All Posts By

Steve Mills

Glossary
September 23, 2021

Conditions Precedent

A condition precedent is an event or state of affairs that is required before something else will occur. In contract law, a condition precedent is an event which must occur, unless its non-occurrence is excused, before performance under a contract becomes due, i.e., before any contractual duty exists. In project…
Glossary
September 22, 2021

Compensation Account

A Control Account, which will receive sums such as insurance proceeds, contract termination payments and performance liquidated damages. Sums from this account may be used to repair / reinstate the project. If this does not happen the sums on the Compensation Account are likely to be used to repay the…
Glossary
September 21, 2021

Commitment Commission

Otherwise known as Non-Utilisation Fee. A fee charged by lenders on the unutilised portion of a committed loan facility – such as a project financing – to compensate them for the capital which they need to set aside on the unused portion of a committed transaction. In project financing transactions…
Glossary
September 20, 2021

Club Deal

A club deal is a loan provided by a group of banks on a non-syndicated basis, i.e. they are all fronting banks who each have a seat at the negotiating table and are each party to the financing documents.  There is no lead arranger as such, rather each lender gets…
Glossary
September 17, 2021

Cashflow Waterfall

The pre-agreed order in which payments will be made from available cashflow by the SPV – typically operating costs (including taxes), then debt service payments and transfers to reserve accounts and then distributions to Equity. Also known as the Cashflow Cascade.
Glossary
September 16, 2021

Cashflow Available for Debt Service (CFADS)

The cashflow remaining in a given period (either historical or projected) after cash operating costs and taxes have been deducted from operating revenues. It is emphasised that this is a cashflow – rather than revenue statement (P&L) – concept, so items such as provisions and depreciation are not taken into…
Glossary
September 15, 2021

Cash Trap

Any feature of a loan facility which permits lenders to hold cash within the SPV rather than releasing it to the project Sponsors as a Distribution. An example would be a Distribution Lock-Up Ratio. Cash traps are viewed negatively by sponsors – who therefore tend to negotiate them heavily –…
Glossary
September 14, 2021

Cash Sweep

A mechanism used in project finance debt structures where projected revenue / cashflow is inherently unpredictable. Following scheduled Debt Service and any required transfers to reserve accounts, some or all of the remaining Cashflow Available for Debt Service – which would usually be distributed to the sponsors of the project…
Glossary
September 13, 2021

Capacity Payment

Part of an offtake arrangement – such as a Power Purchase Agreement – which is structured so as to cover the fixed costs of a project SPV, including its Debt Service. Sometimes referred to as an Availability Payment. The payment is made to the SPV regardless of actual offtake, so…
Glossary
September 10, 2021

Business Interruption Insurance

Business interruption insurance is a type of insurance that covers the loss of revenue relating to delay, suspension or closure of a project facility , provided that such interruption is caused by (or tied to) a claim for physical damage to the underlying project.  It is limited in duration, typically…