Table of contents for The law and business of international project finance / Scott L. Hoffman.

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TABLE OF CONTENTS
About the Author
Preface to the Third Edition
Preface to the Second Edition
Preface to the First Edition
PART I - AN INTRODUCTION TO PROJECT FINANCE
CHAPTER ONE - AN INTRODUCTION TO PROJECT FINANCE
§ 1.01 Definition of Project Finance
§ 1.02 Confusion of Terms
§ 1.03 Nonrecourse Project Finance
§ 1.04 Limited-Recourse Project Finance
§ 1.05 Structured Project Finance---Toward Greater Economic Efficiency?
§ 1.06 Contrast with Other Financing Types
[1] Balance Sheet Finance
[2] Asset-Based Finance
§ 1.07 Uses of Project Finance
§ 1.08 Basic Components of Project Finance
§ 1.09 Advantages of Project Finance
[1] Nonrecourse Debt Financing---It Ain't Necessarily So
[2] Off-Balance-Sheet Debt Treatment
[3] Leveraged Debt
[4] Avoidance of Restrictive Covenants in Other Transactions
[5] Favorable Financing Terms
[6] Internal Capital Commitment Policies
[7] Political Risk Diversification
[8] Risk Sharing
[9] Collateral Limited to Project Assets
[10] Lenders Are More Likely to Participate in a Work-Out Than Foreclose
[11] Matching Specific Assets with Liabilities
[12] Expanded Credit Opportunities
§ 1.10 Disadvantages of Project Finance
[1] Complexity of Risk Allocation
[2] Increased Lender Risk
[3] Higher Interest Rates and Fees
[4] Lender Supervision
[5] Lender Reporting Requirements
[6] Increased Insurance Coverage
[7] Encourages Potentially Unacceptable Risk Taking
§ 1.11 International Project Finance
§ 1.12 Examples of Facilities Developed with Project Finance
[1] Energy Generation
[2] Pipelines, Storage Facilities and Refineries
[3] Mining
[4] Toll Roads
[5] Waste Disposal
[6] Water
[7] Telecommunications
[8] Uses by Industrial Companies for Growth and Restructuring
[9] Leisure and Sports Stadium Projects
[10] Ethanol Production
[11] Other Projects
[12] Contrasting Risks
§ 1.13 Chicken or the Egg: The Effect of a Project's Financing Structure on its Commercial Structure
§ 1.14 Merchant Facilities: Projects Financed Without Revenue Contracts
§ 1.15 Project Finance in Developing Countries
§ 1.16 Other Financing Alternatives
§ 1.17 Bankability, Financeability and Other Assaults on Language
§ 1.18 The Law of Project Finance---Sources of Project Finance Law and Standards
§ 1.19 Economic Studies of Project Finance
§ 1.20 The Lessons of a Financial Crisis---What the East Asian Financial Crisis Teaches About Project Finance
[1] Increased Cost of Power
[2] Power Purchase Contract Renegotiation
[3] Decrease in Market Demand for Private Power
[4] Conclusions
§ 1.21 Political Risk: The Dabhol Project
§ 1.22 Project Cancellations
PART II - RISK IDENTIFICATION, ALLOCATION AND MITIGATION
CHAPTER TWO - PROJECT FINANCE RISKS
§ 2.01 Risk
§ 2.02 The Risk Matrix
§ 2.03 Project Finance Participants and Perspectives
[1] Development Risks
[2] Design Engineering and Construction Risks
[3] Start-up Risks
[4] Operating Risks
§ 2.04 Objectives of Project Finance Participants
§ 2.05 Risk Identification by Participant
[1] Sponsor
[2] Construction Lender
[3] Permanent Lender
[4] Contractor
[5] Operator
[6] Technology Owner
[7] Supplier
[8] Output Purchaser
[9] Host Government
[10] Other Governments---Export and Transit Countries
[11] Equity Investor
[12] Multilateral and Bilateral Agencies
§ 2.06 Development Stage Risks
§ 2.07 The Joint Venture as a Risk Mitigation Device
§ 2.08 A Caveat About Risk Allocation
CHAPTER THREE - PROJECT FINANCE CROSS-BORDER RISKS
§ 3.01 Generally
§ 3.02 Currency-Related Risks
[1] Generally
[2] Nonconvertibility of Currency (Unavailability of Foreign Exchange)
[3] Currency Transfer (Inability to Transfer Foreign Exchange Abroad)
- Generally
- Types and Characteristics of Exchange Controls
- Violation of Exchange Laws
- Enforcement of Transactions That Violate a Country's Exchange Controls
- Exchange Permissions and Consents
- Reducing Exposure to Exchange Controls
[4] Currency Devaluation Risk Caused by Fluctuations in Foreign Exchange Rates
- Generally
- Indexing Revenues
- Matching Revenue Currency to Debt Currency
- Raising Debt in Local Currency
- Derivatives
- Sharing of Risk
[5] Offshore Accounts
[6] Special Currency Problems in Large-Scale Projects
[7] Advance Approvals
- Consent
- Exemption
- Debt Repayment
[8] Summary of Currency Risk Minimization Techniques
- Payment in Hard Currency
- Foreign Exchange Risk Insurance
- Indexed Local Currency Payments
§ 3.03 Permit, Concession and License Risk
[1] Permits
[2] Concessions and Licenses
§ 3.04 Expropriation Risk
§ 3.05 Expatriation
§ 3.06 Change of Law Risk
[1] Import Tariffs
[2] Export Tariffs
[3] Production or Consumption Controls
[4] Taxes
- Generally
- Taxes on Income
- Customs Duties
- Withholding Tax on Payment of Interest
- Nondiscrimination
[5] Environmental Controls
[6] Regulation and Deregulation
§ 3.07 Political Violence, Civil Unrest, War and Other Political Force Majeure Events
§ 3.08 Political Collapse and Succession
§ 3.09 Preemption and Priority
§ 3.10 Sovereign Risk
§ 3.11 Breach of Undertakings (Contract Repudiation)
§ 3.12 Collateral Risk
[1] What Type of Collateral Security Does the Sovereign Government Allow?
[2] Are All Local Formalities Complied With?
[3] What is the Priority of the Lien?
[4] How is the Lien Enforced?
[5] How Does the Foreclosure Process Work?
