INTRODUCTION TO

PROJECT DEVELOPMENT AND FINANCE PROCESS

Private and Confidential: For Limited Circulation Only

DISCLAIMER

• This presentation (“Presentation”) has been prepared by Synergy Consulting Infrastructure and Advisory Services Inc. (“Synergy’)
to provide helpful information on the subjects discussed for educational purposes only.

• Synergy will not regard any person (whether a recipient of this Presentation or not) as a Client and will not be responsible for
providing any advice or protections to such person.

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• Synergy does not undertake and is under no obligation to provide any additional information, to update this file, to correct any
inaccuracies or to remedy any errors or omissions in this Presentation.

• This Presentation should not be regarded as constituting an opinion on the situations discussed in the Presentation, nor relied
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Private and Confidential: For Limited Circulation Only 2

 CONTENTS

1 DEVELOPMENT PROCESS OVERVIEW

2 KEY FINANCING TERMS 3 FINANCE DOCUMENTS

Private and Confidential: For Limited Circulation Only

 DEVELOPMENT
1 PROCESS -
OVERVIEW

4
1.0 PROJECT DEVELOPMENT PROCESS

1 2 3 4
PHASE– 1 PHASE– 2 PHASE– 3 PHASE– 4
Project Prefeasibility Initial Negotiations & Project Signing &
Studies Development Finalization Financial Close

Completion of
Initiation Project Launch Prefeasibility
study
Phase 1:
Project Pre-
feasibility Studies
Completion
of Detailed
Studies
Phase 2:
Initial
Development
Appointment of EPC End of Negotiations
Finalization of
Contractor with relevant
Project Documents
parties
Phase 3:
Negotiations &
Finalization
CTA/Facility
EPC, O&M and Project Agreement
Document Signing Execution
Phase 4:
Project Signing &
Financial Close

Private and Confidential: For Limited Circulation Only 5

1.1 PROJECT DEVELOPMENT PROCESS – PHASE 1 ..(1/2)

1 2 3 4
PHASE– 1 PHASE– 2 PHASE– 3 PHASE– 4
Project Prefeasibility Initial Negotiations & Project
Studies Development Finalization Signing & Financial
Close

Key Activities: Phase 1 involves evaluation of followings -

 Project Initialization
• Initial discussions with the Ministry for off-
take requirement, credit support, land
allocation etc.
• Identification of all licenses, permits and
authorizations
 Equity Partners (Joint Development)
• Identification of potential partners
• Allocation of roles and responsibilities
• Joint Development Agreement
• Minimum IRR requirement
 Contract Structure and Risk Allocation
• Preliminary commercial and transaction
structure
• Initial risk matrix
• Legal and regulatory framework
• Technical and operational aspects

 Project Management Team and Cost  Project Prefeasibility Studies  Land

Estimation • Advisors appointment • Site identification
• Allocating resources for monitoring the • High level techno-commercial prefeasibility • Land size and geographical topography
technical, financial and administrative study • Proximity to the Access Road
aspects • Demand analysis for the Country • High level site investigation
• Preliminary cost estimation • Geological risks – foreseen and
• Internal approval and budgeting unforeseen

Private and Confidential: For Limited Circulation Only 6

1.1 PROJECT DEVELOPMENT PROCESS – PHASE 1 ..(2/2)

1 2 3 4
PHASE– 1 PHASE– 2 PHASE– 3 PHASE– 4
Project Prefeasibility Initial Negotiations & Project
Studies Development Finalization Signing & Financial
Close

Key Activities: Phase 1 involves evaluation of followings -

 Transmission line  Market Sounding  Tariff Structure Finalization

• Pre-feasibility preliminary study for
transmission network, grid connection etc.
• Study of capacity of existing network and
utilization of current infrastructure
 Utilities Procurement Study
• Initial study on water procurement
• Initial study on main and back-up fuel
procurement
 Environment Study
• Initial Environmental and social impact
assessment (ESIA) study
• Market research/analysis of similar • Benchmarking
projects and development of internal • Take or Pay (procurer pays for installed
timelines capacity)
• Project market sounding, teaser, high level
identification of potential lending groups  Financial Model
• Preliminary financial model for techno-
commercial study
 Feedback Analysis • Evaluation of various financial and
• Collection of proposals from prospective technical options
lenders for initial financing terms for the
Project  MoU Signing
• Benchmarking of initial responses from • Signing of MoU or a similar document
lenders reflecting consent and support of Govt.
• Identification of key bankability issues for the Project

