Category

Glossary

Glossary
December 7, 2021

Price Deck

The price assumption being used at a particular point in time by a bank financing oil & gas projects for projected production which is not subject to a hedge such as a swap, option or collar. The price deck assumption will be revised by a lender on a regular basis…
Steve Mills
Glossary
December 6, 2021

Prepayment Penalty / Fee

A fee which requires a payment by the Borrower to the parties financing a project (typically banks) in the event that all or a part of a financing is repaid by the borrower in advance of its scheduled final maturity date. The payment is typically a percentage of the amount repaid. If…
Steve Mills
Glossary
December 3, 2021

Power Purchase Agreement (PPA)

A structured – typically long-term – offtake arrangement between a power-generator SPV and a power Offtaker. The offtaker may be a public or private sector entity. A wide range of such instruments exists, but the PPA incorporating a Capacity Payment tends to be the offtake structure of choice in project-financed…
Steve Mills
Glossary
December 2, 2021

Political Risk Insurance (PRI)

A type of insurance which covers the risk that losses will be caused by country or political issues, such as: Political violence - revolution, insurrection, civil unrest, terrorism or war; Governmental expropriation or confiscation of assets; Governmental frustration or repudiation of contracts; Wrongful calling of letters of credit or similar…
Steve Mills
Glossary
December 1, 2021

Performance Bond

When a contractor’s tender for a construction project is successful, he will be released from his obligations under his Bid Bond once he has submitted a performance bond as security for completion of the work. If the contractor fails to construct the project according to the specifications laid out by…
Steve Mills
Glossary
November 30, 2021

Participation Fee

A fee paid by the Mandated Lead Arranger(s) of a financing to other banks taking part in the transaction. This is a one-off payment, typically a flat percentage of the participant’s contribution to the loan (the participant’s “ticket”).
Steve Mills
Glossary
November 26, 2021

Open Book Contract

In an open-book contract, the buyer and seller of work/services agree on: a) which costs are remunerable; and b) the margin that the supplier can add to these costs. The project is then invoiced to the customer based on the actual costs incurred plus the agreed margin. It is essentially…
Steve Mills
Glossary
November 25, 2021

Offtake

The arrangements for the disposal / use of the goods or services to be produced by a project. Many projects have a formal offtake contract (e.g. a power purchase agreement) with a contractual Offtaker. Others have no formal offtake agreements – e.g. where a commodity (such as oil) is sold in…
Steve Mills
Glossary
November 24, 2021

Non-Recourse Loan

The difference between a Limited-Recourse Loan and a Non-Recourse Loan is really one of emphasis. The term Non-Recourse Loan tends to be used by Sponsors, who are thereby emphasising that once they have injected their base Equity there is no further obligation on them. Lenders tend to use the term “Limited-Recourse Loan” rather than “Non-Recourse…
Steve Mills