Loan & Investments Ltd

LOANS, INTERNATIONAL PROJECT FINANCE, BG, SBLC, DLC

Monthly Archives: September 2015

How to cope in volatile markets

Turbulence in asset prices can be unsettling for investors. A diversified portfolio and a focus on the long term are better defences than trying to time the market.

Periods of high volatility can be unnerving. We’re told that long-term returns are the only thing that matters, but it’s difficult to remain calm when our investments’ short-term performance looks bad.

Stock markets worldwide have been more volatile this year, but investors have suffered from particularly painful falls in share prices in recent weeks.

The recent turmoil in global financial markets was triggered by data suggesting weaker economic growth in China, the world’s second largest economy, following a surprise devaluation of its currency earlier this month.

Chinese stock markets suffered some of the biggest declines in share prices, adding to the significant sell-off that began in June. However, fears about the wider implications for the global economy, including companies that sell goods and services in China, led share prices to tumble around the world.

As a result, the FTSE 100 index of British shares dropped to below 6,000 at one point, having surpassed 7,000 earlier in the year, while commodities markets, which are heavily dependent on demand from China, also fell heavily.

Some investors fear a weaker Chinese Yuan could lead to the spread of deflation, or falling prices, across the developed world. Falling asset prices are worrying because it can depress consumer spending and proves painful for debtors. They see the cost of their borrowing rise in real terms.

Following weeks of volatility, the Chinese authorities stepped up support for share prices with a series of measures, including cutting its benchmark one-year lending rate by 25 basis points to 4.6% and the one-year deposit rate by 25 basis points to 1.75%. The moves have led stock markets around the world to rally, recovering some of their losses.

But a broader reason for the turmoil could be worries about an impending increase in interest rates by the US Federal Reserve. Central banks in both the US and the UK are moving to normalise monetary policy, ending a period of record-low interest rates and quantitative easing (QE) that has resulted in unusually calm bond markets and rising share prices. This has pushed up the cost of equities around the world.

Janet Yellen, chair of the Fed, has hinted that US interest rates could rise next month, although this isn’t likely to happen until March next year now following the setbacks on stock markets.

Even so, volatility is likely to continue. So how should investors respond?

Whenever the prospect of a sell-off seems to be particularly severe, there is a temptation to reduce exposure to the market. Once the threat has diminished, we can buy back in, hopefully at lower valuations.

However, it is almost impossible to distinguish between a genuine, imminent crisis and a mere market wobble over an event that proves far less serious than anticipated. As a result, investors who spend too much time waiting for the right moment to invest may miss out on many of the gains.

For example, over the last five years, some investors have kept part or all of their cash on the sidelines. In waiting for the global economy to become a safer place, they have missed out on very significant gains in most asset classes.

The implication is that unless markets are clearly extremely overvalued, your best approach may be to stay invested and try to manage the psychological effects of high volatility. That’s assuming, of course, you are investing for the long term.

If your goal is to retire comfortably in several decades then you have more time in which to regain any losses resulting from short-term volatility. But if you need to access your money sooner, you may wish to rebalance your portfolio. For example, you could move towards asset classes that have historically been less volatile or move into cash.

Focusing on the long term is more easily said than done, but adopting a sensible strategy of diversification should temper the volatility of your portfolio. This means both diversifying within asset classes and among asset classes.

For example, a fully diversified portfolio of stocks will be less volatile than holding just a handful of stocks. No matter how effectively you diversify though, your investments can still fall in value so you may get back less than you invest.

Investors should also consider whether they want to diversify their stock holdings globally, rather than confining themselves to the UK market. In doing so they could benefit from the different performance of international markets.

Note, however, that international diversification can expose investors to another form of volatility: foreign currency risk. This is where the value of investments can fall owing to a decline in the sterling value of foreign currencies.

Contact Us today for all your funding needs, including Loans, International Project Funding, Lease/Rent Bank Guarantees, SBLC, DLC, MTN, Letters of Credit….
 
EMAIL 1: loanandinvestments@outlook.com
EMAIL 2
: ceo@loanandinvestments.com
Skype: 
loanandinvestments
 
NOTICE: Brokers are welcomed, appreciated and compensated. We pay 1% commission to our brokers and company representatives. If you want to be our broker or company representative in your country, EMAIL us  for more information.

Investing in main market stocks

The main market on the London Stock Exchange is home to some of the world’s biggest companies, but it also imposes strict listing rules to protect investors.

Investing in equities is very risky: the price of shares in a company can slump dramatically in a matter of hours and the business can even go bust, wiping out your investment altogether. But some types of equity investments are generally considered riskier than others.

Most UK investors buy shares in companies listed on the London Stock Exchange (LSE) for a series of reasons. Many companies listed on the LSE are British businesses that investors know well. These shares are also priced in pounds, so you don’t need to worry about the prospect of currency movements directly affecting the value of your holding. Still, bear in mind that if a firm makes some sales abroad, changes in foreign exchange rates can still affect profit levels and hence share prices.

However, there is an important distinction to be made between companies listed on the LSE’s main market and its junior exchange, the Alternative Investment Market (AIM).

The main market of the London Stock Exchange, established in 1698, currently includes more than 1,000 firms, from corporate giants such as Vodafone and BP to smaller companies like Topps Tiles and Punch Taverns. The 100 largest companies in the main market make up the blue chip FTSE 100 Index, while the FTSE 250 Index is comprised of mid-sized firms.

Companies on the main market are required to meet strict listing rules tougher than those applied to companies listing on AIM, giving investors more confidence and greater protection.

Governance

Generally speaking, companies on the main market tend to be larger, more mature businesses, but the LSE still imposes strict regulations on the companies listed.

To qualify for a premium listing, which includes access to the FTSE indices, companies must meet basic qualifying criteria. The company has to be worth at least £700,000, for example, and it must make at least 25% of its shares available to the public. It must have three years of independently-audited accounts and it must have had control over the majority of its assets for at least three years.

These are important safeguards that mean investors in the business can be confident it is an established company that hasn’t just appeared out of nowhere. Moreover, additional rules ensure that investors are able to keep a close eye on the businesses they have backed (or are considering for investment).