Red-dots are part of Financing Process

Private and Confidential: For Limited Circulation Only 7

1.2 PROJECT DEVELOPMENT PROCESS – PHASE 2 ..(1/2)

1 2 3 4
PHASE– 1 PHASE– 2 PHASE– 3 PHASE– 4
Project Prefeasibility Initial Negotiations & Project
Studies Development Finalization Signing & Financial
Close

Key Activities: Phase 2 involves evaluation of followings -

 Contract Structure and Risk Allocation
• Detailed risk allocation matrix
• Risk mitigation/allocation through
appropriate commercial and transaction
structure
 Transmission line (Existing)
• Detailed report on transmission network
and grid connection including capacity of
existing network, nearest sub-station,
availability and operational risk of the  Water
transmission line etc.
• Requirement for new transmission line for
off-take
Red-dots are part of Financing Process
 Contractual Structure for Development of
New Transmission Line
• Contractual structure for the
construction, maintenance and
operation of transmission line
• Feasibility/Technical Studies
• Grant of easements/land acquisition,
Right-of-Way (RoW) etc.
• The delivery point
• Detailed water procurement study
including source, quality, transportation
• Land acquisition/right-of-way for laying
pipelines
• Negotiations with water authority
 Land
• Detailed site investigation including
topography, soil investigation, gradation,
etc.
• Finalize terms of land lease/
acquisition/utilization
 Environment Study
• Detailed study on environmental and
health & safety aspects
• Review of plant safety issues,
• Related performance guarantees
(emissions, noise, water treatment and
discharge, etc.)
• Compliance with local legislation and
international standards including Equator
Principles

Private and Confidential: For Limited Circulation Only 8

1.2 PROJECT DEVELOPMENT PROCESS – PHASE 2 ..(2/2)

1 2 3 4
PHASE– 1 PHASE– 2 PHASE– 3 PHASE– 4
Project Prefeasibility Initial Negotiations & Project
Studies Development Finalization Signing & Financial
Close

Key Activities: Phase 2 involves evaluation of followings -

 Fuel – Main and Back-up  Financial Model  Preparation of Project Documents

• Finalize fuel procurement strategy
• Study of existing fuel infrastructure
including transportation
• Feasibility/Technical Studies
• Grant of easements/land acquisition,
Right-of-Way (RoW) etc.
• Preparation of detailed financial model
• Finalization of technical and financial
structure
• Evaluation of possible technical/
commercial solutions
• Sensitivity and scenario analysis
• Initial draft of project documents such as
PPA, FSA, ESA, land lease,
interconnection, water supply etc.
• Legal advise as required for local and
international legal aspects
• Finalization of head of terms for power
purchase agreement with the procurer

 Project Technical Studies  Debt Arrangement  Pre-qualification of EPC and O&M

• Initial engineering design including plant
configuration
• Technical advisor review on key aspects
and risk on the proposed technology such
as plant performance and reliability
• Identification of lending group and Contractor
Mandated Lead Arranger (MLAs) • Prequalification
• Application for ECA/DFI/ Commercial bank • Prepare and release Request for
funding cover Proposal (RfP) including technical
specifications

Red dots are part of Financing Process

Private and Confidential: For Limited Circulation Only 9

1.3 PROJECT DEVELOPMENT PROCESS – PHASE 3 ..(1/2)

1 2 3 4
PHASE– 1 PHASE– 2 PHASE– 3 PHASE– 4
Project Prefeasibility Initial Negotiations & Project
Studies Development Finalization Signing & Financial
Close