[6] Collateral Trusts
[7] Real Property
[8] Interaction Among Risks
§ 3.13 Law and Legal System Risk
[1] Choice of Law
[2] Agent for Process and Submission to Jurisdiction
[3] Dispute Resolution
[4] Fees, Approvals and Filings
[5] Legal Expertise and Experience
[6] General Business Law and Regulation
[7] Waiver of Sovereign Immunity
[8] Legal Cultures
§ 3.14 Illiquidity of Equity Investment
§ 3.15 Freezing or Blocking Orders
§ 3.16 Export Prohibitions
§ 3.17 Price Controls and Regulation
§ 3.18 Commercial or Political---It May Be Both
CHAPTER FOUR - PROJECT FINANCE COMMERCIAL RISKS
§ 4.01 Introduction to Commercial Risks
[1] Probability of Risk Evolving Into a Project Problem
[2] Due Diligence
[3] Feasibility Study in Risk Identification
[4] Categories of Commercial Risk
§ 4.02 Credit Risks
§ 4.03 Increase in Construction Costs
§ 4.04 Delay in Completion
§ 4.05 Force Majeure in Construction Contracts
§ 4.06 Experience and Resources of Contractor
§ 4.07 Building Materials
§ 4.08 Facility Site
§ 4.09 Technology
§ 4.10 Construction of Related Facilities
§ 4.11 Shortfalls in Mineral Reserves
§ 4.12 Raw Material Supply and Utilities
§ 4.13 Creditworthiness of Off-take Purchaser
§ 4.14 Market for Product or Service
§ 4.15 Shortfalls in Anticipated Capacity, Output and Efficiency
§ 4.16 Operator Experience
§ 4.17 General Operating Expenses
§ 4.18 Sponsor Commitment
§ 4.19 Management Experience
§ 4.20 Permits and Licenses
§ 4.21 Political Environment
§ 4.22 Interest Rate
§ 4.23 Force Majeure
§ 4.24 Economic Projection and Feasibility Report Inaccuracy
§ 4.25 Environmental
§ 4.26 Contract Mismatch
§ 4.27 Contract Risks Generally
§ 4.28 Commercial Risk Mitigation
[1] Construction Period Risk Mitigation
- Contractual Undertakings
- Contingency Reserve Funds and Equity and Other Funding Commitments
- Insurance
[2] Operations Period Risk Mitigation
- Contractual Undertakings
- Contractual Arrangements
- Contingency Reserve Funds
- Cash Traps
- Insurance
PART III - PROJECT FINANCE STRUCTURES
CHAPTER FIVE - PROJECT FINANCE PARTICIPANTS AND THEIR ROLES
§ 5.01 Project Sponsor
§ 5.02 Project Company
§ 5.03 Borrowing Entity
§ 5.04 Commercial Lender
[1] Arranging Bank
[2] Managing Bank
[3] Agent Bank
[4] Engineering Bank
[5] Security Agent
§ 5.05 Bondholders
§ 5.06 International (Multilateral) Agencies
§ 5.07 Bilateral Agencies
§ 5.08 Rating Agency
§ 5.09 Supplier
§ 5.10 Output Purchaser
§ 5.11 Contractor
§ 5.12 Operator
§ 5.13 Financial Advisor
§ 5.14 Technical Consultants
§ 5.15 Project Finance Lawyers
§ 5.16 Local Lawyers
§ 5.17 Host Government
§ 5.18 Insurers
CHAPTER SIX - PROJECT FINANCE STRUCTURES
§ 6.01 Generally
§ 6.02 Commercial Loan Financing
[1] Construction Phase
[2] Operations Phase
§ 6.03 Export Credit Financing
[1] Generally
[2] Types of Export-Import Financing
Direct Lending
Financial Intermediary Loans (Bank-to-Bank)
Interest Rate Equalization
§ 6.04 Lease Financing
[1] Generally
[2] Advantages to the Project Company
Control Over the Project
Total Financing
Lower Financing Costs
Tax Deductibility of Rent
Shifting of Residual Risk
Equity Risk-Taker Replaces Lender as Financing Source
[3] Lease Financing from the Lessor's Perspective
§ 6.05 Bond Financing
§ 6.06 BOT
§ 6.07 Co-Financing
§ 6.08 Production Payments
§ 6.09 Forward Purchase Agreements
CHAPTER SEVEN - SELECTING THE PROJECT FINANCE OWNERSHIP STRUCTURE
§ 7.01 Generally
§ 7.02 Pre-Development Activities
[1] Generally
[2] The Development Agreement
Definition of Project
Exclusivity
Roles and Responsibilities
Tasks and Schedule
Cost Funding
Management and Voting
Withdrawal
Abandonment
Confidentiality
Antitrust and Restrictive Trade Practices Considerations
§ 7.03 Determining the Structure to Use
[1] Need for Leverage
[2] Grade of Investment
[3] Tax Laws and Treaties
[4] Project Management
[5] Accounting Treatment and Objectives
[6] Lender Preferences
[7] Transferability of Equity Interests
§ 7.04 Avoiding Parent Company Direct Involvement
§ 7.05 Special-Purpose Nature of Project Company
§ 7.06 Host Country Investment Requirements
[1] Generally
[2] Ownership of Real Estate
[3] Local Participation
[4] Local Formation of Project Company
§ 7.07 Corporation
[1] Generally
[2] Reasons for Selection
[3] Management
§ 7.08 General Partnership
[1] Generally
[2] Liability
[3] Reasons for Selection
[4] Collateral Considerations
§ 7.09 Limited Partnership
[1] Generally
[2] Reasons for Selection
[3] Management
§ 7.10 Limited Liability Company
§ 7.11 Joint Venture
[1] Generally
[2] Reasons for Selection
[3] Types
[4] Project Management
[5] Conflicts of Interest
[6] Nature of Liability
§ 7.12 European Economic Interest Groupings ("EEIG")
[1] Generally
[2] Nature of Liability
[3] Management
[4] Collateral Considerations
§ 7.13 Development Consortium
§ 7.14 Preserving Flexibility
§ 7.15 Fragmentation: The More the Merrier
PART IV - TECHNICAL, POLITICAL AND ECONOMIC FEASIBILITY
CHAPTER EIGHT - THE FEASIBILITY STUDY AND NEEDS ASSESSMENT
§ 8.01 Purpose of Feasibility Study
§ 8.02 General Description
§ 8.03 Project Sponsors and Project Company
§ 8.04 Project Participants
§ 8.05 Technical Information
§ 8.06 Economic Information
§ 8.07 Contracts
§ 8.08 Project Schedule
§ 8.09 Government
§ 8.10 Market
§ 8.11 Proposed Financing Sources
§ 8.12 Privatization
[1] Generally
[2] Types
[3] Benefits
[4] Effect on Project Feasibility
§ 8.13 Needs Assessment
§ 8.14 The Independent Engineer
CHAPTER NINE - HOST COUNTRY BUSINESS ENVIRONMENT FOR PROJECT FINANCE
§ 9.01 Introduction
§ 9.02 Political
§ 9.03 Social and Human Rights
§ 9.04 Legislative and Regulatory
§ 9.05 Economic Conditions
§ 9.06 Project Finance in Developing Countries
CHAPTER TEN - ECONOMIC FEASIBILITY
§ 10.01 Purpose
§ 10.02 Construction Budget
§ 10.03 Operating Budget
§ 10.04 Debt Service
§ 10.05 Working Capital
§ 10.06 Assumptions
§ 10.07 Ratios
§ 10.08 Valuation
CHAPTER ELEVEN - ENVIRONMENTAL REGULATION AND ENVIRONMENTAL FEASIBILITY OF THE PROJECT
§ 11.01 Growth of Environmental Regulation
[1] Generally
[2] Host Country
[3] Multilateral and Bilateral Institutions
[4] International Treaties
[5] Home Country
§ 11.02 Environmental Impact of Project
[1] Site
[2] Air
[3] Water
[4] Plant and Animal Habitats
[5] Health Hazards
[6] Noise
[7] Aesthetics
[8] Historic and Cultural Significance
[9] Transportation, Public Services and Utilities
[10] Indigenous People
§ 11.03 Permits
§ 11.04 Public Opposition
§ 11.05 World Bank Environmental Standards
§ 11.06 Environmental Damage and Audits
§ 11.07 Future Environmental Regulation
§ 11.08 The Equator Principles
[1] Assessment
[2] Management
[3] Documentation
[4] 2006 Revisions
[5] Effects on Project Finance
PART V - PROJECT FINANCE DOCUMENTATION
CHAPTER TWELVE - AN OVERVIEW OF PROJECT DOCUMENTATION
§ 12.01 Generally
§ 12.02 Transnational Contracting
