Loan & Investments Ltd

LOANS, INTERNATIONAL PROJECT FINANCE, BG, SBLC, DLC

Tag Archives: SBLC Projektfinanzierung

Indonesia’s fires have now razed more land than in the entire US state of New Jersey

Provider of BG, SBLC, DLC or Letters of Credit loanandinvestments@outlook.com

 

The fires in Indonesia that are creating hellish amounts of toxic smoke are also doing their job: clearing land. This year they’ve removed about 21,000 square kilometers (8,100 square miles) of forests and peatland, according to the country’s National Space and Aviation Agency (link in Indonesian).

For context, that’s greater than the land area of the US state of New Jersey, or of the nations of Slovenia, Kuwait, or El Salvador.

Set to inexpensively clear land for the palm oil and pulp-and-paper industries, the smoke from the fires have caused respiratory ailments in half a million people in Indonesia, and at least 19 have died (most from breathing in smoke, some from fire-fighting accidents). The fires have also cast a toxic haze over a large part of Southeast Asia, including Singapore and parts of Malaysia, Thailand, and the Philippines. By some calculations the smoke has catapulted Indonesia to the top of the rankings of the world’s worst global warming offenders, just ahead of the United Nations Climate Change Conference to be held next month in Paris.

The agency used satellite imagery and data collected from June 21 to Oct. 20 to make its calculations. It warned, however, that the final figure was likely to be higher. The fires are still raging, and there’s little hope of rain—delayed by El Nino—extinguishing the flames anytime soon. (Last week the Indonesian Red Cross extended its response period to the haze crisis until January.) And smoke still shrouding the land, it added, makes assessing the situation difficult for many areas.

Here’s the latest look at the first that were burning on Monday afternoon (Nov. 2) in Indonesia, according to Global Forest Watch, which is monitoring the situation in real time:

Bank Guarantee provider, lease SBLC, DLC   loanandinvestments@outlook.com
(Globalforestwatch.org)

According to Indonesia’s space and aviation agency, about 6,180 square kilometers (2,390 square miles) of the land burned is peatland—highly toxic when drained and burned—and 15,000 square kilometers (5,790 square miles) is not. The fires have primarily hit Sumatra, Kalimantan, and the Indonesian side of New Guinea, which is considered the next frontier for Indonesia’s palm oil industry.

If you need Loan, project financing, Bank Guarantees, SBLC, DLC or Letters of Credit kindly contact us immediately for more detailed information. 
 
 
Skype: loanandinvestments
Advertisements

More than 45 Venture Capital Backed Unicorns have been added in the last two quarters

lease Bank Guarantee provider, top world bg provider, leasing BG, genuine letters of credit providers, sblc financing, dlc providers, top bank instrument providers, loan for sme's

Source: loanandinvestments.com

If you need Loan, project financing, Bank Guarantees, SBLC, DLC or Letters of Credit kindly contact us immediately for more detailed information. 
 
 
Email: ceo@loanandinvestments.com  and  loanandinvestments@outlook.com
Website: http://www.loanandinvestments.com
Skype: loanandinvestments


BROKERS ARE WELCOME & ARE 100% PROTECTED!! If you want to be our broker or company representative please contact us via email for more information.

Labor groups say H&M is lying about its progress in improving factory safety in Bangladesh

After a garment factory collapse at Rana Plaza in Bangladesh killed 1,133 people in 2013, H&M was among the first of many international clothing brands that agreed to signthe binding Bangladesh Accord on Fire and Building Safety, to prevent such a tragedy happening again.

It was a significant moment: The fast-fashion retailer is one of the largest buyers of garments from the country, which gives it considerable leverage in Bangladesh—and also makes it a symbol of the Western fashion brands doing business there. Many other companies followed suit.

But despite touting its progress in accordance with the agreement, H&M is now defending itself against a damning report  by the Clean Clothes Campaign and other labor groups that advocate for workers’ rights. The report, based on public information released by the Accord organization, accused H&M of being “dramatically behind schedule” in making factory-safety improvements it had committed to. In reply, H&M issued a press release and statements to the media explaining the delays (among the problems: Not all of the technology needed for the upgrades is available yet in Bangladesh), and reiterated that it had made “good progress” in some regards.

