International project finance : law and practice / edited by John Dewar.
2011
K3830 .I63 2011 (Map It)
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Details
Title
International project finance : law and practice / edited by John Dewar.
Published
Oxford ; New York : Oxford University Press, 2011.
Call Number
K3830 .I63 2011
ISBN
9780199601448 (cloth : alk. paper)
0199601445 (cloth : alk. paper)
0199601445 (cloth : alk. paper)
Description
xlii, 516 pages : illustrations ; 26 cm
System Control No.
(OCoLC)713126032
Bibliography, etc. Note
Includes bibliographical references and index.
Record Appears in
Added Author
Table of Contents
List of Contributors
xix
List of Financial Terms, Abbreviations, and Acronyms
xxv
Glossary
xxix
Table of Cases
xxxi
Table of Legislation
xxxvii
Table of International Treaties, Conventions, and Agreements
xli
1.
Approaching Legal Issues in a Project Finance Transaction
Introduction
1
Overall Risk Assessment
7
Assessing the Host Country
11
Corporate governance
16
Industrial regulation
18
Permitting
24
Taxation
26
Customs and immigration law
34
Reliability of local law and courts
35
Changes in law
39
Environmental and Social Considerations
41
Governing Law Considerations
44
Choice of law
45
Enforceability
48
Forum
49
Sovereign immunity
53
Credit Documentation
54
Security Packages
58
Process Management
63
2.
Project Participants and Structures
General Overview
1
Project Participants: Stage One (Project Origination)
5
An introduction to project origination
5
The role of host governments
9
The roles of advisers and consultants
38
The role of private sponsors/equity owners
42
The role of the project company
60
Project Participants: Stage Two (Financing the Project)
63
An introduction to the financing stage
63
The role of equity financing
65
The role of debt financing
68
The role of alternative financing
74
The role of other financing participants
77
Project Participants: Stage Three (Constructing the Project)
81
An introduction to the construction stage
81
The role of the construction contractor
83
The role of energy and other infrastructure
87
Ongoing roles
92
Project Participants: Stage Four (Operating the Project)
94
An introduction to the operations stage
94
The role of the operator
95
The role of the operation and maintenance guarantor
98
The role of feedstock, fuel, and other suppliers
99
The role of off-takers
101
Ongoing roles
104
Project reincarnation
105
Ownership and Project Structures
110
An introduction to ownership and project structures
110
Selecting an ownership structure
112
Types of ownership vehicle
123
Relationship among equity investors
135
Dilution and cross-charge mechanisms
138
Project structures
140
3.
Sources of Funding
Sources
8
Equity
13
Equity bridge loans
16
Subordinated shareholder debt
17
Mezzanine debt
20
Bank debt
22
Islamic project finance
27
Capital markets
28
Public sector lenders in project financings
38
Export credit finance
40
Multilateral agencies and development finance institutions
45
Leveraged and finance lease arrangements
53
Letters of Intent, Term Sheets, Commitment Letters, and Mandate Letters
55
Showing interest without a commitment---the letter of intent
55
The term sheet
59
Commitment letters and mandate letters
63
4.
Projects Risks
Introduction to project risks
1
Risk Identification---Due Diligence
3
General Issues For All Projects
7
Completion risk
7
Operating risk
30
Supply risk
34
Currency risk
41
Political risk
56
Environmental and social risk
71
Insurance
81
Supervening events affecting contractual performance
82
Force majeure
83
Frustration
90
Procurement rules
97
Competition law
99
Corrupt practices and money laundering
104
Participant risk
113
5.
Allocation of Risks in Project Documentation
Risk Allocation in Project Agreements
14
Shareholders' or joint venture agreements
15
Construction contracts
16
Operation and maintenance agreements
33
Site purchase or lease agreements
38
Off-take agreements
41
Fuel and other feedstock supply and transportation agreements
54
Development agreements/concession agreements
59
6.
Insurance
The importance of project insurances
1
A `bankable' insurance programme
4
Insurance Programme Design
10
Material insurances---material damage insurance
12
Material insurances---consequential loss insurance
22
Material insurances---liability insurance
24
Mandatory but non-material insurances
27
Project Company Control
32
The Breadth and Scope of the Insurance Programme
37
Full value coverage
38
Natural force majeure
39
Political force majeure
40
Insurability of force majeure risks
41
Standard exclusions from insurable risks
42
Legal and Commercial Influences on Procurement
45
Creditworthiness of the risk carriers
47
Reinsurance
49
Insurance Risk itself and Lenders' Clauses
56
General insurance law principles
57
Mitigation of the risks presented by general insurance law principles---lender endorsements
76
Broker's letter of undertaking
90
7.