[1] Governing Law
[2] Forum
[3] Contract Formation
[4] Contract Structure and Validity
[5] Formalities
[6] Enforceability of Risk Allocation and Remedies
[7] Currency Issues
[8] Government Action
[9] Term
[10] Language
§ 12.03 Document Types
§ 12.04 Amendments, Modifications and Supplements
§ 12.05 Nonrecourse Provision
[1] Introduction
[2] Sample Provisions
§ 12.06 Cooperation with Financing
[1] Introduction
[2] Sample Provision
§ 12.07 Term
§ 12.08 Completion
[1] Introduction
[2] Sample Provision
§ 12.09 Come Hell or High Water
§ 12.10 Force Majeure
§ 12.11 When Things Go Wrong
[1] Generally
[2] Contract Damages
[3] Liquidated Damages
[4] Specific Performance
§ 12.12 Internationalization of Contracts
CHAPTER THIRTEEN - REPRESENTATIONS AND WARRANTIES IN PROJECT FINANCE CREDIT AGREEMENTS AND CONTRACTS
§ 13.01 Generally
[1] Definition
[2] Purpose
[3] Role of Representations and Warranties in Project Finance
§ 13.02 Mechanics of Representations and Warranties
[1] Affirming the Basic Assumptions
Legal Status
Authority to Enter Into Transaction
[2] Additional Facts Received in Negotiation Process
[3] Date Representations and Warranties Are Made
[4] Materiality and Knowledge Limitations in Representations and Warranties
§ 13.03 Verification of Representations and Warranties
§ 13.04 Introduction to Sample Provisions
§ 13.05 Formalities of Business Organization
[1] Generally
Due Incorporation; Due Formation
Valid Existence
Good Standing
Power and Authority
Due Qualification
[2] Corporation
[3] General Partnership
[4] Limited Partnership
[5] General Partners of Limited Partnership
§ 13.06 Power and Authority
[1] Introduction
Authority to Enter into and Perform Transaction
Corporate or Partnership Approval
Violation of Law or Judicial Order
Breach of Existing Agreement
Creation of Liens
[2] Sample Provision
§ 13.07 Legally Enforceable Agreement
[1] Introduction
[2] Sample Provision
§ 13.08 Financial Statements, Project Budget and Projections
[1] Introduction
[2] Sample Provision for Project Finance Credit Agreement for New Project
Project Budget
Projections
[3] Modification of Financial Statement Representation for Existing Project
Generally Accepted Accounting Principles
Fair Presentation of Financial Condition
[4] Financial Statement Representation for Contracting Party
§ 13.09 Litigation
[1] Introduction
[2] Litigation Representation When No Litigation Exists
[3] Litigation Representation When Litigation Exists
§ 13.10 Judgments and Orders
[1] Introduction
[2] Sample Provision
§ 13.11 Existing Agreements
[1] Introduction
[2] Sample Provision
§ 13.12 Force Majeure
[1] Introduction
[2] Sample Provision
§ 13.13 Asset Ownership and Liens
[1] Introduction
[2] Sample Provision
§ 13.14 Subsidiaries and Ownership of Securities
[1] Introduction
[2] Sample Provision
§ 13.15 Operation of Business
[1] Introduction
[2] Sample Provision
§¦13.16 Project Assets and Necessary Assignments
[1] Introduction
[2] Sample Provision
§¦13.17 Project Contracts
[1] Introduction
[2] Sample Provision
§¦13.18 Debt
[1] Introduction
[2] Sample Provision
§¦13.19 Taxes
[1] Introduction
[2] Sample Provision
§¦13.20 Regulatory and Legal Status
[1] Introduction
[2] Sample Provision
§¦13.21 Permits
[1] Introduction
[2] Sample Provision
§¦13.22 Compliance with Laws
[1] Introduction
[2] Sample Provision
§¦13.23 Infrastructure
[1] Introduction
[2] Sample Provision
§¦13.24 Completion
[1] Introduction
[2] Sample Provision
§¦13.25 Collateral
[1] Introduction
[2] Sample Provision
§¦13.26 Full Disclosure
[1] Introduction
[2] Sample Provision
§¦13.27 Representations and Warranties Made in Other Project Contracts
[1] Introduction
[2] Sample Provision
§¦13.28 No Prior Business Activity
[1] Introduction
[2] Sample Provision
§¦13.29 Complete Project
[1] Introduction
[2] Sample Provision
CHAPTER FOURTEEN - PRELIMINARY HOST COUNTRY AGREEMENTS
§ 14.01 Introduction
§ 14.02 Bidding (Tendering) Processes
[1] Generally
[2] Advantages of Bidding Programs
[3] Disadvantages of Bidding Programs
[4] Pre-qualification of Bidders (the "RFQ")
[5] Bid Design and Preparation of Bid Documents (the "RFP")
Generally
Evaluation and Scoring
[6] Model Contracts
[7] Bid Meetings and Bidder Questions
[8] Security
[9] Promotion of Public Bids by Multilateral Agencies
[10] Bidding in the Project Finance Context
Generally
Special-Purpose Entities
The Problem of Consortium Bids
§ 14.03 Letter of Intent and Memorandum of Understanding
§ 14.04 Concessions and Licenses
[1] Generally
[2] Concession Agreement
Terms from the Host Government's Perspective
Terms from the Project Company's Perspective
Ongoing Consents and Approvals by the Host Government
[3] Example in a BOT Structure
[4] Disputes
§ 14.05 Legislative Approval
§ 14.06 Implementation Agreements
[1] Generally
[2] Sovereign Guarantees
[3] Expropriation
[4] Permits and Other Governmental Approvals
[5] Currency Concerns
[6] Tax Benefits and Customs Duties Relief
- Generally
- Tax Holiday
[7] Legislative Protection
[8] War, Insurrection, General Strikes and Political Violence
[9] Authorization to Do Business
[10] Exclusive Right to Develop Project
[11] General Cooperation for Project Development and Nondiscrimination
[12] Good Citizenship
[13] Enforcement and Dispute Resolution
[14] Constitutionality Considerations of Implementation Agreements
[15] Damages
[16] Contrast: Country Support Agreements
[17] Stabilization Clauses
[18] Sovereign Guarantees from the Government's Perspective
§ 14.07 Other Considerations for Preliminary Agreements
[1] Infrastructure Development
- Land and Air Transportation
- Water Ports and Harbors
- Power
- Water
- Waste Disposal
- Communications
[2] Product or Service
[3] Milestones
[4] Expansion Rights or Requirements
[5] Social Program Support
[6] Option to Acquire Raw Materials in the Host Country
[7] Importation of Construction Equipment
[8] Price Regulation
[9] Government-Owned Natural Resources
[10] Local Restriction on Sale
[11] Export Restrictions
[12] Import Restrictions
[13] Employees
[14] Withholding Taxes on Loan Interest
§ 14.08 Host Country Approval of Political Risk Insurance
§ 14.09 The Problem of Binding Future Governments to Actions of Predecessor Governments
[1] Introduction
[2] The Effectiveness of Contracts with Host Governments as Risk Mitigation
[3] Contractual Damages and Assurances
[4] Sanctity of Contract Versus State Sovereignty
§ 14.10 Waiver of Sovereign Immunity
[1] Generally
[2] Foreign Sovereign Immunities Act of 1976
- Generally
- Exceptions to Immunity
- Counterclaims
- Extent of Sovereign Liability
- Attachment of Sovereign's Property
- Case Study: Waiver of Sovereign Immunity in a Project Finance Transaction
[3] State Immunity Act of 1978 (U.K.)
- Generally
- Exceptions to Immunity
- Application
§ 14.11 Act of State Doctrine (U.S.)
