Glossary

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…

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.

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…

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 –…

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…

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…

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…

A loan structure under the terms of which the full amount of loan principal is repaid in one amount on the final maturity date of the loan facility.

A type of loan facility used in Reserve-Based Lending (RBL). The term may refer to either the US type of facility (US Borrowing Base) or the European / International variant (European Borrowing Base).

May have a range of meanings in the finance sector. In project finance the most common meanings are: A loan instrument used as an alternative or in addition to bank financing – a “Project Bond”. The project SPV raises debt by selling bonds to investors – usually through the intermediary…