Markets and Companies LawPrinciples of Project Financing - 2017-2018

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What is Project Finance

• Definitions and terms• The basic components of project finance• Project finance vs. balance sheet or asset-based

finance• Non-recourse vs. limited recourse project finance• Other structures

2

Why Project Finance

• Uses of project finance• Advantages• Disadvantages• International project finance; does location matter?• Does project finance suit any projects?• The concept of bankability

3

Project Finance participants

• Project sponsors• Project company/ies• Borrowing entity/ies• The lenders, banks and bondholders• Any banks?• The “agencies”, international vs. domestic

4

Project Finance participants - continued

• The project chain; contractors, suppliers, output purchasers

• Operation and mantainance• The advisors: technical experts, financial advisors,

legal experts• Insurers• The host country government

5

Project Finance structures• Different financial structures• Commercial loan financing• Export credit financing• Lease financing• Bond financing• “Build-own-transfer”• Co-financing• Production payments and forward purchase

agreements

6

Project Finance Ownership Structure

• General considerations• The pre-development stage• Determining a suitable ownership structure• Sponsors and parent companies• The “special purpose” company• The role of the host country

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Project Finance Ownership Structure -continued

• The form for a suitable structure• Corporation• General and limited partnerships• Joint ventures• Consortia and temporary arrangements• European Economic Interest Group (EEIG) • A magic word: flexibility

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Project Finance Ownership Structure -continued

• Implementing the ownership structure• Legal formats and contract flexibility• Is there a law of project finance?

9

Risky business?

• Risk identification, allocation and mitigation• Perspectives and objectives• The risk matrix• Cross-border risks• Legal risk• Commercial risk• Force majeur and hardship clauses

10

The Feasibility of a Project Finance

• The feasibility study – purpose and contents• Host country environment• Economic feasibility• Environmental feasibility• Regulation• Role of agencies (World Bank, OECD, IFC)

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Project Finance Documentation• Contracts are king• Types of documents• Non recourse provisions• Protection of sponsors vs. lending community

requirements – bankability• Take-or-pay and similar clauses• Transnational contracting• Internationalization of contracts• When things go wrong

12

Representation & Warranties in Project Finance Contracts• Role and purpose• Mechanics of representation and warranties• Legal framework: reps & wars vs. guarantee

obligations• Review of sample provisions

13

Host Country Agreements in Project Finance• The role of the host country• Preliminary agreements and government approvals• Tendering processes – how do they fit with project

finance structures?• Concessions and licenses• Implementation agreements• Infrastructures and environment• Sovereign immunity and the “act of State doctrine”• What if the government changes?

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