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Joshua Hawley

Common Project Characteristics of Successful ECA Supported Project Financings


Sponsor Equity

  • Sponsors and strategic equity investors have committed significant equity to fund their respective project’s capital costs, cost overruns and contingent equity requirements.

  • Successful project sponsor(s) typically have access to capital and meaningful guarantees from their respective parent company for any needed project support.

  • Sponsor(s) should be committed to contribute significant equity to the project’s capital structure.

  • Leverage is subject to each project sector’s unique characteristics.

Advanced Project Development

  • Project Sponsors generally are advanced in their permitting process, have completed feasibility studies, Front End Engineering & Design and developed an Environmental & Social Impact Assessment.

  • Project sponsor(s) have a preliminary finance plan and will have engaged their own legal and financial consultants in preparation of commencing discussion, due diligence and financing activities with IGA and the ECA's and DFI with which we cooperate.

 Binding Shareholders Agreement and/or Joint Venture Agreement

  • The Binding Shareholders Agreement details the ownership structure and the terms and conditions: a) on which the Project company is to be owned and operated with established voting rights and requirements by the respective stakeholders; b) sponsor equity funding and committed injection of capital contributions, and obligations from each stakeholder(s); and c) resolution of disputes, disposal of shares, exit strategy and change of control (if applicable).

  • All ECA's and commercial lenders seek to ensure the project has experienced and creditworthy sponsor(s)/shareholder(s) undertaking the responsibilities of funding the project’s equity requirements, operations and management of the project, and of the respective debt obligations.

Project Sponsor(s)

  • Project sponsor(s) will demonstrate credit strength, established experience and reputation in the sector to operate similar projects successfully.

  • Project sponsor(s) will have an experienced and qualified management team and a skilled operations team in place to oversee the project plant and operations in the respective country.

  • IGA Capital and it's partners seek to ensure that project sponsor(s) have established reputation, experience operating similar projects in the same sector proposed, management experience to operate in the country of destination (project risk can be site/country specific).

Management Team

  • The management team has successfully developed similar projects previously and is experienced in developing bankable deals.

  • The management team is free of any major blemishes to its record with no material reputational or criminal convictions.

  • Management team demonstrates sound corporate governance.

  • Project sponsor(s) should have a well established management and operations teams in the project sector with relevant experience managing similar projects.

Technology

  • Technology provider is experienced and has the financial strength to fund its working capital and warranty obligations.

  • The technology selected for the project is proven. For projects using newer technologies, risk mitigants such as technology risk insurance have been proposed.

  • The ECA seeks to mitigate performance failure through performance guarantees from creditworthy experienced technology providers.

  • The ECA seeks suitable warranties and liquidated damages for nonperformance and/or delay of technology delivery.

Resource Feedstock Supply

  • The resource or fuel supply is stable and can be delivered reliably.

  • Long-term contracts have volume commitments with stability in contracted pricing.

  • Fuel supply matches contractual terms required by off-taker(s).

  • Near completed to final fuel or feedstock supply agreements containing market terms and conditions can be submitted on a preliminary basis, until final agreement is finalized.

  •  The ECA will hire a third-party consultant to conduct due diligence on the quality and reasonableness of the resource/supply.

Construction Delay Construction Completion

  • Project sponsor has begun negotiations with a creditworthy and experienced EPC contractor.

  • EPC contract contemplates sufficient liquidated damages to cover loss of revenues in case of project completion delays.

  • ECA seeks a Date Certain EPC or construction contract with sufficient liquidated damages to ensure both a commercial operations start date and sufficient funds to service debt in the case of project delays. This may help offset potential loss of the project’s PPA and termination of contracts with project sponsor and may assist in debt service payments and other contractual financing commitments.

O&M (Operations & Maintenance)

  • The project has an experienced O&M operator(s) with a strong track record of operating assets of a similar nature and size.

  • Long-term maintenance agreement(s) are in place (preferably with the original equipment manufacturers) along with quality and duration of warranty periods.

  • Major maintenance (beyond regular maintenance) activities are contemplated and have appropriate reserve accounts established to fund those activities.

  • ECA will assess the quality and strength of the O&M contractor and the project sponsor(s)' commitment to minimize operational risk.

Project Financial Model Project Revenues

  • A detailed financial model is provided in the application outlining sources and uses of capital during construction, revenues and expenses during operations and debt amortization with resulting debt coverage ratios.

  • The financial model contemplates a Debt Service Reserve Account for potential revenue shortfalls.

  • The financial model incorporates assumptions for breakeven analysis, potential costs overruns and downside scenarios.

  • The financial model allows the lender to conduct stress tests to assess potential impacts to the project under certain downside scenarios.

  • The financial model clearly identifies and itemizes the project’s revenue streams outlining contracted versus merchant revenues.

  • The ECA seeks to ensure financial strength, feasibility and long-term viability of project operations, and financially strong and stable off-taker(s).

  • The ECA looks for predictability of project revenues and cash flow generated by the project to pay debt service and other project costs.

Off-taker(s)Off-take Contracts

  • The project will enter into long-term contracted agreements with creditworthy off-takers. Credit strength and concentration risk of off-taker(s) is typically outlined in the Application.

  • Projects possess signed and executed commercial long-term offtake contracts with investment grade enterprises or state-owned entities. Sovereign guarantors are committed to pay/ make good on their guarantee and performance obligations. generally seeks a diversified number of credit worthy off taker(s) to minimize concentration risk.

  • The ECA generally seeks off-take contracts that exceed the life of the requested tenor

Commodity Price Risk

  • Project Sponsors will generally offer hedging products, price floor guarantees from credit worthy parents and other market risk mitigants to offset commodity price risk.

  • Merchant-based agreements are generally higher risk and likely require additional due diligence.

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