But the groups behind the report have now issued a rebuttal claiming that H&M’s statements are misleading, and in some cases, just plain wrong.

One of the statements they point to (link in Swedish) is the assertion by H&M’s press chief on Oct. 2 that all of H&M’s supplier factories have emergency exits. They label this “an outright falsehood,” based on the standard for an emergency exit laid out by the Accord.

“By definition, any building that does not have enclosed stairwells, protected by fire-rated doors, does not have fire exits (or emergency exits, to use H&M’s terminology),” the analysis states. “As H&M admits, more than two years after it signed the Bangladesh Accord, ‘some’ (actually, most) of its supplier factories still lack proper fire doors, and therefore do not have fire exits.”

Members of the police inspect a garment factory after a devastating fire in Savar November 25, 2012. A fire swept through Tazreen Fashion factory in the Ashulia industrial belt of Dhaka, on the outskirts of Bangladesh's capital killing more than 100 people, the fire brigade said on Sunday, in the country's worst ever factory blaze.The aftermath of the fire at the Tazreen Fashions factory in Bangladesh.

H&M also said that it is only producing in factories that meet the Accord’s requirements for operation. Of the 5,000 or so garment factories in Bangladesh, it sources from fewer than 300. But the groups suggest that H&M’s phrasing is misleading.

“According to the Accord’s published reports, there is not a single H&M supplier factory in Bangladesh that meets the building safety standards of the Accord,” they state. “We presume that H&M, in making this claim, is referring instead to the fact that the factories it is using, though clearly unsafe, have not been ordered to shut down due to risk of imminent structural collapse.”

Other claims they call out include H&M’s assertion that it has completed 60% of the remediation work in factories where it holds the lead role in overseeing renovations, and that lockable doors in its factories aren’t ever locked, which the groups say H&M can’t possibly know.

H&M tells Quartz that the labor groups’ complaints are misleading. “We do not recognize ourselves in the picture given in the report, nor in the recent analysis that you refer to,” spokesperson Elin Hallerby said. “For example, basic safety equipment such as fire exits is a fundamental requirement for a supplier in order to be allowed to produce for H&M. Also, there have always been clear escape routes in our supply chain, although many of them will be improved in accordance with new standards.”

Even though the Accord has more than 200 signatories, the labor groups focused on H&M in their report because it was a leader in signing the Accord.

“H&M gained significant credibility as the first signer (rightly at the time) and have also communicated to consumers through their sustainability report that all significant repairs are complete,” a representative for Labour Behind the Label, one of the groups that collaborated on the report, has told Quartz previously.

The groups say H&M hasn’t followed through, and that after two and a half years to make the improvements it agreed to, there are no excuses for the lack of progress.

H&M maintains that its commitment to Bangladesh’s garment industry is long-term, and that its work in the country “is not only active but also genuine and honest.”

If you need Loan, project funding, Bank Guarantee, SBLC, DLC or Letters of Credit please contact us immediately.
Skype: loanandinvestments
Brokers are paid good commission on each successful transaction so if you want to work for our company as a broker, agent or mandate please contact us for more information.

Aston Martin is working on an electric supercar with double the horsepower of its gas-powered cars

One of the most quintessentially British cars will soon be driving into the 21st century. At a Bloomberg conference in London Monday (Oct. 12), Aston Martin CEO Andy Palmer said that the car company is working on an all-electric version of its Rapide sports car, which it plans to have available by the end of 2017. And it’s going to be a beast.

“We’re talking about an electric Aston Martin with between 800 and 1,000 horsepower—imagine having all that torque on demand,” Palmer told Bloomberg. (For reference, the 2015 gasoline-powered Rapide model has 552 horsepower, whereas a Tesla Model S can have up to 691 horsepower.)

The company wasn’t immediately available for comment on how the electric Rapide will differ from the current model, but Palmer said onstage that the new car will be based on the existing model. After that, the company plans to put out an electric crossover vehicle. The company showed off a concept car earlier this year, called the DBX—the first crossover the company has made—and Palmer said this would be the basis for the company’s second electric vehicle.

The DBX concept crossover car.The DBX concept crossover car.