§ 14.12 Cooperative Risk Management
CHAPTER FIFTEEN - CONSTRUCTION CONTRACTS
§ 15.01 Generally
§ 15.02 Important Construction Risks
[1] Increase in Construction Costs
[2] Delay in Completion
[3] Performance Guarantees
[4] Force Majeure in International Construction Contracts
[5] Experience, Reputation and Resources of Contractor
[6] Building Materials
[7] Construction of Related Facilities
[8] Raw Material Supply and Utilities
[9] Excuses for Contractor Nonperformance---The Owner Did It
[10] Coordination
§ 15.03 Creditworthiness
§ 15.04 Types of Construction-Related Contracts
[1] Engineering Contract
[2] Procurement Contract
[3] Construction Contract
[4] EPC Contract
§ 15.05 Fixed Price Contract
§ 15.06 Cost Plus Fee Contract
§ 15.07 Cost Plus Fee Contract With Maximum Price and Incentive Fee
§ 15.08 Project Finance Turnkey Contract
§ 15.09 Typical Provisions in Project Finance Turnkey Construction Contracts
§ 15.10 Scope of Work
[1] Introduction
[2] Draft Provision
§ 15.11 Contractor's Responsibilities
[1] Introduction
[2] Draft Provision
§ 15.12 Project Company's Responsibilities
[1] Introduction
[2] Draft Provision
§ 15.13 The Notice to Proceed and Commencement of Construction
[1] Introduction
[2] Draft Provision
§ 15.14 Price
[1] Introduction
[2] Draft Provision
§ 15.15 Payment and Retainage
[1] Introduction
[2] Retention Money Guarantee
[3] Liens
[4] Draft Provision
§ 15.16 Completion Date Guarantees, Performance Guarantees and Liquidated Damages
[1] Introduction
[2] Mechanical Completion
[3] Substantial Completion
[4] Final Completion
[5] Correction
[6] Delay Liquidated Damages
[7] Testing
[8] Bonuses for Early Completion
[9] Environmental Guarantees
[10] Exceptions to Guarantees
[11] Alternatives to Guarantees
[12] Draft Provision
§ 15.17 Warranties
[1] Introduction
[2] Draft Provision
§ 15.18 Changes
§ 15.19 Title to Work
[1] Introduction
[2] Draft Provision
§ 15.20 Remedies for Breach
[1] Introduction
[2] Draft Provision
§ 15.21 Suspension of Work and Termination
[1] Introduction
[2] Draft Provision
§ 15.22 Payment and Performance Bonds
[1] Introduction
Performance Bond
Payment Bond
Warranty Bond
Money Retention Bond
[2] Draft Provision
§ 15.23 Insurance
[1] Introduction
[2] Draft Provision
§ 15.24 Force Majeure
[1] Introduction
[2] Draft Provision
§ 15.25 Coordination Concerns
[1] Introduction
[2] Draft Provision
§ 15.26 Training
[1] Introduction
[2] Draft Provision
§ 15.27 Subcontractors
[1] Introduction
[2] Draft Provision
§ 15.28 Liability Limitations
[1] Introduction
[2] Draft Provision
§ 15.29 Site Conditions
[1] Introduction
[2] Draft Provision
§ 15.30 The Special Problem of Compliance by the Contractor with the Other Project Contracts
[1] Introduction
[2] Draft Provision
§ 15.31 Unraveling the Project Finance Deal: Termination for Convenience
§ 15.32 Compliance with Concession Terms and Conditions
[1] Introduction
[2] Draft Provision
CHAPTER SIXTEEN - INPUT CONTRACTS
§ 16.01 Introduction
§ 16.02 When Input Contracts Are Not Needed
§ 16.03 Important Input Risks
[1] Increase in Input Costs
[2] Delay in Completion of Transportation Facilities
[3] Availability of Supply
[4] Disruption to Transportation
[5] Force Majeure in International Input Contracts
[6] Experience and Resources of Input Supplier and Transporter
[7] Fuel Management and the Fuel Manager
[8] Quality
[9] Linking Project Inputs to Outputs
§ 16.04 Types of Input Contracts
[1] Fixed Amount
[2] Requirements
[3] Output
[4] Spot
[5] Dedicated Reserves
[6] Firm vs. Interruptible
[7] Subordination of Project Costs to Debt Service
[8] The Commodity Supplier as Project Partner
§ 16.05 Excuses to Performance
§ 16.06 Creditworthiness
§ 16.07 Typical Provisions in Project Finance Input Contracts
§ 16.08 Quantities and Commencement of Deliveries
[1] Introduction
[2] Draft Provision
§ 16.09 Price
[1] Introduction
[2] Draft Provision
§ 16.10 Payment
[1] Introduction
[2] Draft Provision
§ 16.11 Scheduling; Metering and Weighing
[1] Introduction
[2] Draft Provision
§ 16.12 Quality and Rejection
[1] Introduction
[2] Draft Provision
§ 16.13 Title and Risk of Loss
[1] Introduction
[2] Draft Provision
§ 16.14 Term
[1] Introduction
[2] Draft Provision
§ 16.15 Force Majeure
[1] Introduction
[2] Uncontrollable Events
[3] Change of Law
[4] Draft Provision
§ 16.16 Default
[1] Termination Events Generally
[2] Termination by Supplier
[3] Termination by Project Company
[4] Draft Provision
§ 16.17 Remedies for Breach
[1] Introduction
[2] Termination Payments
[3] Specific Performance
[4] Alternative Inputs
[5] Draft Provision
§ 16.18 Reserves and Mining or Production Plans
CHAPTER SEVENTEEN - OPERATION AND MAINTENANCE AGREEMENTS
§ 17.01 Generally
[1] Operating Agreement
[2] Self-Operation
§ 17.02 Important Operation Risks
[1] Increase in Operating Costs
[2] Performance Guarantees
[3] Force Majeure in International Operation Contracts
[4] Experience and Resources of Operator
[5] Raw Material Supply and Utilities
[6] Excuses for Operator Nonperformance---The Contractor Did It; The Owner Did It
[7] Coordination
§ 17.03 Creditworthiness
§ 17.04 Fixed Price Contract
§ 17.05 Cost Plus Fee Contract
§ 17.06 Cost Plus Fee Contract With Maximum Price and Incentive Fee
§ 17.07 Typical Provisions in Project Finance Operation and Maintenance Agreements
§ 17.08 Operator's Responsibilities
[1] Introduction
[2] Draft Provision
§ 17.09 Project Company's Responsibilities
[1] Introduction
[2] Draft Provision
§ 17.10 Operating Standard
[1] Introduction
[2] Draft Provision
§ 17.11 Price and Payment
[1] Introduction
[2] Draft Provision
§ 17.12 Performance Guarantees and Liquidated Damages
[1] Introduction
[2] Draft Provision
§ 17.13 Capital Changes
[1] Introduction
[2] Draft Provision
§ 17.14 Remedies for Breach
[1] Introduction
[2] Draft Provision
§ 17.15 Suspension of Services
[1] Introduction
[2] Draft Provision
§ 17.16 Procedure at End of Agreement
[1] Introduction
[2] Draft Provision
§ 17.17 Insurance
[1] Introduction
[2] Draft Provision
§ 17.18 Force Majeure
[1] Introduction
[2] Draft Provision
CHAPTER EIGHTEEN - PROJECT FINANCE OFF-TAKE SALES CONTRACTS
§ 18.01 Necessity for Off-take Contracts
§ 18.02 Types of Off-take Contracts
[1] Great Confusion
[2] Take-or-Pay
[3] Take-and-Pay
[4] Blended
[5] Long-term Sales Agreement
[6] Spot Sales
§ 18.03 Contractual Risk---the Value of Contracts to the Project Company and as a Credit Support
§ 18.04 Risks in Contract Terms and Defenses
[1] Commercial Impracticability
[2] General Contract Theories
[3] An Example of Project Contract Risks: Output and Requirements Contracts
§ 18.05 Revenue Contracts in Transnational Projects
§ 18.06 Enforcement of Revenue Contracts in Transnational Projects
§ 18.07 Assignment of Revenues to the Project Lenders
§ 18.08 Selected Provisions in Off-take Contracts
§ 18.09 Agreement for Allocation of a Portion of Production Capacity
[1] Introduction
[2] Draft Provision
§ 18.10 Option Capacity
[1] Introduction
[2] Draft Provision
§ 18.11 Reserve Capacity
[1] Introduction
[2] Draft Provision
§ 18.12 Standby Charge
[1] Introduction
[2] Draft Provision
§ 18.13 Sanctity of Contracts
[1] Introduction
[2] Analysis Under U.S. Law
[3] Retroactivity and Settled Expectations---The Effect of Governmental Actions on Existing Contracts
[4] Lessons for International Project Finance
[5] Stability of Contracts in Emerging Markets---The Dabhol Project
CHAPTER NINETEEN - POWER SALES AGREEMENTS
§ 19.01 Introduction
§ 19.02 Revenue Contracts in Transnational Projects
§ 19.03 Development Obligations
§ 19.04 Performance Milestones
[1] Generally
[2] Approval of Project Contracts
[3] Financial Closing
[4] Penalties for Missed Milestones
- Generally
- Delayed Entry into Commercial Operation
- Failure to Construct Facility
- Shortfall in Nameplate Capacity
[5] Commercial Operations
[6] Force Majeure
§ 19.05 Obligation to Deliver Power; Obligation to Take Power
§ 19.06 Delivery Point and Interconnection
[1] Delivery Point
[2] Interconnection Facilities
[3] Power of Eminent Domain
[4] Wheeling
[5] Land Rights
§ 19.07 Price for Power
[1] Introduction
[2] The Political Side of Energy Rates---A Lesson Learned in the U.S.
[3] General Forms of Power Contract Price Provisions
-Take-or-pay
-Take-and-pay
[4] Capacity and Energy Payments Structure
[5] Capacity Payment
- Fixed or Variable
- Floor
- Front-Loaded
-Back-Loaded
- Levelized
[6] Adjustments to Capacity Charges
[7] Energy Payment
- Fixed or Variable
- Floor
- Forecasted
- Indexed
[8] Fuel Costs
[9] Penalties and Bonuses
[10] When Capacity Payments Begin
[11] When Capacity Payments End
[12] The Problem of Equity Return for Developing Countries
[13] What If the Deal Turns Out to be a Bad One?