Main market-listed companies must publish an audited annual report within four months of the end of their financial year, as well as more basic half-year reports within two months of the end of this period. The London Stock Exchange also requires firms to publish an interim management statement twice a year, between the annual and semi-annual reports, to update investors on the business.

Companies are also bound by the UK Corporate Governance Code, which sets standards for how companies are run and their relationship with shareholders – those businesses that don’t meet any of the standards must say so and explain why they have chosen not to comply.

Transparency

Another advantage of the LSE’s main market is that it operates with an electronic order book. This means every investor buying and selling shares in a particular company places their order through the Stock Exchange Electronic Trading Service (SETS) – in practice, your stockbroker or online trading platform may do this on your behalf – detailing what price they are prepared to buy or sell at, and how many shares they want to buy or sell.

Everyone else considering investing in the same company can look at all the orders placed at a given time. This means the system is both transparent – you can see what prices people are willing to trade at – and liquid, in that investors always have access to the maximum possible amount of demand and supply.

By contrast, other markets operate using a quote-driven book (as did the London Stock Exchange until the 1990s). This relies on dealers, or market makers, who post the prices they are prepared to accept for sales and purchases of shares in a particular company at any one time. This is a much less transparent system, since there is no way of knowing what trades other investors dealing with the market maker are hoping to make.

Also, liquidity depends on the market makers – if only one or two dealers choose to trade a particular stock, sale volumes may be quite low. Lower liquidity means there is less likelihood of investors being able to buy or sell at the price they choose.

Investing on the main market, in other words, gives investors access to larger, more closely regulated companies, via a dealing system that produces greater transparency and liquidity.

Remember that all investments can fall as well as rise in value and you may get back less than you invested. Investing in individual shares is not suitable for everyone, and they should usually only be held as part of a diversified portfolio. If you’re unsure, seek independent advice.

Contact Us today for all your funding needs, including Loans, International Project Funding, Lease/Rent Bank Guarantees, SBLC, DLC, MTN, Letters of Credit….
 
EMAIL 1: loanandinvestments@outlook.com
EMAIL 2
: ceo@loanandinvestments.com
Skype: 
loanandinvestments
 
NOTICE: Brokers are welcomed, appreciated and compensated. We pay 1% commission to our brokers and company representatives. If you want to be our broker or company representative in your country, EMAIL us  for more information.

Tax efficient ISA / SIPP investments in the UK

Can’t fit all your investments into your ISA and SIPP tax shelters? Then you’re going to have to make some choices. Happily, the pecking order for maximum tax efficiency is clear cut.

In order of most important-to-shelter to least:

  • Offshore funds without reporting fund status
  • Bond funds / Fixed interest ITs
  • REITs
  • Individual bonds
  • Income producing equities
  • Foreign equities (arguable)

Tax efficient investing for your ISA or SIPP

To see why this sequence is likely to suit your circumstances, let’s just quickly tee up the relevant tax rates from April 2016:

 2016/17 Income tax Dividend tax Capital Gains Tax
Tax-free allowance £11,000 £5,000 £11,100
Basic rate taxpayer 20% 7.5% 18%
Higher rate taxpayer 40% 32.5% 28%
Additional rate taxpayer 45% 38.1% 28%

At a glance we can see that income tax is the nastiest while capital gains tax (CGT) is generally the most benign due to the high personal allowance (you can use your spouse’s too) and the ability to offset gains against losses.

Before we get into the guts of it, I’ve got to dish up some caveat pie:

  • This article is written for the 2016/17 tax year, so I’ve used the new dividend income tax rates.
  • Information on the CGT rate for 2016/17 is currently unavailable.
  • Interest is taxed at your usual income tax rate and basic rate payers will have a £1,000 personal savings allowance from April, reduced to £500 for higher rate payers and nil pounds beyond that.
  • If your interest or dividend income or capital gains pushes you into a higher tax band then you will pay a higher rate of tax on the protruding part.
  • I’m restricting this article to mainstream investments – no kinky stuff.
  • If you’d like a quick refresher on the tax deflecting powers of ISAs and SIPPs, well, just click on those links.
  • And if you’re not sure which is best for saving then try our take on the old ISA vs SIPP debate.

Non-reporting funds

Offshore funds that do not have reporting fund status are taxed on capital gains at income tax rates. As you can see in the table above that’s a hefty tax smackdown. Worse still, your capital gains allowance and offsetting losses are knocked out of your hands by HMRC like the school bully taking your lollipop.

If your offshore fund or ETP doesn’t trumpet its reporting status on its factsheet then it probably falls foul and should be stashed in your ISA or SIPP.

It’s worth double-checking HMRC’s list of reporting funds. Around 25% of offshore funds / ETPs available to UK investors don’t qualify.

It is possible for a reporting fund to lose its special status, therefore you could put all offshore investments in tax shelters, if you like to head off unlikely but plausible worst case scenarios.

Bond funds

Bond funds / ETFs are next into the tax bunker because interest payments are taxed at income tax rates rather than as dividends. Any vehicle that has over 60% of its assets in fixed income or cash at any point in its accounting year falls into this category.

Real Estate Investment Trusts (REITs)

REITs pay some of their distributions as Property Income Distributions (PIDs). PIDs are taxed at income tax rates not as dividends. Get ‘em under cover.

Individual bonds

Individual bonds are liable for income tax on interest just like bond funds. The only reason that bonds are slightly further down the list is because individual gilts and qualifying corporate bonds do not pay capital gains tax.

Income producing equities

The dividend tax situation has suddenly got a lot worse for UK investors, so high-yielding shares and funds should duck under your tax testudo next.

By all means prioritise protection for your growth shares if you think CGT is the bigger problem, but bear in mind you can defuse capital gains every year and you can always defer a sale.

Foreign equities

It isn’t necessarily a priority to get overseas funds and equities sheltered but there’s a tax-saving wrinkle here that only works with SIPPs. The issue is withholding tax which is levied by foreign tax services on dividends and interest you repatriate from abroad.

Some withholding tax will be refunded as long as you fill in the right forms. For example a 30% tax chomp on distributions from US equities becomes a mere 15%.

