entity's financial obligations as well as capital contributions, interests and direct taxes;

   • exclude VAT unless VAT is not recoverable;

   • not take into account the residual value unless the asset is actually liquidated in the last year of analysis considered;

3. (3)

   in the case of an operation not subject to the requirements set out in Article 61 of Regulation (EU) No 1303/2013, or whenever negative cash-flows are projected in the future, it must be indicated how costs will be covered with a clear long-term commitment of the beneficiary/operator to provide adequate funding from other sources to ensure the sustainability of the project;

4. (4)

   if projects fall within a pre-existing infrastructure, such as capacity extension projects, the overall financial sustainability of the system operator in the ‘with-project scenario’ (more than the capacity of the single extended segment) must be checked and a sustainability analysis at a system operator level must be performed and results must be taken into account in the risk assessment.