§ 19.08 Security and Commitment of Project Sponsor
[1] Security for Performance
[2] Project-Based Security
[3] Minimum Equity Undertaking
[4] Cash and Letters of Credit
[5] Tracking Accounts---Front-End Loaded
§ 19.09 Force Majeure
[1] Political Risk
[2] Uncontrollable Events
[3] Change of Law
§ 19.10 Payment
§ 19.11 Currency Convertibility
§ 19.12 Term and Termination
[1] Term
[2] Termination Events
[3] Termination by Power Purchaser
[4] Termination by Project Company
[5] Project Lenders
[6] Remedies
[7] Termination Payments
[8] Power Purchaser's Right to Operate the Project
[9] Ownership of Project at Expiration of Term
§ 19.13 Penalties
§ 19.14 Technical Standards
§ 19.15 Operating Procedures
§ 19.16 Metering
§ 19.17 Third Party Sales and Project Transfers of Ownership
[1] Generally
[2] Right of First Refusal
[3] Effects of Third Party Sales
§ 19.18 "Regulatory Out" Provisions
§ 19.19 Power Purchaser Responsibilities
§ 19.20 Project Company Responsibilities
§ 19.21 Insurance
§ 19.22 Successors to the Power Purchaser
§ 19.23 Common Risk Allocation in Developing Country Power Purchase Agreements
[1] Construction
- Cost Overrun
- Delay
- Failure to Achieve Performance Standards
[2] Operating
- Cost Overrun
- Operating Performance Shortfall
[3] Fuel
- Price
- Supply
- Transportation
[4] Market
- Demand
- Price
- Inflation
- Exchange Rate Fluctuations
[5] Political
§ 19.24 Tolling Agreements
[1] Fuel Availability and Force Majeure
[2] Efficiency and Fuel Use
PART VI - CREDIT ENHANCEMENT
CHAPTER TWENTY - PROJECT FINANCE CREDIT ENHANCEMENT
§ 20.01 Introduction to Credit Enhancement in Project Financings
§ 20.02 Guarantees
[1] Generally
[2] Sponsor
[3] Third Party
[4] Contrast to Put Options
[5] Collateral
§ 20.03 Transnational Guarantees
[1] Introduction
[2] Varying Interpretation of Terms
[3] Payments and Currency Risks
[4] Tax Implications
[5] Foreign Law
§ 20.04 Limited Guarantees
[1] Generally
[2] Claw-back
[3] Cash Deficiency
[4] Completion
[5] The Risk With Unlimited Guarantees
§ 20.05 Indirect "Guarantees"
[1] Take-or-Pay Contracts
[2] Take-and-Pay Contracts
[3] Other Forms
§ 20.06 Implied Guarantees and Undertakings
[1] Generally
[2] Comfort Letter
§ 20.07 Put Options
[1] Generally
[2] Regulatory Put
[3] Contrast to Guarantees
§ 20.08 Letters of Credit
§ 20.09 Surety Obligations
[1] Bid Bonds
[2] Performance Bonds
[3] Payment Bonds
[4] Warranty Bonds
[5] Retention Money Bonds
[6] Labor and Material Payment Bond
§ 20.10 Commercial Insurance
[1] Generally
[2] Commercial Insurance and the Project Lender
- Additional Insured
- Loss Payee
- Non-Vitiation Clauses
- Reinsurance
- Waiver of Subrogation
- Collateral Security
- Other Insurance Issues
[3] Types of Commercial Insurance
- Contractor's All Risks
- Advanced Loss of Revenue
- Marine Cargo
- Marine Advanced Loss of Revenue
- Operator's All Risks
- Operator's Loss of Revenue
- Third Party Liability
- Employers's Liability?Workers' Compensation
- Finite Risk
- Trade Disruption
[4] The "Commercially Available in the Marketplace" Standard
[5] Exchange Controls
[6] Export Financing Requirements
§ 20.11 Political Risk Insurance, B Loan Programs and Guarantees
[1] Generally
[2] Multilateral Investment Guarantee Agency
- Generally
- Eligibility
- Coverage
[3] International Finance Corporation
[4] World Bank Guarantees
[5] Asian Development Bank
[6] Inter-American Development Bank
[7] Overseas Private Investment Corporation (US)
[8] United States Export-Import Bank
[9] Japanese Bank for International Cooperation
[10] Export Credit Guarantee Department of the United Kingdom Department of Trade and Industry
[11] Export Development Corporation (Canada)
[12] Other OCED Government Insurance Entities
[13] Other OCED Export Credit Agencies
[14] Commercial Insurance
- Scope of Coverage
- MIGA Cooperative Underwriting Program
- Portfolio Political Risk Insurance
[15] Assignment Rights
[16] Political Risk Insurance for Bond Financing in Emerging Market Project Finance
[17] Credit Evaluation of Political Risk Insurance Policies
§ 20.12 Warranty
§ 20.13 Liquidated Damages in Fixed-Price Construction Contracts and Other Liquidated Damages
§ 20.14 Indemnification Obligations
§ 20.15 Sovereign Guarantees
[1] Project
[2] World Bank
[3] Are Sovereign Guarantees Useful Without World Bank Involvement?
[4] Availability of Funds to Pay Guarantee Claims
[5] Are Sovereign Guarantees from the Host Country Always Necessary?
§ 20.16 Other Forms of Government Credit Enhancement
[1] Generally
[2] Government Subordination
[3] Government-Funded Accounts
[4] Pledge of Receivables
[5] Government Account Supported with Local Country Bank Letter of Credit
[6] Use of State Devolution Account as Collateral
[7] Replacement of the State-Owned Off-take Purchaser with a More Creditworthy Purchaser
§ 20.17 Implementation Agreements
§ 20.18 Reserve Funds
§ 20.19 Cash Calls
§ 20.20 Subordination of Project Costs to Debt Service
§ 20.21 Hedging Strategies
§ 20.22 The Commodity Supplier as Project Partner
PART VII - DEBT AND EQUITY FINANCING
CHAPTER TWENTY-ONE - FINANCING SOURCES FOR THE PROJECT
§ 21.01 Generally
§ 21.02 Banks and Institutional Lenders
§ 21.03 The Equity Markets
[1] Domestic Equity Markets and Equity Placements
[2] International Equity Markets
§ 21.04 The Bond Markets
[1] Generally
[2] Credit Ratings
- Sovereign Risk Analysis
- Currency Risk Analysis
- Political Risk Analysis
- Legal (Contract) Risk Analysis
- Market for Output
[3] Advantages
- Large and Liquid Market
- Longer Term of Debt
- Less Onerous Terms
[4] Disadvantages
- Regulatory Oversight
- Ratings
- Consents to Changes to Underlying Project Are Difficult
- Negative Arbitrage
- Expensive Transaction Costs
[5] The Mini-Perm and Amortizing Mini-Perm
§ 21.05 Rule 144A Debt Placements (U.S.)
[1] Advantages
- Large and Liquid Market
- Longer Term of Debt
- Less Onerous Terms
- Limited Regulatory Oversight
[2] Disadvantages
- Consents to Changes to Underlying Project Are Difficult
- Negative Arbitrage
§ 21.06 Investment Funds
§ 21.07 The World Bank Group Financing Sources
[1] Global and Regional Multilateral Involvement
[2] The International Bank for Reconstruction and Development (IBRD)
- Generally
- Loan Program
- Guarantee Program
- General Requirements
- Enclave Projects
- Indirect Support
- Negative Pledge
[3] International Monetary Fund (IMF)
[4] International Development Association (IDA)
[5] International Finance Corporation (IFC)
- Generally
- Loan Program
- Equity Program
- Guarantee Program
- Benefits of IFC Participation
[6] Role of World Bank Group Credit in Project Financings
- Financing from the IBRD and IDA
- IBRD Financing for Enclave Projects
- IDA Credits
- Equity Financing
- Debt Refinancing
[7] Role of World Bank Group Guarantees in Project Financings
- IBRD Guarantees
- IBRD Indirect (Financed) Guarantee Coverage
- When Are World Bank Guarantees Available?