Foreign investments in SIPPs can have all withholding tax refunded but only if your broker is on the ball. You’d need to check. ISAs don’t share this feature.

If you hold foreign equities outside of a tax shelter then you can use whatever withholding tax you have paid to reduce your UK dividend bill.

So in the case of US equities, a basic rate taxpayer could use the 15% they’ve paid in the US to reduce their 7.5% HMRC liability to zero.

In other words, only higher rate / additional rate taxpayers should consider sheltering US equities in ISAs. Everyone can benefit from the SIPP trick, though.

Bow-wowing out

It only remains to say that this is generalised guidance and tax is a byzantine affair. Please check your personal circumstances.

Tax efficiency is important but whatever happens don’t let the tax tail wag your investment dog.

Take it steady,

Contact Us for all your funding needs, including Loans, Project Finance, BG, SBLC, L/C. 
 
EMAIL 1: loanandinvestments@outlook.com
EMAIL 2
: ceo@loanandinvestments.com
Skype: 
loanandinvestments
 
NOTICE: Brokers are welcomed, appreciated and compensated. We pay 1% commission to our brokers and company representatives. If you want to be our broker or company representative in your country, EMAIL us  for more information.

International Project finance

Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of equity investors, known as ‘sponsors’, as well as a ‘syndicate’ of banks or other lending institutions that provide loans to the operation. They are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling. The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given a lienon all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms.

From investopedia : The financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cashflow generated by the project.


Generally, a special purpose entity is created for each project, thereby shielding other assets owned by a project sponsor from the detrimental effects of a project failure. As a special purpose entity, the project company has no assets other than the project. Capital contribution commitments by the owners of the project company are sometimes necessary to ensure that the project is financially sound or to assure the lenders of the sponsors’ commitment. Project finance is often more complicated than alternative financing methods. Traditionally, project financing has been most commonly used in the extractive (mining), transportation, telecommunications industries as well as sports and entertainment venues.

Risk identification and allocation is a key component of project finance. A project may be subject to a number of technical, environmental, economic and political risks, particularly in developing countries and emerging markets. Financial institutions and project sponsors may conclude that the risks inherent in project development and operation are unacceptable (unfinanceable). “Several long-term contracts such as construction, supply, off-take and concession agreements, along with a variety of joint-ownership structures are used to align incentives and deter opportunistic behaviour by any party involved in the project. The patterns of implementation are sometimes referred to as “project delivery methods.” The financing of these projects must be distributed among multiple parties, so as to distribute the risk associated with the project while simultaneously ensuring profits for each party involved.

A riskier or more expensive project may require limited recourse financing secured by a surety from sponsors. A complex project finance structure may incorporate corporate finance, securitization, options (derivatives), insurance provisions or other types of collateral enhancement to mitigate unallocated risk.

Project finance shares many characteristics with maritime finance and aircraft finance; however, the later two are more specialized fields within the area of asset finance.

History

Limited recourse lending was used to finance maritime voyages in ancient Greece and Rome. Its use in infrastructure projects dates to the development of the Panama Canal, and was widespread in the US oil and gas industry during the early 20th century. However, project finance for high-risk infrastructure schemes originated with the development of the North Sea oil fields in the 1970s and 1980s. Such projects were previously accomplished through utility or government bond issuances, or other traditional corporate finance structures.

Project financing in the developing world peaked around the time of the Asian financial crisis, but the subsequent downturn in industrializing countries was offset by growth in the OECD countries, causing worldwide project financing to peak around 2000. The need for project financing remains high throughout the world as more countries require increasing supplies of public utilities and infrastructure. In recent years, project finance schemes have become increasingly common in the Middle East, some incorporating Islamic finance.

The new project finance structures emerged primarily in response to the opportunity presented by long term power purchase contracts available from utilities and government entities. These long term revenue streams were required by rules implementing PURPA, the Policy resulted in further deregulation of electric generation and, significantly, international privatization following amendments to the Public Utilities Holding Company Act in 1994. The structure has evolved and forms the basis for energy and other projects throughout the world.

Parties to a project financing

There are several parties in a project financing depending on the type and the scale of a project. The most usual parties to a project financing are;

  1. Sponsor
  2. Lenders
  3. Financial Advisors
  4. Technical Advisors
  5. Legal Advisors
  6. Debt Financiers
  7. Equity Investors
  8. Regulatory Agencies
  9. Multilateral Agencies

Project development

Project development is the process of preparing a new project for commercial operations. The process can be divided into three distinct phases:

  • Pre-bid stage
  • Contract negotiation stage
  • Money-raising stage

Financial model

A financial model is constructed by the sponsor as a tool to conduct negotiations with the sponsor and prepare a project appraisal report. It is usually a computer spreadsheet designed to process a comprehensive list of input assumptions and to provide outputs that reflect the anticipated real life interaction between data and calculated values for a particular project.

Properly designed, the financial model is capable of sensitivity analysis, i.e. calculating new outputs based on a range of data variations.

Contractual framework

The typical project finance documentation can be reconducted to four main types:

  • Shareholder/sponsor documents
  • Project documents
  • Finance documents
  • Other project documents

Engineering, procurement and construction contract

The most common project finance construction contract is the engineering, procurement and construction (EPC) contract. An EPC contract generally provides for the obligation of the contractor to build and deliver the project facilities on a turnkey basis, i.e., at a certain pre-determined fixed price, by a certain date, in accordance with certain specifications, and with certain performance warranties. The EPC contract is quite complicated in terms of legal issue, therefore the project company and the EPC contractor need sufficient experience and knowledge of the nature of project to avoid their faults and minimize the risks during contract execution.