Key Activities: Phase 3 involves evaluation of followings -

 Appointment of EPC and O&M Contractor  Transmission Network
• Evaluation of EPC proposals • Grid Connection Agreement
• Negotiation and finalization • Dispatch Agreement
• Appointment of EPC and O&M Contractor • Network Access Agreement
• Drafting and review of EPC and O&M term • Wheeling Agreement
sheets
 Debt Arrangement
• Commitment letters from financing
 Permits and licenses entities
• Obtain and maintain all licenses, permits, • Appointment of Mandated Lead Arranger
authorizations and consents (MLAs)
• Appointment of lenders’ advisors
• Assist lenders/their advisors in due
diligence, ESIA study process, KYC
requirement, etc.
 Negotiations and Finalization of Project
Agreements
• Submission of Initial draft of project
documents to the relevant entities
• Meetings to resolve project document
mark ups/ queries if any
• Negotiation and finalization of PPA, fuel
supply agreement, government support ,
land lease agreement, interconnection
and other key project documents

Red-dots are part of Financing Process

Private and Confidential: For Limited Circulation Only 10

1.3 PROJECT DEVELOPMENT PROCESS – PHASE 3 ..(2/2)

1 2 3 4
PHASE– 1 PHASE– 2 PHASE– 3 PHASE– 4
Project Prefeasibility Initial Negotiations & Project
Studies Development Finalization Signing & Financial
Close

Key Activities: Phase 3 involves evaluation of followings -

 Negotiations and Finalization of Financing  Other Activities  Equity investment and Sponsors
Agreements • Formation of project company, KYC • Finalization of shareholders and
• Negotiations on financing terms and requirements, opening of project shareholders agreement
contractual aspects accounts, etc. • Potential dilution and investment from
• Lenders approval on project documents, • Finalization of all other financial closure other investors (if needed)
financial model, sensitivity analysis etc. documents
• Finalization of ISDA agreement for hedge
placement
• Preparation of financing documents
(financing term sheets, letters of support
etc.)

Red-dots are part of Financing Process

Private and Confidential: For Limited Circulation Only 11

1.4 PROJECT DEVELOPMENT PROCESS – PHASE 4

1 2 3 4
PHASE– 1 PHASE– 2 PHASE– 3 PHASE– 4
Project Prefeasibility Initial Negotiations & Project
Studies Development Finalization Signing & Financial
Close

Key Activities: Phase 4 involves evaluation of followings -

 EPC and O&M contract execution  Project Agreements  Financing Agreements

• Finalization of commercial aspects and • Finalization of project documents with the
negotiations with: procurer
o EPC Contractor (including sizing of LDs, • Signing of project documents including
risk allocation, margins for competitive PPA, FSA etc. with relevant parties
EPC pricing)
o O&M Contractor (including O&M fees,
 Hedge Placement
LDs and risk allocation)
• Negotiation and execution of all
• EPC Contract execution documents relating to the hedge process
• O&M Contract execution
• Obtaining of an optimal and competitive
hedging solution
• Model finalization, Hedge execution, post
hedge tariff finalization
• Finalization of bank roles, completion of
lenders’ due diligence and final credit
approvals
• Negotiations and discussions with
lender’s legal advisor
• Signing of covered/direct facility from
ECA/DFI/ World bank
• Finalization and signing of financing
agreements/CTA

Red-dots are part of Financing Process

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1.5 TYPICAL CONTRACTUAL STRUCTURE
Shareholders’ Financing
Agreement Agreements
Sponsors/
Senior Lenders
Shareholders Equity Debt

Fuel Cost Payment

Project Company
Input Supplier Concession Grantor
(SPV) Concession
Fuel Supply Agreement
Agreement

EPC Agreement O&M Agreement Direct Agreement

EPC Contractor O&M Contractor

Vide the above water-tight contractual structure, risk is allocated to the party most suited to manage it

Legend
Payment
Contract 13
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1.6 SOURCE OF FUND
FINANCING OF PROJECT COST

In order to meet the project’s funds requirement, cash is infused either in form of Equity or Debt

EQUITY PROJECT COST DEBT

OPTIONS FOR EQUITY FINANCING OPTIONS FOR DEBT FINANCING

• Cash Equity Infusion • Loans from lenders including :

• Equity Bridge Loan • Multilateral Agencies/ DFIs
• Shareholders Loan • ECAs
• CCD/OCD • Commercial Banks/FIs
• Bonds
• Debentures
• Institutional Investors

LOAN CLASSIFICATION: ON THE BASIS OF LOAN CLASSIFICATION: ON THE BASIS OF

DOCUMENTATION STRUCTURE

• Commercial Lending • Long Term Facility (Covered / Uncovered)