While Tesla currently has the luxury electric sports car market wrapped up with its Model S and recently announced Model X vehicles, the company will soon be facing increased competition. Audi, Mercedes, and Porsche have all announced their intentions to have electric vehicles on the road by the end of the decade. Tesla is likely to increasingly go after the rest of the market, however: CEO Elon Musk has said that the company’s next car—the Model 3—will be more affordable, starting at $35,000. Palmer said that Aston Martin has no intention to leave the luxury market, whether it’s electric or gasoline-powered, telling the conference he wants to avoid the “vanilla in the middle.”

James's new Aston Martin DB10, next to the classic DB5. Up next: Electric Bond?James’s new Aston Martin DB10, next to the classic DB5. Up next: Electric Bond?

For years, James Bond, the protagonist of the British 007 spy films, has driven an Aston Martin. He’s experimented over the years with Germans and Italians over the years, but seems to always find himself back behind the wheel of a British classic. In the upcoming Bond film, “Spectre,” James will be driving the new Aston Martin DB10. And Palmer said there’s a chance that an electric vehicle could make it into a Bond film in the future (assuming there’s another one): “It’s an awfully good getaway vehicle,” he said. “I don’t think James really cares what the power train is as long it’s fast and beautiful.”

If you need Loan, project funding, Bank Guarantee, SBLC, DLC or Letters of Credit please contact us immediately.
Skype: loanandinvestments
Brokers are paid good commission on each successful transaction so if you want to work for our company as a broker, agent or mandate please contact us for more information.

Why India needs a new constitution

The widely acknowledged fact that non-resident Indians (NRIs) are successful in the US, in general—and the Silicon Valley, in particular—stands in sharp contradistinction to the fact that Indians are not very successful in promoting their country’s prosperity. Even after seven decades of independence, India has failed to become a developed nation.

The question why so needs an answer not for any academic reason, but because the prosperity of more than a billion people hinges on it. Without understanding the precise reasons for India’s continued under-performance, it is unlikely that the country will break out of this trap.

A quick review of factors that could potentially prevent a country’s economic growth is useful. Among those factors that destroy all possibilities of wealth creation are devastating foreign invasions or protracted wars; decades-long chronic internal civil conflict; frequent countrywide natural disasters such as earthquakes, floods and droughts; acute lack of natural resources; and total lack of human, social and cultural capital.

Clearly, in India’s case, those factors do not apply—either individually or in combination. That leaves just two other factors that were not mentioned, but could explain India’s case. One is divine decree and the other is poor governance. Assuming that the gods are not maliciously inclined towards India, we focus on the government factor.

The claim made here is that the proximate reason for India’s lack of progress is policies that prevent sustained growth—and that these policies ultimately derive from the Constitution of India.

The constitution affects policies

Economic policies flow from the type of government and its objectives. Growth-oriented governments implement policies that promote economic development. Contrast that with governments that implement extractive policies, which retard or altogether prevent development, primarily because extractive policies are not consistent with development. It is the Constitution that directly determines what kind of government a nation has, and thereby indirectly the economic policies.

Economic policies have consequences. How an economy performs depends on policies that the government implements. Nobel prize winning economist Douglass North observed that “economic history is overwhelmingly a story of economies that failed to produce a set of economic rules of the game (with enforcement) that induce sustained economic growth.”

Is there any reason to expect Indian governments to be exploitative? History provides a plausible answer. For nearly a century, India was under comprehensive colonial British rule. As can be rationally expected, the government that the British imposed on India was not primarily directed towards development, but rather towards extraction. That is only reasonable because wealth extraction is the rationale for colonial rule.

The British, therefore, created the institutional structures, which necessarily includes the government that controlled India through comprehensive government control of the economy. This structure administration and control was left intact when the British decided to leave India, and was taken over by the government of Independent India. Although India attained political independence from the British raj, Indians did not become free of a controlling—and extractive—government.