An EPC contract differs from a turnkey contract in that, under a turnkey contract, all aspects of construction are included from design to engineering, procurement and construction whereas in the EPC contract the design aspect is not included. Alternative forms of construction contract are a project management approach and alliance contracting. Basic contents of an EPC contract are:

  • Description of the project
  • Price
  • Payment
  • Completion date
  • Completion guarantee and Liquidated Damages (LDs):
  • Performance guarantee and LDs
  • Cap under LDs

Operation and maintenance agreement

An operation and maintenance (O&M) agreement is an agreement between the project company and the operator. The project company delegates the operation, maintenance and often performance management of the project to a reputable operator with expertise in the industry under the terms of the O&M agreement. The operator could be one of the sponsors of the project company or third-party operator. In other cases the project company may carry out by itself the operation and maintenance of the project and may eventually arrange for the technical assistance of an experienced company under a technical assistance agreement. Basic contents of an O&M contract are:

  • Definition of the service
  • Operator responsibility
  • Provision regarding the services rendered
  • Liquidated damages
  • Fee provisions

Concession deed

An agreement between the project company and a public-sector entity (the contracting authority) is called a concession deed. The concession agreement concedes the use of a government asset (such as a plot of land or river crossing) to the project company for a specified period. A concession deed would be found in most projects which involve government such as in infrastructure projects. The concession agreement may be signed by a national/regional government, a municipality, or a special purpose entity set up by the state to grant the concession. Examples of concession agreements include contracts for the following:

  • A toll-road or tunnel for which the concession agreement giving a right to collect tolls/fares from the public or where payments are made by the contracting authority based on usage by the public.
  • A transportation system (e.g., a railway / metro) for which the public pays fares to a private company)
  • Utility projects where payments are made by a municipality or by end-users.
  • Ports and airports where payments are usually made by airlines or shipping companies.
  • Other public sector projects such as schools, hospitals, government buildings, where payments are made by the contracting authority.

Shareholders Agreement

The shareholders agreement (SHA) is an agreement between the project sponsors to form a special purpose company (SPC) in relation to the project development. This is the most basic of structures held by the sponsors in a project finance transaction. This is an agreement between the sponsors and deals with:

  • Injection of share capital
  • Voting requirements
  • Resolution of force one
  • Dividend policy
  • Management of the SPC
  • Disposal and pre-emption rights

Off-take agreement

An off-take agreement is an agreement between the project company and the offtaker (the party who is buying the product / service that the project produces / delivers). In a project financing the revenue is often contracted (rather than being sold on a merchant basis). The off-take agreement governs mechanism of price and volume which make up revenue. The intention of this agreement is to provide the project company with stable and sufficient revenue to pay its project debt obligation, cover the operating costs and provide certain required return to the sponsors.

The main off-take agreements are:

  • Take-or-pay contract: under this contract the off-taker – on an agreed price basis – is obligated to pay for product on a regular basis whether or not the off-taker actually takes the product.
  • Power purchase agreement: commonly used in power projects in emerging markets. The purchasing entity is usually a government entity.
  • Take-and-pay contract: the off-taker only pays for the product taken on an agreed price basis.
  • Long-term sales contract: the off-taker agrees to take agreed-upon quantities of the product from the project. The price is however paid based on market prices at the time of purchase or an agreed market index, subject to certain floor (minimum) price. Commonly used in mining, oil and gas, and petrochemical projects where the project company wants to ensure that its product can easily be sold in international markets, but off-takers not willing to take the price risk
  • Hedging contract: found in the commodity markets such as in an oilfield project.
  • Contract for Differences: the project company sells its product into the market and not to the off-taker or hedging counterpart. If however the market price is below an agreed level, the offtaker pays the difference to the project company, and vice versa if it is above an agreed level.
  • Throughput contract: a user of the pipeline agrees to use it to carry not less than a certain volume of product and to pay a minimum price for this.

Supply agreement

A supply agreement is between the project company and the supplier of the required feedstock / fuel.

If a project company has an off-take contract, the supply contract is usually structured to match the general terms of the off-take contract such as the length of the contract, force majeure provisions, etc. The volume of input supplies required by the project company is usually linked to the project’s output. Example under a PPA the power purchaser who does not require power can ask the project to shut down the power plant and continue to pay the capacity payment – in such case the project company needs to ensure its obligations to buy fuel can be reduced in parallel. The degree of commitment by the supplier can vary.

The main supply agreements are:

1. Fixed or variable supply: the supplier agrees to provide a fixed quantity of supplies to the project company on an agreed schedule, or a variable supply between an agreed maximum and minimum. The supply may be under a take-or-pay or take-and-pay.

2.Output / reserve dedication: the supplier dedicates the entire output from a specific source, e.g., a coal mine, its own plant. However the supplier may have no obligation to produce any output unless agreed otherwise. The supply can also be under a take-or-pay or take-and-pay

3.Interruptible supply: some supplies such as gas are offered on a lower-cost interruptible basis – often via a pipeline also supplying other users.

4.Tolling contract: the supplier has no commitment to supply at all, and may choose not to do so if the supplies can be used more profitably elsewhere. However the availability charge must be paid to the project company.

Loan agreement

A loan agreement is made between the project company (borrower) and the lenders. Loan agreement governs relationship between the lenders and the borrowers. It determines the basis on which the loan can be drawn and repaid, and contains the usual provisions found in a corporate loan agreement. It also contains the additional clauses to cover specific requirements of the project and project documents.

Basic terms of a loan agreement include the following provisions.

  • General conditions precedent
  • Conditions precedent to each drawdown
  • Availability period, during which the borrower is obliged to pay a commitment fee
  • Drawdown mechanics
  • An interest clause, charged at a margin over base rate
  • A repayment clause
  • Financial covenants – calculation of key project metrics / ratios and covenants
  • Dividend restrictions
  • Representations and warranties
  • The illegality clause

Intercreditor agreement

Intercreditor agreement is agreed between the main creditors of the project company. This is the agreement between the main creditors in connection with the project financing. The main creditors often enter into the Intercreditor Agreement to govern the common terms and relationships among the lenders in respect of the borrower’s obligations.

Intercreditor agreement will specify provisions including the following.

  • Common terms
  • Order of drawdown
  • Cashflow waterfall
  • Limitation on ability of creditors to vary their rights
  • Voting rights
  • Notification of defaults
  • Order of applying the proceeds of debt recovery
  • If there is a mezzanine funding component, the terms of subordination and other principles to apply as between the senior debt providers and the mezzanine debt providers.

