Modest unlevered returns, attractive levered equity returns, the honest signature of a long-life infrastructure asset.

Project and equity returns

On a 15-year discounted-cash-flow basis the project generates an IRR of 13.4%, with an NPV of R-7.7m at a 14% WACC and R5.1m at 13%. The unlevered project therefore sits close to its cost of capital, value-neutral to marginally positive. The equity return is enhanced by leverage and by a market-standard 5.5x EBITDA exit, producing a 23.5% equity IRR and a 2.21x MOIC over five years.

Discounted cash flow

The project valuation discounts 15 years of free cash flow to the firm (FCFF) at the 14% WACC, with steady-state growth of 4.5% beyond Year 5 and a terminal value. The early-year profile below shows why the unlevered return is modest: heavy initial capital and a cash-absorbing ramp precede meaningful free cash flow from Year 3.

Years 6–15 grow from the Year-5 base at ~4.5% p.a.; the terminal value is folded into the 15-year discounting. The resulting project NPV of R-7.7m at 14% (and R5.1m at 13%) confirms an unlevered return close to the cost of capital — the equity upside comes from leverage and the exit multiple, as set out above.

Debt serviceability

Debt-service coverage (DSCR) is thin during the ramp, below 1.0x through Year 3, because scheduled amortisation begins before EBITDA matures. This is expressly managed through the 24-month grace, the DSRA and the revolver; DSCR clears the 1.3x covenant level from Year 4 and reaches 1.84x by Year 5. Lenders should size the facility, grace and reserve to this profile, which the structure does.

Which investor this suits

The return signature, long life, inflation-linked cash flows, modest unlevered IRR, attractive levered equity IRR, is well matched to development-finance institutions, infrastructure and industrial-minerals investors, and strategic buyers seeking corridor supply. It is not suited to investors requiring high unlevered returns or a rapid exit.