- IDA Guarantees
- Other Credit Support---Take-or-Pay and Take-and-Pay Contracts
[8] Benefits of World Bank Involvement
- Catalyst for Participation by Other Entities
- Financial Resources
- Ability to Lend to Developing Countries
- Ability to Finance Government Investment
- Favorable Maturities and Interest Rates on Debt
- Political Risk Protection and Comfort
- Ability to Influence Governmental Actions Through Cross-Default Provisions in Loan Agreements
- Ability to Influence Governmental Actions Through Decisions About Financing Future Governmental Projects
- Influence over Macroeconomic Policies that May Affect a Project
- Less Emphasis on Project Risks
- Use of World Bank Procurement Policies
- Use of World Bank Management Requirements
§ 21.08 Regional Development Banks
[1] Generally
[2] African Development Bank
[3] Arab Fund for Economic and Social Development
[4] Asian Development Bank
[5] European Bank for Reconstruction and Development
[6] European Union
[7] European Investment Bank
[8] Inter-American Development Bank
Inter-American Investment Corporation
[9] Islamic Development Bank
[10] Nordic Investment Bank
[11] Nordic Development Fund
[12] OPEC Fund for International Development
§ 21.09 Bilateral Agencies
[1] Generally
[2] The OECD Consensus
[3] Methods of Export-Import Financing
Direct Lending
Financial Intermediary Loans (Bank-to-Bank)
Interest Rate Equalization
[4] U.S. Export-Import Bank
[5] Export-Import Bank of Japan
[6] Overseas Private Investment Corporation
[7] Office National du Ducroire (Belgium)
[8] Export Development Corporation (Canada)
[9] Eksportkreditraadet (Denmark)
[10] Finish Export Credit Limited (Finland)
[11] Compagnie Française d'Assurance pour le Commerce Extérieur (France)
[12] Hermes Cover (Germany)
[13] Instituto Centrale per il Credito a Medio Termine (Italy)
[14] Netherlands
[15] Export Credit Guarantee Department (United Kingdom)
[16] Export Finance and Insurance Corporation (Australia)
[17] Oesterreichische Kontrollbank AG (Austria)
[18] Garanti-Instituttet for Eksportkreditt (Norway)
[19] Swedish International Development Authority
[20] Export Credit Insurance Company (Spain)
[21] Export-Import Bank of Korea
[22] Other Bilateral Support
§ 21.10 Global Environment Facility
§ 21.11 Subordinated Debt
[1] Generally
[2] Subordinated Debt Terms in Project Financings
Funding
Conditions to Funding
Other Indebtedness
Payment Blockage Periods
Amendment of Senior Debt Documents
Amendment of Project Contracts
§ 21.12 Development Loans
[1] Introduction
[2] Definition
[3] Goals of Project Sponsor
[4] Goals of Developmental Lender
§ 21.13 Financing from Project Participants
§ 21.14 Other Sources
[1] Generally
[2] Host Government
[3] Contractor
- Generally
- Retainage as Financing
- No Right of Offset
§ 21.15 Financings Consistent With The Koran
§ 21.16 Securitizations of Project Cash Flows
[1] Generally
[2] Benefits of Securitization
[3] Structure of Securitizations
CHAPTER TWENTY-TWO - THE OFFERING MEMORANDUM
§ 22.01 Purpose
§ 22.02 Key Provisions
§ 22.03 Project Overview
§ 22.04 Borrower
§ 22.05 Project Sponsors
§ 22.06 Debt Amount
§ 22.07 Uses of Proceeds
§ 22.08 Collateral
§ 22.09 Sources of Debt and Equity
§ 22.10 Equity Terms
§ 22.11 Cost Overruns
§ 22.12 Other Sponsor Guarantees and Credit Enhancement
§ 22.13 Interest Rate
§ 22.14 Repayment and Debt Amortization; Mandatory and Optional Prepayments
§ 22.15 Commitment, Drawdown and Cancellation of Commitment
§ 22.16 Fees
§ 22.17 Conditions to Closing and Drawdown of Funds
§ 22.18 Conditions to Each Drawdown of Funds
§ 22.19 Covenants
§ 22.20 Defaults
§ 22.21 Governing Law
§ 22.22 Lawyers, Advisors and Consultants
CHAPTER TWENTY-THREE - PROJECT FINANCE DEBT COMMITMENT LETTERS
§ 23.01 The Term Sheet
[1] Approaching the Project Finance Lender for Business Advice
[2] The Project Finance Loan Application---When Should the Process Begin?
[3] The Letter of Intent---Showing Interest Without a Commitment
[4] The Oral Commitment
§ 23.02 The Commitment
[1] The Commitment and its Scope
Introduction
Sample Provision
[2] The Loan Amount
Introduction
Sample Provision
[3] Use of Proceeds
Introduction
Sample Provision
[4] Repayment Terms
Introduction
Sample Provision
[5] Representations and Warranties
Introduction
Sample Provision
[6] Covenants
Introduction
Sample Provision
[7] Events of Default
Introduction
Sample Provision
[8] Conditions to Closing
Introduction
Sample Provision
[9] Term
Introduction
Sample Provision
[10] Non-disclosure
Introduction
Sample Provision
[11] Expenses
Introduction
Sample Provision
[12] Material Adverse Change
Introduction
Sample Provision
§ 23.03 General Recommendations on Commitment Letters
CHAPTER TWENTY-FOUR - CREDIT AND RELATED DOCUMENTATION FOR PROJECT FINANCE TRANSACTIONS
§ 24.01 The Commercial Lender's Perspective
§ 24.02 Analyses of Project Risks in the Credit Appraisal Process by the Commercial Lender
[1] Experience and Reputation of Project Sponsor
[2] Experience and Reputation of Project Management Team
[3] Experience and Resources of Contractor
[4] Experience and Resources of Operator
[5] Predictability of Price and Supply of Raw Materials to be Used for the Project
[6] Predictability of Price and Supply of Energy to be Used for the Project
[7] Market for Product or Service
[8] Terms and Enforceability of Off-take Contracts
[9] Completion and Cost Over-run Risks are Addressed
[10] Technology
[11] Real Estate
[12] Construction of Related Facilities
[13] Permits and Licenses
[14] General Operating Expenses
[15] Political Environment
[16] Currency and Exchange Risks
[17] Timing and Certainty of Equity Contributions
[18] Equity Returns for Equity Owners
[19] Value of Project and Project Assets as Collateral
[20] Interest Rate
[21] Force Majeure
[22] Project-Specific Risks
§ 24.03 Protecting the Lender from Project Risks
[1] Due Diligence
[2] Assignments
[3] Control Over Excess Cash Flow
[4] Approval of Contract Amendments
[5] Restrictions on Sale of Project Interests
§ 24.04 Overview of Project Finance Credit Agreements
§ 24.05 Significant Provisions of the Project Finance Credit Agreement
§ 24.06 Conditions Precedent to Closing
[1] Generally
[2] Organization and Existence of Project Company, Project Sponsors, Guarantors and Other Major Project Participants; Copies of Governing Documents of Project Company, Project Sponsors, Guarantors and Other Major Project Participants
- Generally
- Draft Provision
[3] Execution and Delivery of Credit Agreement and Related Financing Documents
- Generally
- Draft Provision
[4] Lien Filings and Possession of Certain Collateral
- Generally
- Draft Provision
[5] Availability of Funds
- Generally
- Draft Provision
[6] Related Equity Documents and Availability of Funds
- Generally
- Draft Provision
[7] Sponsor Support Documents
- Generally
- Draft Provision
[8] Third-Party Support Documents and Credit Enhancement
- Generally
- Draft Provision
[9] Host Government Concessions and Guarantees
- Generally
- Draft Provision
[10] Off-take Agreements
- Generally
- Draft Provision
[11] Supply Agreements
- Generally
- Draft Provision
[12] Construction Contract and Issuance of the Notice to Proceed
- Generally
- Draft Provision
[13] Operation and Maintenance Agreements
- Generally
- Draft Provision
[14] Permits
- Generally
- Draft Provision
[15] Insurance and Insurance Consultant's Report
- Generally
- Draft Provision
[16] Real Estate
- Generally
- Draft Provision
