What is a final investment decision (FID)?
A final investment decision, or FID, is the point at which a project's sponsors and its funders formally commit the capital to build it. It is taken once the approvals, contracts and financing that de-risk the project are in place, and it moves a project from development into construction.
What FID means
In infrastructure and energy, a project spends years in development: feasibility, permitting, land access, an offtake agreement, and a financing structure. FID is the go or no-go moment when the developer's board, and the lenders and investors behind it, decide the remaining risks are acceptable and release the capital. Everything before FID is spending to reduce uncertainty. Everything after it is building.
What has to be true before FID
FID is only reached once a long list of items, held across several parties, is in place. Typically that includes:
- Key permits and environmental approvals granted
- Land and access rights secured, including servitudes and wayleaves
- A signed offtake agreement, and for power projects a power purchase agreement (PPA)
- Construction and operations contracts agreed
- A financing package with lenders committed, and the conditions precedent to that financing mapped
- An environmental and social action plan (ESAP) agreed with the lenders
Because so many of these sit with different parties, a single shared view of what is still open is what actually gets a project to FID on time.
FID versus financial close
FID and financial close are related but not the same. FID is the commitment decision. Financial close is the later point at which the finance documents are signed and the conditions precedent to the first drawdown are satisfied, so money can flow. On many projects FID and financial close happen close together. On others, FID is taken subject to reaching financial close.
Where Capital Governance fits
Capital Governance is the shared obligations register that sits under all of this. In the run-up to FID and financial close, the open items, conditions precedent, land, permits and ESAP, are held in one register that the developer, the funders and the facility agent all read from. Each has an owner, a due date and a clear statement of what closes it, so every party sees exactly what still stands between the project and the decision, instead of reconciling separate spreadsheets.