• Islamic Financing • Mini Perm Facility

Private and Confidential: For Limited Circulation Only 14

1.7 PROJECT FINANCE PHASES
SCHEDULE OF DEVELOPMENT & CONSTRUCTION PHASE

DEVELOPMENT PHASE CONSTRUCTION PHASE

1. EFFECTIVE DATE 3. CONSTRUCTION IMPLEMENTATION SCHEDULE

2. CLOSING DATE 4. INITIAL COMMERCIAL OPERATION DATE
5. PROJECT COMMERCIAL OPERATION DATE

DEVELOPMENT PHASE

UP TO EFFECTIVE DATE POST EFFECTIVE DATE

• Finalization of concession agreement • Discussions of sponsor with EPC contractor, O&M operator
and financing parties
• The Project Company provides a Development Security to
the Offtaker as a security for achieving the Closing Date / • Approvals from the Offtaker regarding any changes in
financial close specifications or performance
• Finalization of direct agreements between the Project
Company, Offtaker and the lenders
CONSTRUCTION PHASE

SCHEDULED
• Project company shall have obligations to make plant
available for commercial use by Scheduled ICOD (SICOD) /
Scheduled PCOD (SPCOD)
• In case of Force Majeure, the SICOD/ SPCOD are adjusted
as per the project agreements
• Liquidated damages to be paid by the Project Company in
case of breaches in the concession agreement
EXTENDED
• In case of non availability of plant for commercial
operations by SPCOD, liquidated damages covering the
loss of revenue and any additional losses, have to be
paid by the Project Company
• Any delay beyond the Long Stop Date terminates the
concession agreement

Private and Confidential: For Limited Circulation Only 15

1.8 DETAILED FINANCING PROCESS
PROCESS FOR ARRANGING DEBT FINANCING
A process being followed for arranging the financing from the international lenders which typically goes from 6 to 9 months after executing the
PPA/Concession Agreement with the relevant authorities

TASKS ACTIVITIES
• Identifying and exploring alternate financing options for the Project through its strong relationships with major
Market Sounding bilateral and multilateral financing institutions
• Assessment of various financing instruments (Mezzanine/Subordinate Debt, EBL, etc.) for tariff optimization

Assessment of • Leading term sheet discussions and negotiations with lenders

Financing Terms (If • Assisting in the due diligence process with the lenders
Required) • Obtaining approval and signoff from lenders in compliance with RfP

Preparation of Risk • Review and preparation of a comprehensive comments and clarifications on the Project agreements to assess the
Allocation bankability of the Project
Framework • Preparing comments and responses to the clarification documents received
• Assisting legal advisors in preparation of risk allocation matrix & assigning appropriate risk

• Reviewing commercial aspect of the EPC and O&M documents to perform bankability assessment and their
Review of EPC & compliance with RfP
O&M Documents
• Reviewing the project milestones (if provided) and deliverability based on documents

Preparation of
teaser and • Preparation of the high level teaser to reach out to various banks for Lead Arranger Role
Appointment of • Prepare of Initial Response Form (IRF) to seek commercial terms from the Mandated Lead Arranger
Mandated Lead • Negotiate the high level terms
Arranger

Private and Confidential: For Limited Circulation Only 16

1.8 DETAILED FINANCING PROCESS
PROCESS FOR ARRANGING DEBT FINANCING
A process being followed for arranging the financing from the international lenders which typically goes from 6 to 9 months after executing the
PPA/Concession Agreement with the relevant authorities

TASKS ACTIVITIES
• Preparation of RFP/terms of reference for the Lenders Advisors including legal advisors, technical advisors, market
Appointment of advisors, insurance advisor, environment advisor and model auditor
Lenders Advisors
• Appointment of advisors at the relevant stage of financing

Due Diligence by • Support Lenders Advisors in completing their due diligence in terms of clarifications
the Lenders • Support in Preparation of Legal Due Diligence Report, Technical Due Diligence Report and Market Due Diligence
Advisors Report

Preparation of Long • Lender Legal Advisor/Owners Advisors to prepare the Long Form Financing Termsheet
form Financing • Negotiation of Termsheet with lenders and lenders advisors
Termsheet and • Obtaining Credit Approval from the LendersAssisting legal advisors in preparation of risk allocation matrix &
Credit Approval assigning appropriate risk