Tripartite deed

The financiers will usually require that a direct relationship between itself and the counterparty to that contract be established which is achieved through the use of a tripartite deed (sometimes called a consent deed, direct agreement or side agreement). The tripartite deed sets out the circumstances in which the financiers may “step in” under the project contracts in order to remedy any default.

A tripartite deed would normally contain the following provision.

  • Acknowledgement of security: confirmation by the contractor or relevant party that it consents to the financier taking security over the relevant project contracts.
  • Notice of default: obligation on the relevant project counterparty to notify the lenders directly of defaults by the project company under the relevant contract.
  • Step-in rights and extended periods: to ensure that the lenders will have sufficient notice /period to enable it to remedy any breach by the borrower.
  • Receivership: acknowledgement by the relevant party regarding the appointment of a receiver by the lenders under the relevant contract and that the receiver may continue the borrower’s performance under the contract
  • Sale of asset: terms and conditions upon which the lenders may transfer the borrower’s entitlements under the relevant contract.

Tripartite deed can give rise to difficult issues for negotiation but is a critical document in project financing.

Common Terms Agreement

An agreement between the financing parties and the project company which sets out the terms that are common to all the financing instruments and the relationship between them (including definitions, conditions, order of drawdowns, project accounts, voting powers for waivers and amendments). A common terms agreement greatly clarifies and simplifies the multi-sourcing of finance for a project and ensures that the parties have a common understanding of key definitions and critical events.

Terms Sheet

Agreement between the borrower and the lender for the cost, provision and repayment of debt. The term sheet outlines the key terms and conditions of the financing. The term sheet provides the basis for the lead arrangers to complete the credit approval to underwrite the debt, usually by signing the agreed term sheet. Generally the final term sheet is attached to the mandate letter and is used by the lead arrangers to syndicate the debt. The commitment by the lenders is usually subject to further detailed due diligence and negotiation of project agreements and finance documents including the security documents. The next phase in the financing is the negotiation of finance documents and the term sheet will eventually be replaced by the definitive finance documents when the project reaches financial close.

Basic scheme

Hypothetical project finance scheme

For example, the Acme Coal Co. imports coal. Energen Inc. supplies energy to consumers. The two companies agree to build a power plant to accomplish their respective goals. Typically, the first step would be to sign a memorandum of understanding to set out the intentions of the two parties. This would be followed by an agreement to form a joint venture.

Acme Coal and Energen form an SPC (Special Purpose Corporation) called Power Holdings Inc. and divide the shares between them according to their contributions. Acme Coal, being more established, contributes more capital and takes 70% of the shares. Energen is a smaller company and takes the remaining 30%. The new company has no assets.

Power Holdings then signs a construction contract with Acme Construction to build a power plant. Acme Construction is an affiliate of Acme Coal and the only company with the know-how to construct a power plant in accordance with Acme’s delivery specification.

A power plant can cost hundreds of millions of dollars. To pay Acme Construction, Power Holdings receives financing from a development bank and a commercial bank. These banks provide a guarantee to Acme Construction’s financier that the company can pay for the completion of construction. Payment for construction is generally paid as such: 10% up front, 10% midway through construction, 10% shortly before completion, and 70% upon transfer of title to Power Holdings, which becomes the owner of the power plant.

Acme Coal and Energen form Power Manage Inc., another SPC, to manage the facility. The ultimate purpose of the two SPCs (Power Holding and Power Manage) is primarily to protect Acme Coal and Energen. If a disaster happens at the plant, prospective plaintiffs cannot sue Acme Coal or Energen and target their assets because neither company owns or operates the plant.

A Sale and Purchase Agreement (SPA) between Power Manage and Acme Coal supplies raw materials to the power plant. Electricity is then delivered to Energen using a wholesale delivery contract. The cash flow of both Acme Coal and Energen from this transaction will be used to repay the financiers.

Complicating factors

The above is a simple explanation which does not cover the mining, shipping, and delivery contracts involved in importing the coal (which in itself could be more complex than the financing scheme), nor the contracts for delivering the power to consumers. In developing countries, it is not unusual for one or more government entities to be the primary consumers of the project, undertaking the “last mile distribution” to the consuming population. The relevant purchase agreements between the government agencies and the project may contain clauses guaranteeing a minimum offtake and thereby guarantee a certain level of revenues. In other sectors including road transportation, the government may toll the roads and collect the revenues, while providing a guaranteed annual sum (along with clearly specified upside and downside conditions) to the project. This serves to minimise or eliminate the risks associated with traffic demand for the project investors and the lenders.

Minority owners of a project may wish to use “off-balance-sheet” financing, in which they disclose their participation in the project as an investment, and excludes the debt from financial statements by disclosing it as a footnote related to the investment. In the United States, this eligibility is determined by the Financial Accounting Standards Board. Many projects in developing countries must also be covered with war risk insurance, which covers acts of hostile attack, derelict mines and torpedoes, and civil unrest which are not generally included in “standard” insurance policies. Today, some altered policies that include terrorism are called Terrorism Insurance or Political Risk Insurance. In many cases, an outside insurer will issue a performance bond to guarantee timely completion of the project by the contractor.

Publicly funded projects may also use additional financing methods such as tax increment financing or Private Finance Initiative (PFI). Such projects are often governed by a Capital Improvement Plan which adds certain auditing capabilities and restrictions to the process.

Project financing in transitional and emerging market countries are particularly risky because of cross-border issues such as political, currency and legal system risks. Therefore, mostly requires active facilitation by the government.

Contact Us today for all your funding needs, including Loans, Project Finance, BG, SBLC, L/C. 
 
EMAIL 1: loanandinvestments@outlook.com
EMAIL 2
: ceo@loanandinvestments.com
Skype: 
loanandinvestments
NOTICE: Brokers are welcomed, appreciated and compensated. We pay 1% commission to our brokers and company representatives. If you want to be our broker or company representative in your country, EMAIL us  for more information.

What is Loan?

Understanding what  “loans” means

In finance, a loan is a debt provided by one entity (organization or individual) to another entity at an interest rate, and evidenced by a note which specifies, among other things, the principal amount, interest rate, and date of repayment. A loan entails the reallocation of the subject asset(s) for a period of time, between the lender and the borrower.
 
