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Project Financing Model
Delivering value to top engineering company by financing stock related to large projects
Customer facts
Geography - Europe
Sector - Engineering
Services - Purchase, warehousing & sell of parts & components
Customer challenge
Large international Engineering group participated in a tender for the delivery of a large quantity of railways wagons & needed an E2E solution for the management, storage & utilization of the flow of I2M parts & semi-finished goods. The Customer was under pressure in managing the working capital cycle of the project due to the late payment terms of the final client, which was putting the project in a negative NPV position, blocking the approval of the opportunity.
Opportunity Scope:
The customers, leveraging on the possibility to use Project Accounting, wanted to free-up cash & delay as much as possible the cash outflow, so improving the Project NPV, ROCE, Net Debt & Free Cashflow position.
EVDO solution
Use of a partner entity (TradeCo) which purchases & holds the title of the stock, initially off-balance sheet & then, through an increased level of security, efficiently manages the title of the stock until the wagons are finally delivered to the end-client. The solution initially places the title of the assets to the TradeCo & then gradually shifts the ownership to the customer’s balance sheet, providing also extended payment terms.
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