Category

Glossary

Glossary
August 23, 2022

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…
Steve Mills
Glossary
August 19, 2022

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.
Steve Mills
Glossary
August 18, 2022

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…
Steve Mills
Glossary
August 17, 2022

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 –…
Steve Mills
Glossary
August 16, 2022

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…
Steve Mills
Glossary
August 15, 2022

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…
Steve Mills
Glossary
August 12, 2022

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…
Steve Mills
Glossary
August 11, 2022

Bullet Repayment

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.
Steve Mills
Glossary
August 10, 2022

Borrowing Base 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).
Steve Mills
Glossary
August 9, 2022

Bond

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…
Steve Mills