[17] Financial Statements of Project Company, Project Sponsors, Guarantors and Major Project Participants
- Generally
- Draft Provision
[18] Construction Budget and Construction Drawdown Schedule
- Generally
- Draft Provision
[19] Revenue and Expense Projections
- Generally
- Draft Provision
[20] Engineering Report
- Generally
- Draft Provision
[21] Consultant's Reports
- Generally
- Draft Provision
[22] Environmental Review
- Generally
- Draft Provision
[23] Legal Opinions
- Generally
- Draft Provision
[24] No Material Adverse Change
- Generally
- Draft Provision
[25] No Defaults
- Generally
- Draft Provision
[26] No Litigation
- Generally
- Draft Provision
[27] Other Conditions Precedent
- Generally
- Draft Provision
§ 24.07 Conditions Precedent to Each Construction Loan Drawdown
[1] Generally
[2] Recertification of Representations and Warranties
- Generally
- Draft Provision
[3] No Change in Law
- Generally
- Draft Provision
[4] Permit Status
- Generally
- Draft Provision
[5] No Default
- Generally
- Draft Provision
[6] No Material Adverse Change
- Generally
- Draft Provision
[7] No Litigation
- Generally
- Draft Provision
[8] Construction Progress
- Generally
- Draft Provision
[9] Construction Budget and Funds Available to Complete the Project
- Generally
- Draft Provision
[10] Lien Waivers
- Generally
- Draft Provision
[11] Other Conditions Precedent
- Generally
- Draft Provision
§ 24.08 Conditions Precedent to Conversion of Construction Loan to a Term Loan
[1] Generally
[2] Recertification of Representations and Warranties
- Generally
- Draft Provision
[3] No Change in Law
- Generally
- Draft Provision
[4] Permit Status
- Generally
- Draft Provision
[5] No Default
- Generally
- Draft Provision
[6] No Material Adverse Change
- Generally
- Draft Provision
[7] No Litigation
- Generally
- Draft Provision
[8] Completion
- Generally
- Draft Provision
[9] Other Conditions Precedent
- Generally
- Draft Provision
§ 24.09 Representations and Warranties
§ 24.10 Covenants
[1] Generally
[2] Reports on Project Construction and Completion
- Generally
- Mechanical Completion
- Operation Completion
- Final Completion
- Draft Provision
[3] Reports on Project Operation
- Generally
- Draft Provision
[4] Notice of Certain Events
- Generally
- Draft Provision
[5] Maintain Existence
- Generally
- Draft Provision
[6] Maintain Interest in Project
- Generally
- Draft Provision
[7] Pay Taxes
- Generally
- Draft Provision
[8] Compliance with Laws
- Generally
- Draft Provision
[9] Obtain and Maintain all Approvals, Permits and Licenses
- Generally
- Draft Provision
[10] No Merger or Consolidation
- Generally
- Draft Provision
[11] Engineering Standards for Construction and Operation
- Generally
- Draft Provision
[12] Maintenance of Properties
- Generally
- Draft Provision
[13] Environmental Compliance
- Generally
- Draft Provision
[14] Insurance and Insurance Proceeds
- Generally
- Draft Provision
[15] Performance of Project Documents
- Generally
- Draft Provision
[16] Amendment, Modification, Termination, Replacement, Etc. of Project Documents
- Generally
- Draft Provision
[17] Change Orders
- Generally
- Draft Provision
[18] Engaging in Other Business
- Generally
- Draft Provision
[19] Indebtedness
- Generally
- Draft Provision
[20] Liens
- Generally
- Draft Provision
[21] Investments
- Generally
- Draft Provision
[22] Dividends and Restricted Payments
- Generally
- Draft Provision
[23] Maximization of Use of Export Financing, Sponsor Support, Subordinated Debt
- Generally
- Draft Provision
[24] Mandatory Prepayment on Occurrence of Certain Events from Excess Cash Flow
- Generally
- Draft Provision
[25] Financial Tests
- Generally
- Draft Provision
[26] Special Milestones
- Generally
- Draft Provision
[27] Change in Project
- Generally
- Draft Provision
[28] Project Support
- Generally
- Draft Provision
[29] Financial Reporting
- Generally
[30] Use of Proceeds
- Generally
- Draft Provision
[31] Security Documents
- Generally
- Draft Provision
[32] Operating Budget
- Generally
- Draft Provision
[33] Accounts
- Generally
- Draft Provision
[34] Guarantee Obligations of Others
- Generally
- Draft Provision
[35] Sale of Assets
- Generally
- Draft Provision
[36] Capital Expenditures
- Generally
- Draft Provision
[37] Transactions with Affiliates
- Generally
- Draft Provision
[38] Construction Cost Overruns
Generally
Draft Provision
[39] Other Covenants
§ 24.11 Events of Default
[1] Generally
[2] Payment
- Generally
- Draft Provision (Project Company)
Draft Provision (Project Participant)
[3] Breach of Covenants
- Generally
- Draft Provision
[4] Breach of Representation or Warranty
- Generally
- Draft Provision (Project Company)
Draft Provision (Project Participant)
[5] Filing of Bankruptcy Petition
- Generally
- Draft Provision (Project Company)
- Draft Provision (Project Participant)
[6] Commencement of Bankruptcy
- Generally
- Draft Provision (Project Company)
- Draft Provision (Project Participant)
[7] Judgments
- Generally
- Draft Provision
[8] Final Acceptance Date
- Generally
- Draft Provision
[9] Government Approvals
- Generally
- Draft Provision
[10] Project Contracts
- Generally
- Draft Provision
[11] Abandonment
- Generally
- Draft Provision
[12] Expropriation
- Generally
- Draft Provision
[13] Ownership and Control
- Generally
- Draft Provision
[14] Payment of Obligations
- Generally
- Draft Provision (Project Company)
Draft Provision (Project Participants)
[15] Breach of Credit Support
- Generally
- Draft Provision
[16] Security Documents
- Generally
- Draft Provision
§ 24.12 Remedies
§ 24.13 Governing Law
§ 24.14 Limitations on Recourse
CHAPTER TWENTY-FIVE - EXPORT CREDITS DOCUMENTATION FOR PROJECT FINANCE TRANSACTIONS
§ 25.01 The Export Lender's Perspective
[1] Generally
[2] OECD Consensus
§ 25.02 Methods of Export-Import Financing
[1] Direct Lending
[2] Financial Intermediary Loans (Bank-to Bank)
[3] Interest Rate Equalization
§ 25.03 Export-Import Banks
§ 25.04 Overview of Project Finance Export Credits Agreements
§ 25.05 Significant Provisions of the Project Finance Export Credits Agreement
[1] Currency of Loan
[2] Right to Prepay
[3] Conditions Precedent
[4] Representations and Warranties
[5] Covenants
[6] Events of Default
PART VIII - COLLATERAL
CHAPTER TWENTY-SIX - PROJECT COLLATERAL
§ 26.01 The Role of Collateral in a Project Financing
[1] Generally
[2] Collateral as a Defensive Tool
[3] Collateral as an Offensive Tool
[4] Uncertainty in Collateral Protections Available to Lenders---You Can't Always Get What You Want
§ 26.02 The Collateral Package
[1] The "Blanket" Lien
[2] Project Cash Flow
[3] Personal Property
- Intangible Assets
- Permits, Licenses and Concessions
- Contracts
- Insurance Proceeds
Surety Bonds
- Guarantees
Liquidated Damages
- Political Risk Insurance
- Accounts
[4] Real Property
§ 26.03 Collateral Documents
[1] Generally
[2] Personal Property Security Agreement
[3] Mortgage, Deed of Trust and Indenture
[4] Pledge of Ownership Interests
[5] Voting Trust
[6] Offshore Accounts
[7] Disbursement Agreement
§ 26.04 Negative Pledges
§ 26.05 The Floating Lien
§ 26.06 Other Collateral Problems
[1] Types of Liens Allowed
Common Law Countries
Civil Law Countries
Developing Countries
[2] Local Formalities
[3] Denomination of Liens in Local Currency
[4] Priority of Lien
[5] Enforcement
[6] Foreclosure
[7] Real Property
[8] The Problem of Transferability of Project Ownership and Operation Rights
[9] Limited Potential Purchasers of Collateral
[10] If You Think You're So Smart...