Preparation of • Drafting of Common Terms Agreement and other ancillary financing documents
Financing
Documents • Negotiation of all Financing documents, including Direct Agreements

Board Approval and • Obtaining the Board Approval and Satisfaction of CPs, including completion of Model Audit satisfying the financing
CP Satisfaction covenants

Private and Confidential: For Limited Circulation Only 17

 Key Financing
2
Terms

18
2.1 KEY FINANCING CONSIDERATIONS

• Interest cost
• Base rate and margin Debt • Methods of debt drawdown
• Base rate hedging and credit • Structure and frequency of
spread Fees to Drawdown
Lenders and repayment profile
• Additional fee payable to lenders • Impact of repayment profile
(Commitment fee, upfront fee etc.) Repayment on shareholder IRR
• Key project
financial ratios Financial • Different project
under Ratios and Project accounts under
consideration Security Account financing
documents
for seeking Package
debt facility • Movement of
• Guarantee/ funds between
security sought these accounts
by lenders

Sources of KEY FINANCIAL

Conditions
Financing CONSIDERATIONS Precedent

• Equity
• List of approvals, documentation and
• Senior Debt Facility
submissions to be met before debt
• Junior Debt Facility
drawdown
• Standby Equity Facility
• List of consents to be obtained from
• Standby Debt Facility
different entities for operation of the plant
• Bridge Facility

Private and Confidential: For Limited Circulation Only 19

2.2 METHODS OF DEBT DRAWDOWN
BACK ENDED PRO RATA FRONT ENDED

• In this kind of drawdown structure
equity is drawn first. Debt is drawn
once all the equity amount has
been exhausted and utilized to
fund project costs
• Most common structure followed in
infrastructure projects
• Preferred by lenders as there is a
comfort that equity obligations are
utilized first
• Completion risk is mitigated by a
few months (till the equity amount
is fully drawn)
• Interest during construction is
lower and hence leading to lower
project cost
• Both equity and debt are drawn on
a pro rata basis to meet the project
funding requirements
• Debt and equity are drawn from day
1 with the beginning of
construction period
• Leads to higher project costs since
the financing costs are higher (due
to higher IDC)
• Lenders generally require a LC in
this case equivalent to the amount
of equity committed but not
invested by the shareholders
• Under this structure debt is drawn
prior to equity i.e. equity is drawn
once all the debt amount has been
exhausted and utilized to fund the
project costs
• Not very common structure
• Not preferred by lenders due to
higher completion risk and no cash
injected by shareholders
• Interest during construction is the
highest amongst all the three
methods of drawdown
• Lenders generally require a LC in
this case equivalent to the amount
of equity commitment

Impact of the above debt infusion (thus equity infusion) mechanisms may be substantial on the Equity IRR and thus the above may be utilized as
a key IRR optimization technique (subject to discussions with the lenders)

Private and Confidential: For Limited Circulation Only 20

2.3 INTEREST RATE
Definition
General Payment Terms
Components of Interest
WAYS OF STRUCTURING DEBT INTEREST
Interest During
Construction
Uniform Interest Margin
Back Ended Interest
Front Ended Interest
Private and Confidential: For Limited Circulation Only
• Interest is a charge payable to the lender for borrowing money. It is usually calculated as a percentage
of the debt outstanding
• Generally the interest accruing on the debt outstanding is calculated on the basis of actual number of
days elapsed since the amount was borrowed or the last payment of interest
• Interest can be paid on a monthly, quarterly, semi-annual or annual basis
• The interest payment is based on the below two components:
• Base reference rate: for example LIBOR
• Margin: Amount charged by lenders over and above base reference rate
STAGES OF INTEREST
• Interests charges are capitalized during construction period
• Hence the total project cost includes all the soft costs (IDC,
other fees like Upfront Fee, Commitment Fee etc.)
DURING
CONSTRUCTION
• Same interest margins are charged by the lenders throughout
the debt tenor
• Interest amount in absolute terms is higher in the initial years of
debt repayment
DURING
• Interest margin is lower in initial years of debt repayment and OPERATION
stepped up towards the end of the debt tenor
• This incentivizes the borrower to refinance
• In contrast to back ended structure, interest margin is higher in
initial years of debt repayment and stepped down towards the
end of the debt tenor
21
2.3 INTEREST RATE
INTEREST RATE HEDGING