Principal Loan Finance Documentation
Credit Agreements
3
Purpose clause
6
Conditions precedent
7
Drawdown of loans
12
Repayments'
15
Prepayments and cancellation
17
Interest
23
Market disruption
26
Yield protection
28
Tax gross up
31
Increased costs
34
Representations and warranties
35
Covenants
37
Financial ratios
40
Events of default
47
Remedies
50
Accounts Agreements
52
Shareholder Senior Facilities
58
Mezzanine Facility Agreements
59
Introduction
59
Key features of mezzanine facility agreements
63
Selected mezzanine facility agreement issues
68
Subordinated and Equity Bridge Facility Agreements
69
ECA Covered Facilities
77
Documentation
78
Eligibility criteria
80
Bribery and corruption---OECD Guidelines
81
Policing environmental covenants
83
Other documentation issues of interest to EGAs
92
Intercreditor Agreements
101
Introduction
101
Drafting and negotiation considerations
105
The typical project finance creditor classes
109
Selected intercreditor issues
112
Consideration affecting hedge providers
129
ECA covered loan voting mechanics
133
Considerations affecting project bonds
135
8.
Official Funding Sources: Export Credit Agencies and Multilateral Development Banks
ECAs and Multilaterals Generally
2
Export credit agencies defined
3
Multilateral development banks defined
5
Other governmental and quasi-governmental funding sources
7
Funding Considerations
10
Credit alternatives with export credit agencies
11
Rules applicable to ECAs
19
Credit alternatives for multilaterals
31
Common funding issues
38
Recent Trends
46
Non-OECD ECAs and `cooperation' agreements
47
Local currency funding options
49
Credit crisis of 2008--2010 and beyond
50
9.
Documentation of Project Bonds
History of project bonds
4
Securities Regulation and Legal Framework
7
Disclosure
9
United States
10
European Union
23
Other jurisdictions
27
Selling Restrictions
28
United States
29
European Union
33
Other jurisdictions
34
Governing Law
35
The Due Diligence Process
37
The Underwriting Process
41
Types of underwritings
43
Roadshow
45
Typical Project Bond Documentation
49
Offering circular
50
Subscription/underwriting agreement
75
Bond trust deed/indenture and global note
83
Global note
84
Trust deed/indenture
85
Intercreditor arrangements
89
Security documents/collateral deed
90
Auditor's comfort letter
91
Agreement among underwriters
93
Role of legal counsels and legal opinions
94
Listing
98
10.
Islamic Project Finance
Sources of Islamic Finance
4
The role of Sharia'a scholars and regulators
8
Islamic Finance Principles
10
Islamic Finance Techniques
14
Mudarabah
15
Musharaka
16
Murabaha
17
Istisna'a
18
Ijarah
19
Sukuk
22
Islamic Project Finance Techniques
23
Conventional Project Finance Structures
24
Multi-tranche Sharia'a-compliant Financing
26
Walcala-Ijarah tranche
32
Istisnaa-Ijarah tranche
42
Wakala-Ijarah tranche and Istisna'a-Ijarah tranche
45
Other techniques utilized in a multi-tranche project financing
59
Integrating the Conventional and Islamic Tranches
62
11.
Ancillary Finance Documentation
Equity Support
5
Introduction
5
Equity capital contributions
10
Completion support
31
Post-completion support
42
Security Arrangements
47
Introduction
47
The lenders' approach to security
55
Why take security?
59
Security over the sponsors' interests
66
Security over the project company's assets
70
Contract rights
75
Receivables, bank accounts, and permitted investments
83
Insurances
104
Direct Agreements
105
Legal Opinions
115
Purpose
115
First in country
119
Types of opinion
123
12.