§ 26.07 Collateral Trusts
§ 26.08 Security Interests in Project Contracts
[1] Contract Assignment and Anti-Assignment Clauses
[2] Consents to Assignment---Approving Assignments and Enhancing the Contract's Value as Collateral
The Secured Party's Perspective
The Contracting Party's Perspective
The Project Company's Perspective
The Host Government's Perspective
[3] The Project Finance Lender's Rights Under U.C.C.¦§¦9-406
[4] The Project Finance Lender's Liability for Obligations Arising Under Assigned Contracts
§ 26.09 Offshore Collateral Accounts
§ 26.10 Intercreditor Agreements
[1] Generally
[2] Goals of Lenders in an Intercreditor Relationship
[3] Typical Intercreditor Arrangements
Generally
- Nonrecourse Nature of Project Debt
Project Contracts
[4] Insurance
[5] General Terms of Intercreditor Agreements
§ 26.11 Commercial Insurance
[1] Additional Insured
[2] Loss Payee
[3] Non-Vitiation Clauses
[4] Reinsurance
[5] Waiver of Subrogation
[6] Other Insurance Issues
PART IX - PROJECT SPONSOR AND INVESTOR AGREEMENTS
CHAPTER TWENTY-SEVEN - GOVERNING THE PROJECT COMPANY: STOCKHOLDER, PARTNERSHIP, JOINT VENTURE AND MANAGEMENT AGREEMENTS
§ 27.01 Generally
§ 27.02 Stockholder Agreements
§ 27.03 Partnership Agreements
§ 27.04 Joint Venture Agreements
§ 27.05 Management Agreements
PART X - SPECIAL TOPICS IN PROJECT FINANCE
CHAPTER TWENTY-EIGHT - BANKRUPTCY
§ 28.01 Introduction
§ 28.02 Types
[1] Universal
[2] Territorial
[3] Universal and Territorial
§ 28.03 U.S. Debtor Filing for Bankruptcy Protection in U.S. and With Foreign Assets
§ 28.04 Foreign Debtor Filing for Bankruptcy Protection Abroad and Has U.S. Assets
§ 28.05 Selection of Bankruptcy Forum for the Debtor with Multi-Country Assets
§ 28.06 Structuring Bankruptcy Solutions Before Closing
CHAPTER TWENTY-NINE - UNITED STATES LAWS AFFECTING FOREIGN INVESTMENTS
§ 29.01 Introduction
§ 29.02 Foreign Corrupt Practices Act Generally
[1] Anti-bribery Prohibition
[2] Accounting Provisions
[3] Multilateral Agency Anti-corruption Prohibitions
§ 29.03 Anti-Bribery Provisions of the FCPA
[1] Corrupt Intent
[2] Interstate Commerce and Acts in Furtherance
[3] Offer, Payment, Gift or Promise of Money or a Thing of Value
[4] Foreign Official
[5] For the Purpose of Influencing the Foreign Official, in His "Official Capacity," to Assist the Company in Obtaining or Retaining Business
[6] Exceptions and Defenses
"Facilitating" Payments
- Payments Lawful Under Local Law
Promotional Expense Reimbursement
- Payments by Subsidiaries of U.S. Corporations
[7] Enforcement and Penalties
[8] Avoiding Violations of the FCPA
[9] The Problem of the Local Partner
[10] Document Drafting Considerations
Representations
Conditions Precedent
Covenants
Termination
§ 29.04 The Securities Exchange Act of 1934
§ 29.05 The Mail and Wire Fraud Acts
§ 29.06 The Internal Revenue Code
§ 29.07 The Currency and Foreign Transactions Reporting Act
§ 29.08 False Statements Act
§ 29.09 National Security and Related Political Considerations
[1] Introduction
[2] Trade Embargo Regulations
[3] Terrorist States
[4] Export Restrictions
[5] Exon-Florio Amendment
CHAPTER THIRTY - LOCAL LAWYERS AND OVERVIEW OF LOCAL LAWS
§ 30.01 Introduction
§ 30.02 Local Lawyers
[1] Need and Timing
[2] Identifying Competent Lawyers
[3] Criteria for Selection
[4] Managing Local Lawyers
§ 30.03 Overview of Local Laws
§ 30.04 Local Counsel Opinions
§ 30.05 Opinion of Counsel on Permits and Approvals
[1] Purpose of Opinion
[2] Status of Permits, Approvals and Concessions
[3] Change of Law
[4] Rights of Lender
[5] Renewal
[6] Typical Problems Encountered and Disclosed
CHAPTER THIRTY-ONE - DISPUTE RESOLUTION IN PROJECT FINANCE TRANSACTIONS
§ 31.01 Introduction
§ 31.02 On Whether to Litigate or to Arbitrate
[1] Advantages of Arbitration
[2] Advantages of Litigation
[3] Can a Party Select Both?
[4] Alternatives to Arbitration and Litigation
[5] Which is "Best" for a Project Financing?
§ 31.03 Inconsistent Preferences
[1] Lender
[2] Project Company
[3] Contractor and Operator
[4] Off-take Purchaser
§ 31.04 Inconsistent Procedures
[1] Consistency
[2] Uniformity
[3] Consolidation
§ 31.05 Choice of Law
[1] Substantive Law
[2] Procedural Law
[3] Renvoi
[4] Lex Mercatoria
[5] New York Law
[6] Failure to Select a Law
[7] Flexibility for Application of Governing Law
§ 31.06 Choice of Forum
[1] Litigation
[2] Arbitration---The New York Convention
[3] Arbitration---Other Conventions
[4] Arbitration---Bilateral Investment Treaties
[5] Failure to Select a Law
[6] Developing Countries
§ 31.07 Choice of Panel
[1] American Arbitration Association
[2] International Chamber of Commerce
[3] London Court of International Arbitration
[4] United Nations Commission on International Trade Law
[5] Inter-American Commercial Arbitration Commission
[6] Stockholm Chamber of Commerce
[7] International Centre for Settlement of Investment Disputes
[8] Others
[9] Ad Hoc
§ 31.08 Disputes Involving Project Participants Not Parties to the Contract in Dispute
§ 31.09 Challenging Arbitration Awards
§ 31.10 Arbitration and Host Country Disputes
[1] Generally
[2] Pacta Sunt Servanda, Private Contracting, and State Sovereignty
§ 31.11 Arbitration in Developing Countries
§ 31.12 Arbitration Provisions
[1] Final and Binding Arbitration
[2] Scope of Arbitration
[3] Location of Arbitration (Choice of Venue)
4] Institution Selected for Arbitration
[5] Selection of Arbitration Panel
[6] Procedure
[7] Governing Language
[8] Governing Law
[9] Continuing Performance
[10] Res Judicata
CHAPTER THIRTY-TWO -- MULTILATERAL AGENCY PROHIBITIONS ON ANTI-COMPETITIVE ACTIVITY
§ 32.01 Introduction
§ 32.02 Procurement Guidelines
[1] Generally
[2] World Bank
[3] Inter-American Development Bank
[4] European Bank for Reconstruction and Development
§ 32.03 Organization of American States Inter-American Convention Against Corruption
§ 32.04 Council of Europe Criminal Law Convention on Corruption
§ 32.05 Organization for Economic Cooperation and Development (OECD) Recommendation of the Council on the Tax Deductibility of Bribes to Foreign Public Officials
§ 32.06 Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
§ 32.07 European Union Convention on the Fight Against Corruption Involving Officials of the European Communities or Officials of the Member States of the European Union
§ 32.08 United Nations
§ 32.09 International Chamber of Commerce Rules of Conduct to Combat Extortion and Bribery
CHAPTER THIRTY-THREE - MERCHANT FACILITIES -- PROJECT FINANCE WITHOUT CONTRACTUALLY-ASSURED REVENUE FLOWS
§ 33.01 Definition of Merchant Facility
§ 33.02 Market Risk
§ 33.03 Management of Commodity Input Risk
[1] Generally
[2] Long-term Contracts
[3] Linking Inputs and Outputs
[4] Reserve Funds
[5] Cash Calls
[6] Subordination of Project Costs to Debt Service
[7] Hedging Strategies
[8] The Commodity Supplier as Project Partner
§ 33.04 Management of Commodity Output Risk
§ 33.05 Loan Covenants for the Merchant Project
RESOURCES
A SELECTED BIBLIOGRAPHY
GLOSSARY OF PROJECT FINANCE TERMS
A CHECKLIST OF DUE DILIGENCE CONSIDERATIONS FOR A PROJECT FINANCING

Library of Congress Subject Headings for this publication:

Construction contracts.
Construction industry -- Finance -- Law and legislation.
Loans -- Law and legislation.
Construction industry -- Finance.