Independence brought political freedom to Indians, but not economic freedom. The positive correlation between economic freedom and the prosperity of a country is so robust that the causal link between the two is impossible to miss or deny. Countries with the most economic freedom are the most prosperous. Consider the Fraser Institute’sEconomic Freedom of the World: 2015 Annual Report, in which they rank 157 countries for the year 2013. In the first quartile, the most economically free, you find the prosperous large advanced industrialised countries such as the UK (10th rank), the US (16th), Japan (26th) and Germany (29th). The fourth quartile is the least free and understandably economically backward countries like Iran, Brazil, Argentina and Venezuela. India falls near the bottom of the third quartile (114th), behind Mexico (93rd), Russia (99th) and China (111th).[pullquote]Indians are not incapable of creating wealth. Where they have economic freedom, they do prosper.[/pullquote]

As noted at the beginning, Indians are not incapable of creating wealth. Where they have economic freedom, they do prosper. Indian Americans constitute the most economically successful of all ethnic groups in the US, with a median annual household income of around $100,000, which is nearly double that of the US as a whole. This fact is noteworthy because it points to a fundamental structural difference between India and the US even though they are both large democracies. This is a consequence of the “different rules of the economic game,” which arises from differences in the Constitutions of the two countries.

India’s Constitution is very large, gives the government enormous powers to intervene in the economy, allows the government to enact laws that discriminate among citizens based on attributes such as sex, religion, and caste, restricts freedom of speech, and limits the right to property. In short, it allows deliberate political and economic exploitation. The US constitution, by contrast, is short, grants freedom of speech, protects property rights, prohibits discrimination among citizens, and limits the power of the government.

The most salient distinction between the US and Indian Constitutions lies in the relationship between the people and the government that the two define. The US Constitution places the people as the principal and the government as its agent. This is evidenced in the limits that the Constitution imposes on the power of the US Congress. The Indian Constitution places the government as the principal and the people as its agent—as can be expected of a government that is essentially colonial in nature. Like the British government before it, the governments of post-1947 India impose what’s known as the “permit, permission, license, quota control raj.”[pullquote]The wealth Indian Americans create for themselves and their adopted country is immense, but it also represents the wealth that could have been potentially created in India but was lost.[/pullquote]

The deleterious effects of the license-control-quota-permit raj are too evident. Economic policies frame the economic environment and, therefore, the economic opportunities. Competent people who lack economic opportunities vote with their feet—if they are able to—in search of greater economic freedom. Looked at it this way, Indian Americans are economic migrants and economic refugees. The wealth they create for themselves and their adopted country is immense, but it also represents the wealth that could have been potentially created in India but was lost. The government of India, while celebrating the successes of NRIs, must also do a bit of soul-searching and ask why so many Indians are compelled to leave India.

India is a functioning democracy. General elections are regularly held and power is transferred routinely and peacefully. Every election is met with great hope that with different political leaders, that things will change for the better. But, although the governments and leaders change, there is very little real change. Regardless of which party or coalition of parties is in power, the policies hardly change.

A nation of free individuals

Nobel laureate economist, James Buchanan Jr, wrote, “It is folly to think that ‘better men’ elected to office will help us much, that ‘better policy’ will turn things around here. We need, and must have, basic constitutional reform, which must, of course, be preceded by basic constitutional discourse and discussion. This is our challenge.”

The conclusion has to be that India’s problem is structural and systemic, and not idiosyncratic. If the Constitution were to change, the ultimate rules of the game would change, the policies (the derived rules) will change, and thus the action on the ground (the play of the game) will change, and therefore the outcome will change.

India needs a new Constitution that is consistent with a nation of free individuals living in a complex, modern, large economy. This modern Constitution has to be one that guarantees economic freedom to the individual, prohibits the government from making any laws that discriminate among citizens, guarantees freedom of speech and the press, prohibits the government from entering into businesses that are properly the domain of the private sector, and so on. In other words, India needs a Constitution that protects the comprehensive freedom of the individual: economic, social and political.

India’s journey will not be successful by doing a new paint job on the car, or even getting a more competent driver, if the basic problem is under the hood. Perhaps India needs a new engine because the old one is broken and can never deliver the power needed for the journey.

Some reasons why your investment proposal won’t get read!

Check your investment proposal for the following errors or shortcomings:

1. Can’t open the file: the file is password protected or in a file format that is not universal (PDF) or that uses old versions or formats.

Use universally accepted formats that everyone can open, like PDF’s.

You have no idea how many such investment proposals I have seen in my career, do you really think that your would-be investor will send you an email asking for the password or the right program?

Scroll down to the bottom of this page to find a form to make comments, initiate discussions or share your experiences about these tips.