• Since the base rate of the debt interest generally fluctuates with time, the Project Company has to
Requirement
protect itself against the fluctuating interest rates which will impact debt repayment and financial ratios

• Interest rate swaps are used to hedge against fluctuating interest rates
• Project company pays fixed interest rate on hedged principal amount to the hedging bank and the
margin to the lending bank
Determination
• Hedging bank pays the floating rate to the lending bank
• Thus the Project Company is protected against fluctuating interest rates and the risk is borne by the
hedging bank

• The hedging agreement should be compliant with the International Swaps and Derivatives Association
(ISDA) agreement
Hedging Terms
• ISDA has created standardized contracts to enter into derivatives transactions, to help companies
across the world

PAYMENTS STRUCTURE

PROJECT COMPANY

Floating Rate Fixed Rate Floating Rate Margin

HEDGING BANK LENDING BANK

The Project Company pays hedging bank a fixed rate in return for floating rate & pays the hedging bank a floating rate margin

Private and Confidential: For Limited Circulation Only 22

2.4 PRINCIPAL REPAYMENT METHODS
OPTIONS OF PRINCIPAL PREPAYMENT (1/2)
STRAIGHT LINE METHOD

• Under this method the debt amount is repaid in equal STRAIGHT LINE
installments

Debt Service Amount

• The total debt service amount (i.e. interest + principal)
is higher in the initial years and it gradually declines
towards the end of the debt tenor

• Lenders are more comfortable under such a structure Time (Years)

as the amount receivable by them is fixed

MORTGAGE STYLE

• The total debt service amount (i.e. interest + principal) MORTGAGE STYLE
is fixed for each period

• However the component mix of interest and principal

repayment varies under each installment Debt Service Amount

• In the initial periods of repayment, the interest

component is higher and principal repayment amount
is low

• Towards the end of debt tenor, the interest component

declines and principal repayment is higher Time (Years)

Private and Confidential: For Limited Circulation Only 23

2.4 PRINCIPAL REPAYMENT METHODS
OPTIONS OF PRINCIPAL PREPAYMENT (2/2)
SCULPTED REPAYMENT PROFILE

SCULPTED REPAYMENT
• The principal repayment percentage is determined in
such a way that in each period of repayment the
minimum DSCR covenant is met

Debt Service Amount

• Amount of principal repayment is directly related to the
operating margin level of the project

• Most common form of debt repayment method

followed under project financing Time (Years)

DEBT REPAYMENT WITH BALLOON

• The final installment of a loan to be paid in an amount REPAYMENT WITH BALLOON

that is disproportionately larger than the regular
installment
Debt Service Amount
• Suitable for projects in which debt is to be refinanced

• The balloon repayment results in back ended debt

repayment. The developer may benefit by either paying
higher dividends in the initial years (generally not
accepted by banks) or by increasing debt carrying
capacity of the project Time (Years)

Private and Confidential: For Limited Circulation Only 24

2.5 TYPICAL PROJECT FINANCE CASH WATERFALL
Project Revenues Received

Project Revenues Account

Construction / Operating Account Project Construction / Operating Expenses

Debt Payment Account Fees / Interest & Scheduled Principal

Debt Service Reserve Account To maintain the required Debt Service Reserve level

Maintenance Reserve Account To maintain the required Maintenance Reserve level

Subordinated Debt Account Payment of Subordinated Debt (if any)

Remaining amount distributed to equity holders

Distribution Account
(assuming no defaults and financial tests are met)

Private and Confidential: For Limited Circulation Only 25

 Finance
3
Documents

26
3.1 KEY FINANCE DOCUMENTS
KEY AGREEMENTS

S. NO. AGREEMENT PARTIES INVOLVED DESCRIPTION

Project Company, Senior
Debt Lenders, Subordinated
1. Common Terms Agreement
Debt Lenders and Working
Capital Facility Lender
• Sets out the terms that are common for all the lenders and the
relationship among them (including definitions, conditions,
order of drawdowns, project accounts, voting powers for
waivers and amendments).