In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time.
 
The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent.
 
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.
 

Types of loans

Secured

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral.

A mortgage loan is a very common type of money, used by many individuals to purchase things. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.

In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter — often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.

Unsecured

Unsecured loans are monetary loans that are not secured against the borrower’s assets. These may be available from financial institutions under many different guises or marketing packages:

  • credit card debt
  • personal loans
  • bank overdrafts
  • credit facilities or lines of credit
  • corporate bonds (may be secured or unsecured)
  • peer-to-peer lending

The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.

Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured lender’s options for recourse against the borrower in the event of default are severely limited. An unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and then pursue execution of the judgment against the borrower’s unencumbered assets (that is, the ones not already pledged to secured lenders). In insolvency proceedings, secured lenders traditionally have priority over unsecured lenders when a court divides up the borrower’s assets. Thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible.

Demand

Demand loans are short term loans that are typically in that they do not have fixed dates for repayment and carry a floating interest rate which varies according to the prime lending rate. They can be “called” for repayment by the lending institution at any time. Demand loans may be unsecured or secured.

Subsidized

A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In the context of college loans in the United States, it refers to a loan on which no interest is accrued while a student remains enrolled in education.[2]

Concessional

A concessional loan, sometimes called a “soft loan”, is granted on terms substantially more generous than market loans either through below-market interest rates, by grace periods or a combination of both. Such loans may be made by foreign governments to developing countries or may be offered to employees of lending institutions as an employee benefit.

Target markets

Personal

Loans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business. Common personal loans include mortgage loans, car loans, home equity lines of credit, credit cards, installment loans and payday loans. The credit score of the borrower is a major component in and underwriting and interest rates (APR) of these loans. The monthly payments of personal loans can be decreased by selecting longer payment terms, but overall interest paid increases as well. For car loans in the U.S., the average term was about 60 months in 2009.

Commercial

Loans to businesses are similar to the above, but also include commercial mortgages and corporate bonds. Underwriting is not based upon credit score but rather credit rating.

Loan payment

The most typical loan payment type is the fully amortizing payment in which each monthly rate has the same value over time.

The fixed monthly payment P for a loan of L for n months and a monthly interest rate c is:

P = L \cdot \frac{c\,(1 + c)^n}{(1 + c)^n - 1}

Abuses in lending

Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorized, they could be considered a loan shark.

Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organizations of lending at usurious interest rates and making money out of frivolous “extra charges”.

Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.

United States taxes

Most of the basic rules governing how loans are handled for tax purposes in the United States are codified by both Congress (the Internal Revenue Code) and the Treasury Department (Treasury Regulations — another set of rules that interpret the Internal Revenue Code).

1. A loan is not gross income to the borrower. Since the borrower has the obligation to repay the loan, the borrower has no accession to wealth.

2. The lender may not deduct (from own gross income) the amount of the loan. The rationale here is that one asset (the cash) has been converted into a different asset (a promise of repayment). Deductions are not typically available when an outlay serves to create a new or different asset.

3. The amount paid to satisfy the loan obligation is not deductible (from own gross income) by the borrower.

4. Repayment of the loan is not gross income to the lender. In effect, the promise of repayment is converted back to cash, with no accession to wealth by the lender.

5. Interest paid to the lender is included in the lender’s gross income. Interest paid represents compensation for the use of the lender’s money or property and thus represents profit or an accession to wealth to the lender. Interest income can be attributed to lenders even if the lender doesn’t charge a minimum amount of interest.

6. Interest paid to the lender may be deductible by the borrower. In general, interest paid in connection with the borrower’s business activity is deductible, while interest paid on personal loans are not deductible. The major exception here is interest paid on a home mortgage.

Income from discharge of indebtedness

Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness. Thus, if a debt is discharged, then the borrower essentially has received income equal to the amount of the indebtedness. The Internal Revenue Code lists “Income from Discharge of Indebtedness” in Section 61(a)(12) as a source of gross income.

Example: X owes Y $50,000. If Y discharges the indebtedness, then X no longer owes Y $50,000. For purposes of calculating income, this is treated the same way as if Y gave X $50,000.

Contact Us today for all your funding needs, including Loans, Project Finance, BG, SBLC, L/C. 
 
EMAIL 1: loanandinvestments@outlook.com
EMAIL 2
: ceo@loanandinvestments.com
Skype: 
loanandinvestments
NOTICE: Brokers are welcomed, appreciated and compensated. We pay 1% commission to our brokers and company representatives. If you want to be our broker or company representative in your country, EMAIL us  for more information.

Loan and Investment

Loan means lending money.  From one source to the receiver. It is basically a form of a credit. We borrow money because we need to pay for something or it could also mean we borrow to use it on an investment. Whatever it is your reason. You may need to take into consideration the following:


1. Interest – daily/weekly/monthly/yearly
2. Collateral to be use
3. Calculation – do you think you can afford to pay it on its term?

We loan to pay for our obligations- this is the most common reason. We need to pay our bills, credit card, mortgage, insurance etc… But sometimes this reason could be very unreasonable because when we have already the money in our hands, we do not entirely intend to pay it to our dues. We keep some of it to buy stuffs that is not a necessity after all. We make the “borrowing” a complicated “word” by doing this act. Not a good solution if you would only think deeper on the thought. Think of the consideration before applying for a loan.

We loan to put it on an investment – a very good idea, this is acceptable and realistic. BUT, you need to be very careful on what business to put up or where to invest your money so you could pay off your loan. Because if not…you know where this could lead you. Applying for a loan is very risky especially if you are planning to borrow a huge amount and is payable in a short period of time (with the interest compounded sometimes). So you need also to think very hard and planned what and where you will bring you money for an investment, because, investing is more risky than borrowing.

Loan and investment is somehow related, if you know this two terms basically and literally you can go a million miles away with a million cash too…

Think before making a loan…
Think before investing your loan…

 
Contact Us today for all your funding needs, including Loans, Project Finance, BG, SBLC, L/C. 
 