2. No ‘teaser’. No brief presentation. “What do you need money for?”

It’s called the ‘elevator-pitch when you have only 30 seconds. In the movie world it’s the synopsis. In investment jargon we call it ‘the teaser’. A short text that will inform me what you are all about. “What do you need? Tell me succinctly and purposefully exactly what you are looking for and why”. Make it brief.

3. Poor writing and/or spelling in your cover letter/email.

The cover letter with your business plan/investment proposal needs to open the door for you. Otherwise that door will get slammed into your face.

If you can’t write a simple introduction to your business proposals and explain in a few words what you are offering or what you are asking for, forget it! If you can’t do this yourself, ask someone else to do it for you.

4. Typing or Spelling errors on the front page or in the title.

You have no idea how many business plans we have seen over the years with enormous mistakes in titles, subtitles, and even huge mistakes, right on the cover page.

How about having someone evaluate what you have? Seek out family, friends, other business people, or a professional.

5. Failure to specify the amount of business funding required.

Too many business plans do not mention this key piece of information.

I remember wasting my time with excellent business plans, going through them over and over trying to figure out how much money they needed. Finally, I would give up, too much time wasted.

6. No index page in the business plan.

Having the option of a quick overview with a table of contents to assess what’s in your ‘paperwork’ is a requirement that will help the reader decide if they want to go through the task of reading it all.

This is the suit-and-tie approach: the guy who walks into your office knows already that he will get the deal. He has clearly organized the points that he will make in his investment proposal.

7. Outdated contact details in business proposals or business plans, or none at all.

Basic company information with a list of key company management and their contact details is a first requirement. Please do update changes. If someone tries to contact you and gets a disconnected line or a non-existing email address, you’re out.

8. Poor quality images or logos.

The use of images, photos and logos needs to be accurate, timely, well placed, and have a professional look. If you don’t have the right one and it looks bad, don’t use it.

Do your pictures look like they came from your $20.00 printer?

9. The look and feel of your investment proposal is outdated or simply unprofessional.

Business proposals that look like they come straight from a typewriter (in this day and age of high quality computer and print work), will be put aside. The ‘look and feel’ needs to be flawless. Keep the formatting consistent: avoid different fonts throughout the document, bad alignments and margins that change, and are not logical.

If you can’t do it by yourself, yes again, find someone who can. You can’t be an expert in every detail of your business. Business funding is a different world.

10. Timeline in your business plan: the presentation is obviously old and outdated.

Investment proposals or business plans reflect a point in time of a business that supposedly is alive and growing and full of ‘opportunity’. Your documents need to be up-to-date. Don’t use outdated presentations, check them before you send them to your interested parties. Old stuff won’t be read.

When your documents are outdated and are obviously older than six months, no one will look at them anymore.

11. The first paragraphs are unclear and just about incomprehensible, or they are not to the point.

From the first words you have to catch the reader’s attention with accurate and engaging information. If you don’t do that, the ‘buck’ will stop right there.

12. Some investment proposals are obviously written by a non-native English speaking person or organization. Failing to use proper English is unacceptable.

This is the same issue as the formats. If you are going to present to ‘the world’, let’s say to a database of thousands of investors, you have to use proper English. If it is not correct you will not be taken seriously. Find a good translator or someone who speaks correct English, let them help you.

It makes a wonderful impression to present a business plan coming from a non-English speaking country in flawless English. You just scored big.

13. The numbers don’t add up.

You would be surprised to find how many numbers don’t add up in business plans: like numbering of pages or references to pages, but also business projections, don’t make sense.

If you can’t add up or be accurate, would you expect to get big money from an investor who can?

14. Excessive length of the business plan.

Investors have no time reading documents of more than thirty pages.

Too much is too much. More details can be added during the due diligence phase.

15. Excessive appendices.

Again, the due diligence process will focus on such information and is not part of a business plan. Information overload will not do the job.

Attaching proof of revenue or contracts signed or pending will.

16. Absence of key content in your business plan.

These include lack of financial projections, market analyses and challenges such as risks, weaknesses, threats, competition.

Sketch a realistic picture. The investor is not stupid and does not believe in fairy tales.

If you need Loan, project funding, Bank Guarantee, SBLC, DLC or Letters of Credit please contact us immediately. 

