Steve Mills

The Sponsors’ share of the cost of construction, which is typically injected into the SPV partly by the purchase of ordinary share capital in the SPV and partly by way of so-called “Inter-Company Loans” from the Sponsor(s) to the SPV. It is common for the amount of inter-company loan funding…

The Equator Principles provide a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in project finance. It is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. The Equator Principles, formally launched in Washington DC on…

For most practical purposes in project financing an EPC contract is the same as a Fixed Price Turnkey (FPTK) Contract. An EPC contract generally provides for the obligation of the contractor to build and deliver the project facilities on a fixed price, turnkey basis, i.e., at a certain pre-determined fixed…

Payments by a project SPV to its Sponsors by way of dividends on equity ordinary shares and / or by way of interest and principal repayments in respect of equity subscribed as subordinated inter-company loans. Such payments typically occur on a Repayment Date, at the bottom of the Cashflow Waterfall.

A Covenant which requires a project SPV not to pay Distributions unless a pre-agreed Cover Ratio is met. Typically distributions will not be allowed unless three conditions are met: No Event of Default outstanding; Debt Service Reserve Account fully funded as required; Distribution lock-up ratio test met.

A Control Account, which receives loan drawdowns and equity injections and which is mainly used to make payments to the construction contractor(s) against appropriate evidence that construction milestones have been met.

A Control Account, into which the Borrower is obliged to deposit an amount equal to a specified period of debt service, typically 6 months’ worth ( i.e., aggregate of 6 months interest and one principal repayment instalment).

A commitment by a project Sponsor to meet scheduled interest payments or interest and principal repayments on a project which has not been completed by a defined date, until the date that completion is actually achieved.

A form of calculation used in the structuring and stress-testing of project financing debt facilities – the most common being the Annual Debt Service Cover Ratio and the Loan Life Cover Ratio. Cover ratio values are frequently also incorporated into loan agreement Covenants and Events of Default.

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…