EMAIL 1: loanandinvestments@outlook.com
EMAIL 2
: ceo@loanandinvestments.com
Skype: 
loanandinvestments
 
 
NOTICE: Brokers are welcomed, appreciated and compensated. We pay 1% commission to our brokers and company representatives. If you want to be our broker or company representative in your country, just EMAIL us  for more information.

Top Reasons Why We Are Number One BG & SBLC Provider In The World

When you are buying, selling, monetizing, funding or discounting Bank Guarantees, you only want to work with the most reliable, safe, ethical, knowledgeable, honest and efficient providers.
Here are Top 11 Reasons Why LOANS AND INVESTMENTS LIMITED should be Number 1 for you!
1. Unrivaled Authenticity – We are NOT Brokers! We are Direct to 5 Genuine Performing Bank Guarantee Issuers that are located in London, Dubai, New York and Hong Kong. We are Direct to Monetizers in Europe and Asia. There is no Broker between us and the BG Issuer or Monetizer, we have open direct unrestricted access to the most reputable industry Bank Guarantee and SBLC Providers and Monetizers. We know the signatories and members of the Bank Guarantee Funding Management Team have met Real Bankers inside Real Banks to conclude Real transactions.
2    Results 100% Guaranteed – We only use genuine, proven, authentic providers who are either billionaires, large financial institutions or bankers with over 10 years experience funding Bank Guarantee transactions. If you have a REAL deal, we will close it and bank it!
3    Complete End to End Managed BG Buy / Sell Program – We provide a comprehensive, integrated, prenegotiated, prestructured Bank Guarantee Issuing and Monetization Program with PROVEN providers. Hundreds of people are frantically trying to find a BG Issuer and Funder who will work together…. WE HAVE DONE IT!
4.    Knowledge and Expertise –  The industry is shrouded in secrecy, staked with misinformation and filled with uninformed brokers and clients. We see information as power and  provide you with more detailed information, comprehensive explanations, honest answers and warnings of what to watch out for than almost any others company in the industry! The more informed you are the more protected you are, that’s why subscribing to our newsletter is a MUST. This is also why we offer lengthy Program Overviews on services like our Fully Managed Bank Guarantee Program and Buy Leased Bank Guarantee Program.
5.  No Customer has ever had a failed transaction with us
6.  No Attorney Complaints Letters Ever
7.  No Govt or Local Agency Complaints Ever Received
8.  No Lawsuits ever filed against us
9.  No Criminal Convictions for the Business in any Country
10. No Criminal Convictions  for any of our Owners in any Country
11. Brokers are Protected – We value and appreciate brokers working with us and protect them from any potential circumvention. Brokers can earn up to 1% on each successful transaction or client.
LOANS & INVESTMENTS LIMITED has carved out a reputation for credibility, transparency and responsibility. We care about our customers and their money!
Kindly contact us today for more information.
EMAIL 1: loanandinvestments@outlook.com
EMAIL 2
: ceo@loanandinvestments.com
Skype: 
loanandinvestments
NOTICE: Brokers are welcomed, appreciated and compensated. We pay 1% commission to our brokers and company representatives. If you want to be our broker or company representative in your country, just EMAIL us for more information.

The Brazilian real is sliding down a painfully familiar path

Brazil’s real hit its lowest level since it was introduced in 1994 to rescue the country from economic doom.

The currency closed at a historic low of 4.18 real to the US dollar yesterday (Sept. 23) as Brazil struggles with some of the same problems of the early 1990s era: high inflation, budget deficits and a faltering economy.

It may be little consolation to Brazilians, but the economic ills back then were much, much worse. In some years, inflation exceeded 2000%.The exchange rate for the real’s predecessor, the cruzeiro real, was nearly 1,800 per US dollar in 1994.

To restore Brazilians’ faith in their currency, a group of economists established a make-believe currency that was linked to the dollar and remained stable in spite of the jittery cruzeiro.

It worked. The fake currency was later replaced with the real, which started its life at near parity with the dollar.

Given Brazil’s ongoing currency woes, it might be time for another confidence booster.

Top 11 Reasons Why We Are Number One BG & SBLC Providers In The World

When you are buying, selling, monetizing, funding or discounting Bank Guarantees, you only want to work with the most reliable, safe, ethical, knowledgeable, honest and efficient providers.

Here are Top 11 Reasons Why LOANS AND INVESTMENTS LIMITED should be Number 1 for you!
 
 
1. Unrivaled Authenticity – We are NOT Brokers! We are Direct to 5 Genuine Performing Bank Guarantee Issuers that are located in London, Dubai, New York and Hong Kong. We are Direct to Monetizers in Europe and Asia. There is no Broker between us and the BG Issuer or Monetizer, we have open direct unrestricted access to the most reputable industry Bank Guarantee and SBLC Providers and Monetizers. We know the signatories and members of the Bank Guarantee Funding Management Team have met Real Bankers inside Real Banks to conclude Real transactions.
2    Results 100% Guaranteed – We only use genuine, proven, authentic providers who are either billionaires, large financial institutions or bankers with over 10 years experience funding Bank Guarantee transactions. If you have a REAL deal, we will close it and bank it!
3    Complete End to End Managed BG Buy / Sell Program – We provide a comprehensive, integrated, prenegotiated, prestructured Bank Guarantee Issuing and Monetization Program with PROVEN providers. Hundreds of people are frantically trying to find a BG Issuer and Funder who will work together…. WE HAVE DONE IT!
4.    Knowledge and Expertise –  The industry is shrouded in secrecy, staked with misinformation and filled with uninformed brokers and clients. We see information as power and  provide you with more detailed information, comprehensive explanations, honest answers and warnings of what to watch out for than almost any others company in the industry! The more informed you are the more protected you are, that’s why subscribing to our newsletter is a MUST. This is also why we offer lengthy Program Overviews on services like our Fully Managed Bank Guarantee Program and Buy Leased Bank Guarantee Program.
5.  No Customer has ever had a failed transaction with us

6.  No Attorney Complaints Letters Ever 

7.  No Govt or Local Agency Complaints Ever Received

8.  No Lawsuits ever filed against us

9.  No Criminal Convictions for the Business in any Country

10. No Criminal Convictions  for any of our Owners in any Country

11. Brokers are Protected –
 We value and appreciate brokers working with us and protect them from any potential circumvention. Brokers can earn up to 1% on each successful transaction or client.
LOANS & INVESTMENTS LIMITED has carved out a reputation for credibility, transparency and responsibility. We care about our customers and their money!
Kindly contact us today for more information.
Skype:       loanandinvestments
NOTICE: Brokers are welcomed, appreciated and compensated. We pay 1% commission to our brokers and company representatives. If you want to be our broker or company representative in your country, just EMAIL us for more information.

