Project Financing Agreements

Savvy project finance sponsors are skilled in managing stakeholders in agreement with their lawyers to keep everyone working and on the way to conclusion. Truly experienced project sponsors go even further and engage in global trade funding to prepare and manage the creation and negotiation of project documents, usually from start to close. We are the only “principle” that participates in project funding and is not really involved in the agreement, so stakeholders generally give us some leeway, because we are an impartial arbiter of project funding documents and we are only committed to a successful project. Financing agreements: The facility agreement is the main document between lenders and Projectco and contains the terms of project financing. Lenders will also need a security package and guarantees to protect borrowed funds. The loan agreement is discussed in more detail in our separate out-law guide on key issues for lenders in project financing contracts. The first group of project funding documents should be established immediately after the project is designed and well before they are submitted to the proponents to arrange the project loan. These are the forward-looking documents that include your business plan, financial models, market feasibility study, financial feasibility study, etc., that we use to convince project lenders to provide you with the project loan. The second group of project documents is the legal documents used to close, develop, build and operate the project. This is the second group of project funding documents that is summarized below. Supply agreements essentially compensate for offtake agreements and ensure that they maintain a balance, as project production is largely dictated by offtake agreements.

A supply contract is an important financing document for projects that produce, refine or distribute fuels, electricity, natural gas and others, such as raw materials or distribution companies. Project financing is the long-term financing of infrastructure and industry projects based on projected projected cash flows from the project, not the sponsors` balance sheet. Typically, a project financing structure includes a number of equity investors known as “sponsors” and a “union” of banks or other credit institutions that provide loans for the transaction. In most cases, these are non-refundable loans, secured by project assets and fully paid from project cash flows and not from the general assets or solvency of the proponents, a decision that is supported in part by financial modelling; [1] see project funding model. Funding is generally provided by all project resources, including revenue-generating contracts. Project proponents have a pledge right for all these assets and can take control of a project if the project company has difficulty meeting the loan terms. Contracting consortia can participate in larger projects. As far as liability is concerned, these contractors can be held accountable either in several respects or in solidarity. Multiple liability means that each contractor is only responsible for its own contribution to the project, while, under joint and multiple liability, each contractor can be sued for the entire commitment and the consortium is then responsible for clarifying the extent of each contractor`s obligations.