Capital Guarantee Agreement

By applying the international rules of guarantee of the claim (URDG 758), after the “healing period” (good faith, cooperative resolution of problems), it is actually quite difficult for us to call the guarantee. In this sense, we use it to protect the interests of all, to stretch anyone who later turns out to be fraudulent, to help those who are legitimate through more attractive financing conditions, fairer conditions and faster closures. Answer: Indicative terms here. The framework conditions are here. The only maturity generally negotiated is our equity participation (as expressed in a share purchase agreement issued/offered at the end of due diligence) directly related to the size and quality of the capital guarantee. Answer: It is a bit innovative to use a capital guarantee for project financing in this way, with obvious advantages. Most professionals have an automatic association with what warranties are and how they should be used. Here, the warranty effectively ensures the project shutdown, commissioning and commissioning of the commercial operation, known as Commercial Operation Date or COD. In this sense, it is a kind of completion guarantee or serves as a guarantee of completion and performance for the developer and its mandated contractors, to ensure that the project facilities are properly built and commissioned to be operational. These funds therefore tend to invest most of their available capital in very conservative securities in order to minimize the likelihood of losses, a step that also limits the return. A capital guarantee fund may also use derivatives such as option contracts to guarantee against losses, which can also reduce the return due to the cost of buying the options. Answer: Breach of contract by the developer.

The credit agreement is put on the table after our due diligence, which will expose it in the right context. Due diligence is initiated after receipt of the RWA signed letter and usually lasts 2-4 weeks. While they offer a capital guarantee for investment, capital guarantee funds are generally known for illiquidity. These funds do not offer easy access to the money invested and the invested capital is blocked for different periods. 5. How to use the capital guarantee (BG/SBLC)? Answer: The receiving bank keeps BG/SBLC as collateral during construction, until the project is commissioned and reached the Commercial Operation Date (COD), then it is released (technically, it can flow). The terms of use of the capital guarantee are set out in a loan agreement that will be put on the table before the application for BG/SBLC and only when all parties negotiate/conclude and sign the financing document, which constitutes the financial close. This will allow the developer and its mandated contractors to report in accordance with the terms of the project loan agreement. In other words, the guarantee is a form of short-term guarantee (only during the construction and construction period, until catching up, typically) that also serves as an improvement in credit quality for the developer. In a way, the goal of this project financing approach is to ensure that the developer, and therefore the contractors or subcontractors, do not violate their agreement. 1. What happens if the developer does not have the balance sheet depth or seed capital to obtain an eligible capital guarantee? Answer: These capital/loan guarantees can often be provided through counterparties, for example.

B through an OEM (primary equipment supplier), a well-established EPC company, or perhaps the general contractor responsible for building the project assets. The establishment of a “sponsor” (defined below) for the guarantee of the project may or may not mean the renunciation of a certain number of equity, but for 100% financing, the distribution of a supported stake in the cash flows of the project SPV is inevitable, since another party must assume a significant part of the risks, which makes “risk-adjusted returns” a reasonable expectation…