Project Company and • Sets out the rights and obligations of each party regarding the
2. Facility Agreements
Specific Lenders facility provided.

• Sets out the sponsors’ obligation to inject equity into the

ESRA (Equity Subscription
3.
and Retention Agreement)
Project Company and retain it for a specified period of time,
Sponsors and Lenders depending upon the lenders’ comfort with the sponsors’
creditworthiness. It is generally aligned with the terms set out in
the project agreements.

• Allows the senior lenders to take over the project (to “step in”)
4. Direct Agreement Lenders and Off-taker
under certain circumstances.

• Spells out aspects of their relationship with one another, so

Lenders, Inter creditor
5. Inter creditor Agreement that, in the event of a problem emerging, ground rules will be in
agent, Project Company
place.

• Includes details of securities provided to the lenders (e.g. share

Lenders and Project
6. Security Agreements pledge, charge over accounts, movables pledge, receivables
Company
pledge).

Project Company and • Includes details of upfront fee, commitment fee, agency fee,
7. Fee Letters
Lenders etc.

Private and Confidential: For Limited Circulation Only 27

3.2.1 COMMON TERMS AGREEMENT
OVERVIEW

• A Common Terms Agreement enlists the terms that are common to all the financing documents and the relationship between
them
• It eases the debt financing process for the project since it covers the common terms across multiple lending sources
• It supplements loan and other credit agreements by acting as an umbrella agreement common to all senior lenders
• Common Terms Agreement is documented in compliance with the term sheet agreed by the lenders and borrower

ECAs,
Bond Trustees/ Additional Debt
Commercial Senior Lenders
Bond Holder Lenders
Banks

Common Terms Agreement

Sponsor
Intercreditor Security Ancillary
Support
Agreement Documents Documents
Document

Private and Confidential: For Limited Circulation Only 28

3.2.2 FACILITY AGREEMENT
OVERVIEW

• The Facility Agreement covers individual loan facility agreement such as ECA cover loan agreement, senior loan agreements etc.
• It contains specific terms and conditions related to each senior debt tranche such as tenor, pricing, undertaking drawdown,
conditions precedents
• It also covers mandatory prepayment rights for individual lenders, impact on other lenders and event of default triggers

Type Of Facility Purpose Clauses

Facility Payment
Tax Provision Mechanism
Agreement

Increased Cost Interest

Clause Provision

Private and Confidential: For Limited Circulation Only 29

3.2.3 INTERCREDITOR AGREEMENT
OVERVIEW

• Intercreditor Agreement addresses procedures and voting requirement for taking decisions and enforcing security among the
secured senior lenders

• It smoothens the process of large financing through multiple sources and prevents complex intercreditor issues
• Intercreditor Agent is central to all decision processes and communications among secured parties
• Categories of decision and voting thresholds can vary from one transaction to another such as unanimous (100%) , majority
(51%) etc.

Intercreditor Agreement

Transfer
Debt Service Accounts Security
Restriction
Undertaking Agreement Documents
Agreement

Subordination Direct
Deed of Priority
Deed Agreement

These documents are prepared in compliance with the Intercreditor Agreement

Private and Confidential: For Limited Circulation Only 30

3.2.4 SECURITY AGREEMENT
OVERVIEW

• The Security Agreement allows senior lenders to take control over the underlying project and deprive the borrower of the pledged
assets when the loan is in default or other such scenarios detailed under financing documents

• It also assures the senior lenders that no junior lenders have the first right to secured assets over the senior lenders
• It generally includes step-in rights in relations to key project agreements, pledges over project accounts, pledges over key shares
or equity interests etc.

The project is located in a country with no filing or

registration code

The enforceability of contractual step-in rights granted to

lenders is uncertain

Security documents protects the assets of the

project when:
The security package can be registered but no certainty is
provided that such security can be enforced

The host country equity interest cannot be pledged

Private and Confidential: For Limited Circulation Only 31

CONTACT INFORMATION

THOMAS MACKAY
Business Partner, UK
Synergy Consulting Inc.

PHONE
Mob: +44 (7383) 085014

EMAIL
thomas.mackay@synergyconsultingifa.com

Private and Confidential: For Limited Circulation Only 32