Project Finance in Civil Law Jurisdictions
The origins of project financing under civil law
1
Concession or affermage contract (conventions de delegation de service public)
6
Public Private Partnerships (contrats de partenariat public prive)
9
Power Purchase Agreement---PPA
11
Public Projects and Tender Offers
13
EU Procurement Directives
14
Implementation in France---concessions and Public Private Partnerships
17
Consequences of breaches by the public authority of the prior call for competition
27
Creating and Perfecting Security Interests
29
Floating charges and pledges over business concerns in civil law jurisdictions
29
Security interest by type of assets
42
Mortgage over real property---mortgage and lender's purchase money security interest
43
Mortgage
44
Security over tangible moveable property
54
Security over intangible moveable property
61
Civil law fiducie (trust)
119
Direct Agreements and Step in Rights
127
Rationale for direct agreements
127
Issues Arising from Secured Lending
133
Early termination or cancellation of project contracts
133
Indemnification of the project company and the rights of the lenders
146
Insolvency of the project company and enforcement of security
154
Security granted by the project company and direct agreements
158
Management and outcome of the insolvency proceedings
172
Competition law
174
Efficacy of direct agreements
177
Security granted by the sponsors
179
Influence of Civil Code in African Countries: Organisation pour l'Harmonisation en Afrique du Droit des Affaires (OHADA)
182
Purpose of the OHADA
185
Structure of the OHADA organization
190
OHADA institutions
192
13.
Defaults and Workouts: Restructuring Project Financings
What is a restructuring?
1
What is different about a project finance restructuring?
4
Why do projects need restructuring?
7
Restructuring Protagonists
10
Overview
10
The debtor and its directors
14
The financial creditors
21
The sponsors
27
The project parties
32
The government/local authorities
35
Other parties
36
Process
37
Introduction
37
The restructuring `trigger'
38
Project finance covenants
42
The impact of covenant `loosening'
43
Material adverse change `triggers'
44
Creditor organization
46
Information gathering
51
Financial information
54
Legal due diligence
58
The standstill agreement
61
Contents of a standstill agreement
66
Restructuring negotiations
74
Restructuring valuations
75
An English lawyer's approach to valuation
77
The amount of ongoing debt
80
Restructuring agreement and implementation
81
Restructuring documentation
83
Restructuring Options
85
Introduction
85
Project finance limitations on creditors' options
94
Creditors' rights under project finance documents
95
Defaults during development/construction
96
Defaults during operations
98
Enforcement of security
99
14.
Dispute Resolution in Project Finance Transactions
Disputes Involving Commercial Risk
2
Commercial Risks that Frequently Result in Project Disputes
3
The Choice between Litigation and Arbitration
6
Litigation in national courts
8
Arbitration
14
Disputes Involving Political Risk
25
Contractual, regulatory, and tax risks
25
Investment agreements
26
Treaty-based political risk protections
30
Political risks covered by investment treaties and statutes
31
Potentially eligible project participants with treaty protections
37
Consent to arbitration in investment treaties
42
Political risk insurance
44
Structuring investments to optimize political risk protections
49
Enforcement of Judgments and Awards
52
Enforcement of judgments
53
Enforcement of arbitral awards
59
New York Convention
60
Washington Convention
62
Dispute Resolution `Toolkit'
63
Dispute resolution clauses, common components
64
Exclusivity
66
Scope of arbitration
67
Institution selected for arbitration
68
Selection of arbitration panel
70
Severability
73
Language of arbitration
74
Seat of arbitration
75
Scope of disclosure
78
Privacy and/or confidentiality
79
Jurisdiction
80
Entry of judgment, judgment currency, and manner of payment
81
Final and binding arbitration
83
Payment of costs and legal fees
84
Choice of law
85
Reducing disruption---multi-tiered dispute resolution
87
Typical means of ADR
91
Reducing the Chance for Error: Qualification Requirements and Appeals
98
Limited flexibility in litigation
98
Qualification requirements in arbitral clauses
99
Appeals rules in arbitral clauses
100
Consolidation of Potential Disputes by Agreement
101
Structuring for permissive joinder in litigation
102
Structuring for multi-party arbitration
103
Increasing Effectiveness: Early Remedies and Final Enforcement
104
Waiver of defenses to enforcement of judgments
104
Early relief in arbitration
105
Limiting recourse to set aside actions
106
Appendix 1
Checklist of Conditions Precedent, Representations, Covenants, and Events of Default for inclusion in Finance Documents
463
Appendix 2
Environmental Due Diligence Checklist
471
Appendix 3
Checklist of Key Provisions of a Joint Venture or Partnership Agreement
475
Appendix 4
Checklist of Key Provisions in a Concession Agreement
477
Appendix 5
Checklist of Key Provisions in Turnkey Construction/EPC Contracts
481
Appendix 6
Checklist of Key Provisions in Feedstock Supply Contracts
485
Appendix 7
Checklist of Key Provisions in Offtake/Power Purchase Agreements
489
Appendix 8
Checklist of Key Provisions in Operation and Maintenance Agreements
493
Index
407