Why India’s $168 billion river-linking project is a disaster-in-waiting

India’s incredibly ambitious—and some say, incredibly reckless—Rs11 lakh crore ($168 billion) project to interlink its rivers is finally underway.

On Sept. 16, the Godavari and Krishna rivers—the second and the fourth longest rivers in the country—were linked through a canal in Andhra Pradesh. The project was completed at a cost of Rs1,300 crore ($196 million). A second scheme, the Ken-Betwa river project—estimated tocost Rs11,676 crore ($1.7 billion)—is currently under development, with completion likely by December this year.

This is a part of the Narendra Modi government’s plan to revive the river-linking project, which was first envisioned in 1982, and actively taken up by the Bharatiya Janata Party government under prime minister Atal Bihari Vajpayee in 2002.

Here is how the river-linking project works: The big idea is to connect37 Himalayan and peninsular rivers. So, water-surplus rivers will be dammed, and the flow will be diverted to rivers that could do with more water. In all, some 30 canals and 3,000 small and large reservoirs will be constructed with potential to generate 34 gigawatt of hydroelectric power. The canals, planned between 50 and 100 meters in width, will stretch some 15,000 kilometres.

“If we can build storage reservoirs on these rivers and connect them to other parts of the country, regional imbalances could be reduced significantly and lot of benefits by way of additional irrigation, domestic and industrial water supply, hydropower generation, navigational facilities etc. would accrue,” India’s National Water Development Authority describes the project on its website.

The project is expected to create some 87 million acres of irrigated land, and transfer 174 trillion litres of water a year. Also, half a million people are likely to be displaced in the process, according to a report (pdf) by Upali Amarasinghe, a senior researcher at the International Water Management Institute.

Ecologists and environmentalists warn that the project is imprudent and dangerous, especially since there is little clarity on the ultimate impact on such a massive undertaking.

Quartz interviewed a number of Indian environmentalists and activists, and here is what they had to say about this project:

“A river isn’t a pipe that we can control.”

— Dr Latha Anantha, director, River Research Centre

Firstly, there is no concept of deficit and surplus. That’s what we are making it to be. A river has a natural course and for years it has been following that. Who are we to say it has a surplus and it has a deficit? The river will carry as much as it can. Secondly, a river isn’t a pipe that we can control. You can’t compare a Ganga to another. It has different characteristics. And when you build a canal to flow the water that is diverted, you are displacing far too many human lives and the eco-system. For instance, in the Ken-Betwa project, the core area of the Panna national park will be affected. The government, wanting to do the project for political reasons without any sort of clearances, is basically, redrawing the entire geography of the country. Even if there is a surplus and flood, every river needs that. Thats how the natural ecosystem works. You can’t block it.

“There is no scientific basis for this”

— Himanshu Thakkar, coordinator, South Asia Network on Dams, Rivers and People

How do you conclude that river-linking project will be good? There have been no scientific basis to say that. All you have is an incomplete study that says this is good for the country. One has to exhaust all options and potentials before concluding that river-linking is the best alternative. Exhaust options such as watershed development, rainwater harvesting, ground water recharge, optimising existing infrastructure and cropping methods and then we can conclude that water-linking might be good. But there has been no assessments done. For instance, look at Maharashtra and Andhra Pradesh. The Marathwada region in Maharashtra is the worst drought-hit state in India today, and belongs to the Godavari basin. But at the same time, you want to divert water from Godavari to Krishna. It doesn’t make sense. There has to be assessment done because there is huge impact on the nature.

“Horrifying and ill-planned.”

— Medha Patkar, national convener, National Alliance of People’s Movement

This entire push for the river-linking is horrifying and is ill-planned. The hydrology of the rivers are changing and we are ignoring the cultural and ecological significance. Even the cost that the government is talking about, of Rs5.6 lakh crore ($85 billion) is based on old reports. Now the cost would be much more and would at least be Rs10 lakh crore. The bigger question is, who is going to fund this? Is the private sector going to do that? And if they do, they will only have interest in the land. The other thing is, there is no social impact assessment done on the livelihood of the people who are living in these areas. They don’t even engage the gram sabhas while taking decisions.

“River-linking is a social evil, economic evil”

— V. Rajamani, professor emeritus, Jawaharlal Nehru University, New Delhi

The interest in river-linking now is due to the big bucks involved in it for dam builders. A canal is not a river and it cannot support an ecosystem. What happens to everything that is living in the river? When water flows, there are a number of factors associated with it. There are micro organisms and there are marine life. We are taking away all of that by building dams and diverting water for something that is not even natural. When you build dams, you are displacing too many people. What will they do? They land up in slums in cities. River-linking is a social evil, economic evil and will ultimately lead to collapse of civilisation.

“These projects are not viable.”

— Sushmita Sengupta, deputy programme manager, Centre for Science and Environment

The basic concept of linking of rivers in India is to transfer water from where there is a surplus to a place where there is a deficit. But when such transfer of water takes place, there is a significant community displacement that happens along with it.

Another major issue in India vis-a-vis river-linking is that water is a state subject. Now states that have surplus water are not ready to give it to other states and there is a huge logjam which is cropping up time and again because of this. Even though the government is thinking of intra-state river-linking processes—where a river of a state is connected to another on in the same state—the environmental issues relating to these projects are very huge.

There is a big problem of desilting and there is no clarity on where the silt be actually dumped. Will it be somebody’s farm and will the farmers be affected or not? The government has not come clear on any of those points. So considering these environmental and community issues, overall I don’t think these projects are really viable.