Blog: https://loanandinvestment.wordpress.com

Website: http://www.loanandinvestments.com

EMAIL 1: ceo@loanandinvestments.com

EMAIL 2: loanandinvestments@outlook.com

Twitter: https://twitter.com/loanbgsblc

Skype: loanandinvestments

Brokers are paid good commission on each successful transaction so if you want to work for our company as a broker, agent or mandate please contact us for more information. 

Project finance explained in details

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 lien on 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.

If you need Loan, project funding, Bank Guarantee, SBLC, DLC or Letters of Credit please contact us immediately.
EMAIL 1: ceo@loanandinvestments.com
EMAIL 2: loanandinvestments@outlook.com
Skype: loanandinvestments
Brokers are paid good commission on each successful transaction so if you want to work for our company as a broker, agent or mandate please contact us for more information.

Nigerian President finally names a new cabinet—but it’s not that new

Inline image 1

Four months after getting elected in landmark polls, Nigeria’s president Muhammadu Buhari has finally given his 21 nominations for a new government cabinet to the senate, but is yet to identify specific portfolios for each nominee.
The list of names, which was expected to break from a tradition of rewarding party cronies and supporters, includes former governors of Lagos, Rivers and Ekiti states, as well as a few operatives from Buhari’s APC party. There are also a few new names.
After being sworn in on May 29, there was eager anticipation of Buhari’s changed approach to governance as would be evidenced through his key appointments. After four months of waiting for names, it became a local social media meme with the hashtag #theList in recent weeks.
In Nigerian politics, ministerial appointments are closely watched particularly for crucial ministries like petroleum resources and finance. Outside of state governorships, much of the corruption and mismanagement in Nigeria’s history has occurred at the ministry level or at key government agencies. This week has seen the case of former oil minister Diezani Allison-Madueke, who was arrested, and later released on bail, for alleged money laundering.
Politically, the appointment of ministers allows the president and party leaders ‘reward’ members of their party and also set the agenda for the president’s entire policy and economic direction. There is also an ethnic slant as the Nigerian constitution requires the president to select one minister from each state.
Gender bias
The lack of female representation on the ministerial list- only three of 21 nominees- will certainly raise eyebrows and questions over the involvement of women in Buhari’s administration.
In general, the 21-person list has a balance of career politicians such as Lai Mohammed, the national spokesman of Buhari’s All Progressives Congress and career profesionals such as Osagie Ehanire, a surgeon with stellar qualifications from Germany.
The names included were governors Babatunde Fashola (Lagos), Rotimi Amaechi (Rivers) and Kayode Fayemi (Ekiti). Others named were Abubakar Malami; Abdurahman Bello Dambazzau; Aisha Jumai Al Hassan; Lai Mohammed; Adebayo Shittu; Solomon Dalong; Chris Ngige; Audu Ogbeh; Amina Ibrahim; Osagie Ehaneri; Emmanuel Kachukwu; Suleiman Adamu; Mrs. Kemi Adeosun; Ogbonnaya Onu; Ahmed Musa Bello; Ibrahim Usman Jubrin; Hadi Serika and Udo Udoma.
Buhari is expected to announce at least 15 more in compliance with Nigeria’s constitution which demands the appointment of a minister from each of Nigeria’s 36 states.
The long wait for ministers was understood to be as a result of Buhari’s careful selection process to find people who fit in his administration and with the fight against corruption being an obvious goal of the president, several integrity checks were supposedly carried out. Despite these checks and the long selection process, some people on the list have had to deal major allegations of corrupt practices. Former Lagos governor Fashola has faced a raft of accusations since leaving office with one of the most conspicuous being building a website for $390,000. Others like Amaechi and Chris Ngige have also had allegations of corruption laid against them.
Even though the names are yet to be matched with portfolios, there is already speculation. One of the fairly obvious matches is for Ibe Kachikwu, newly appointed head of Nigeria’s oil company (NNPC), to head to the ministry of petroleum. With Buhari confirming days ago that he will remain in charge of the ministry, Kachikwu could possibly be a junior minister in charge of day to day activities. Kachickwu’s selection presents another conundrum as he will likely vacate his current position leaving Buhari to select a new NNPC boss.