Mastering Project Finance Documentation

Risk & its Management

• The distinguishing features of project finance
• The objective of managing risk
• The six ways in which risk can be managed
• The project finance structure overview, relationship of the parties

Governing Law & Enforcement of Rights

• Conflicts of law
• Two requisites of project finance contracts
  • reversal of plaintiff/defendant positions
  • avoidance of litigation to enforce rights
• Alternative Dispute Resolution Procedure

Pre-Completion – Construction Contracts

• FIDIC and other standards
• Liquidated damages
• Performance bonds and retentions
• EPC and functional specification
• Fixed price, lump sum, control of variations
• Completion guarantees
• Two-phase financing
• Force majeure

Concession & Offtake Agreements

• The origins of PPP and BOT
• The pricing basis
• The treatment of performance shortfalls
• Termination, step-in rights
• Direct agreements
• Compensation
• Volume risk – take-and-pay; take-or-pay; marketing agreements
• Exclusion clauses

Financing Agreements

• The loan syndication process
• The term sheet
• Particular features of project financings
  • the cashflow waterfall
  • the role of the project cashflow model
  • LLCR and ADSCR
  • cash sweeps
  • distribution lockups
• The layout of the loan agreement
• Key issues for Lenders:
  • material adverse change
  • drawdown stops
  • waivers and rectification
  • market disruption, increased costs
  • negligence – of Agent bank or consultants
  • disclaimers
  • legal opinions
  • non-exclusive jurisdiction
  • loan liquidity, sell-down, novation, assignments
  • enforcement implications
  • environmental liability
• Key issues for Sponsors
  • conditions precedent to distributions to Sponsors
  • the potential to ‘hide’ recourse, how and why
  • the trigger for recourse
  • the quantum of recourse
  • 3-dimensional leverage, incl. maturity, grace, sculpting
  • majority lenders, snooze ‘n’ lose
  • removing individual financier participants, ‘yank the bank’, super majorities
• Other key issues:
  • reps and warranties, repeating reps
  • sponsor lock-ins, change of control
  • sponsor insolvency
  • appropriations, partial payments
  • illegality and severance
  • the effects of Basel 3 and Solvency 2
• Lender rights upon default
• Reschedulings, restructurings

Security

• A classification of securit
  • mortgages
  • fixed and floating charge
  • liens and pledges
  • hypothecation
  • assignments
• The limitations of security in project financings
• Avoiding security:
  • use of the unincorporated joint venture
  • use of the bankruptcy remote vehicle
• The role of a security trustee
• Guarantees:
  • the common law treatment
  • variations, additionality, on-trust, continuing security, termination, ruling off, joint and several, conclusive evidence, indemnity, liability post-insolvency

Other Legal Issues

• Insurances – CAR, ALOP, Marine, DSU, public liability
• Political risk insurances – FX convertibility, insurrection, expropriation
• Monoline insurance, credit enhancement structures
• Security trust vs. security agency
• Intercreditor agreements