LaoCann’s investment process illustrates the stages a proposed venture goes through to become a LaoCann-financed project.
Guided by LaoCann’s strategic goals, our Investment Officers and Business Development Officers identify suitable projects. This first step in the cycle is critical for us to understand the clients’ needs and to determine whether there is a role for LaoCann.
LaoCann and Client sign an Engagement Agreement. Meanwhile, the Investment Officer prepares a description of the project, LaoCann’s role, the anticipated contribution to development and benefits to stakeholders, and any potential deal-breakers. In some cases, a pre-appraisal visit is conducted to identify any issues in advance. LaoCann senior management then decides whether to authorize project appraisal.
The investment team assesses the full business potential, risks, and opportunities associated with the investment through discussions with the client and visits to the project site. We want to know:
- Is the investment financially and economically sound?
- Can it comply with LaoCann’s social and environmental performance standards?
- Have lessons from prior investments been taken into account?
- Have the necessary disclosure and consultation requirements been met?
- How can LaoCann help the client further improve the sustainability of the project or enterprise?
The investment team makes its recommendations to LaoCann management, who will decide whether to approve the project. This is a key stage in the investment cycle. The team and management must be confident that the client is able and willing to meet LaoCann standards and work with us to improve the sustainability of their enterprise.
The team starts to negotiate the terms and conditions of LaoCann participation in the project. These include:
- conditions of disbursement and covenants
- performance and monitoring requirements
- agreement of action plans and resolution of any outstanding issues.
The project is submitted to LaoCann’s Board of Directors, financial partners and associates for consideration and approval through regular or streamlined procedures. “Streamlined” means that the members of the Board, partners and associates review the documents but don’t meet to discuss the project. This option is available to low-risk projects of a small enough size. Certain small projects can be approved by LaoCann management under delegated authority. The due diligence process and public disclosure remain the same in all cases. The Board, partners and associates demand that each investment have economic, financial, and development value and reflects LaoCann’s commitment to sustainability.
LaoCann and the company sign the legal agreement for the investment. This includes the client’s agreement to:
- comply with the applicable Performance Standards;
- immediately report any serious accident or fatality;
- provide regular monitoring reports.
The legal agreement will also covenant the client’s Action Plan.
Funds are disbursed in stages or on condition of certain steps being completed as agreed in the legal agreement.
Investment are monitored through our regional and/ or local development partners and/ or contractors to ensure compliance with the conditions set out in the loan agreement. The company is expected to submit regular reports on financial, social and environmental performance, and information on factors that might materially affect the enterprise. Ongoing dialogue during supervision allows LaoCann to support clients, both in terms of solving issues and identifying new opportunities. We also track the project’s contribution to development against key indicators identified at the start of the investment cycle.
Projects will be evaluated regularly. To help improve our operational performance, annual evaluations are conducted based on a stratified random sample of projects that have reached early operating maturity.
We close our books on the project when the investment is repaid in full or when we exit by selling our equity stake.