Every day CCC Training provides a definition of a different project finance term, so please bookmark this page to build up your own personal glossary.

Participants in CCC Training courses each receive the most up-to-date version of our comprehensive glossary – which covers the complete range of financing, documentation, ESG, sector and technical terminology.

TODAY’S DEFINITION

Conditions Precedent

By Glossary

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…

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A-Z of Project Finance

Advance Payment Guarantee

By Glossary

Where a construction contractor receives an advance payment (often in the range of 10-20% of contract price) he will frequently be required to post a Bond for the same amount by way of security until the amount of work represented by the payment has been carried out. The bond will…

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Amortisation

By Glossary

With regard to loans, amortisation is the process of reducing the size of the loan by making scheduled repayments of principal (as opposed to the interest due on the loan outstandings). The amortisation schedule is thus the agreed series of repayments built into the loan agreement. In accounting, amortisation is…

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Annual Debt Service Cover Ratio (ADSCR)

By Glossary

The ratio of Cashflow Available for Debt Service to interest payments and loan repayments in a given period. The most commonly used ratio for the sculpting and stress-testing of debt service payments and the setting / testing of cashflow-based covenants.

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Arrangement Fee

By Glossary

In project finance, usually the fee paid by the sponsor(s) of a project to the lender(s) acting as Mandated Lead Arranger(s) in return for structuring, documenting and syndicating the necessary loan facilities. From this fee the Mandated Lead Arranger(s) will typically pay Participation Fees to the lenders joining the transaction…

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Bid Bond

By Glossary

A bid bond is issued to the owner of a project (typically the SPV), as part of a supply bidding process, to provide assurance  that the winning bidder will undertake the contract under the terms at which they bid. The bond is subject to full or partial forfeiture if the…

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Boilerplate

By Glossary

In contract law, the term “boilerplate language” or “boilerplate clause” describes the parts of a contract that are considered standard. In negotiations, the phrase “that’s boilerplate” can be used to mean that a clause is simply required and therefore not negotiable, does not need to be negotiated or is not…

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Bond

By Glossary

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…

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Borrowing Base Facility

By Glossary

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).

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Business Interruption Insurance

By Glossary

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…

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Capacity Payment

By Glossary

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…

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Cash Sweep

By Glossary

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…

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Cash Trap

By Glossary

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 –…

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Cashflow Available for Debt Service (CFADS)

By Glossary

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…

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Cashflow Waterfall

By Glossary

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.

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Club Deal

By Glossary

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…

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Commitment Commission

By 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…

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Compensation Account

By Glossary

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…

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Conditions Precedent

By Glossary

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…

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