The law and business of international project finance

Cambridge University Press
978-0-521-88220-0 - The Law and Business of International Project Finance - Third Edition - by Scott L. Hoffman
Table of Contents

Preface to the Third Edition		page xlv
Preface to the Second Edition		xlvii
Preface to the First Edition		xlix
PART ONE. AN INTRODUCTION TO PROJECT FINANCE
CHAPTER ONE. AN INTRODUCTION TO PROJECT FINANCE		3
§ 1.01	Definition of Project Finance	4
§ 1.02	Confusion of Terms	4
§ 1.03	Nonrecourse Project Finance	4
§ 1.04	Limited Recourse Project Finance	5
§ 1.05	Structured Project Finance – Toward Greater Economic Efficiency?	5
§ 1.06	Contrast With Other Financing Types	7
	[1] Balance Sheet Finance	7
	[2] Asset-Based Finance	7
§ 1.07	Uses of Project Finance	7
§ 1.08	Basic Components of Project Finance	8
§ 1.09	Advantages of Project Finance	8
	[1] Nonrecourse Debt Financing – It Ain’t Necessarily So	8
	[2] Off-Balance-Sheet Debt Treatment	9
	[3] Leveraged Debt	10
	[4] Avoidance of Restrictive Covenants in Other Transactions	11
	[5] Favorable Financing Terms	11
	[6] Internal Capital Commitment Policies	11
	[7] Political Risk Diversification	11
	[8] Risk Sharing	11
	[9] Collateral Limited to Project Assets	11
	[10] Lenders Are More Likely to Participate in a Workout Than Foreclose	11
	[11] Matching Specific Assets With Liabilities	12
	[12] Expanded Credit Opportunities	12
§ 1.10	Disadvantages of Project Finance	12
	[1] Complexity of Risk Allocation	12
	[2] Increased Lender Risk	12
	[3] Higher Interest Rates and Fees	12
	[4] Lender Supervision	12
	[5] Lender Reporting Requirements	13
	[6] Increased Insurance Coverage	13
	[7] Encourages Potentially Unacceptable Risk Taking	13
§ 1.11	International Project Finance	13
§ 1.12	Examples of Facilities Developed With Project Finance	13
	[1] Energy Generation	13
	[2] Pipelines, Storage Facilities, and Refineries	14
	[3] Mining	14
	[4] Toll Roads	14
	[5] Waste Disposal	14
	[6] Water	14
	[7] Telecommunications	15
	[8] Uses by Industrial Companies for Growth and Restructuring	15
	[9] Leisure and Sports Stadium Projects	15
	[10] Ethanol Production	15
	[11] Other Projects	16
	[12] Contrasting Risks	16
§ 1.13	Chicken or the Egg: The Effect of a Project’s Financing Structure on Its Commercial Structure	17
§ 1.14	Merchant Facilities: Projects Financed Without Revenue Contracts	17
§ 1.15	Project Finance in Developing Countries	17
§ 1.16	Other Financing Alternatives	19
§ 1.17	Bankability, Financeability, and Other Assaults on Language	19
§ 1.18	The Law of Project Finance – Sources of Project Finance Law and Standards	20
§ 1.19	Economic Studies of Project Finance	21
§ 1.20	The Lessons of a Financial Crisis – What the East Asian Financial Crisis Teaches About Project Finance	21
	[1] Increased Cost of Power	21
	[2] Power Purchase Contract Renegotiation	22
	[3] Decrease in Market Demand for Private Power	23
	[4] Conclusions	23
§ 1.21	Political Risk: The Dabhol Project	23
§ 1.22	Project Cancellations	24
PART TOW. RISK IDENTIFICATION, ALLOCATION, AND MITIGATION
CHAPTER TWO. PROJECT FINANCE RISKS		27
§ 2.01	Risk	27
§ 2.02	The Risk Matrix	28
§ 2.03	Project Finance Participants and Perspectives	28
	[1] Development Risks	28
	[2] Design Engineering and Construction Risks	28
	[3] Start-up Risks	29
	[4] Operating Risks	29
§ 2.04	Objectives of Project Finance Participants	29
§ 2.05	Risk Identification by Participants	33
	[1] Sponsor	33
	[2] Construction Lender	33
	[3] Permanent Lender	34
	[4] Contractor	35
	[5] Operator	35
	[6] Technology Owner	35
	[7] Supplier	36
	[8] Output Purchaser	36
	[9] Host Government	36
	[10] Other Governments – Export and Transit Countries	36
	[11] Equity Investor	36
	[12] Multilateral and Bilateral Agencies	37
§ 2.06	Development Stage Risks	37
§ 2.07	The Joint Venture as a Risk Mitigation Device	38
§ 2.08	A Caveat About Risk Allocation	38
CHAPTER THREE. PROJECT FINANCE CROSS-BORDER RISKS		39
§ 3.01	Generally	40
§ 3.02	Currency-Related Risks	40
	[1] Generally	40
	[2] Nonconvertibility of Currency (Unavailability of Foreign Exchange)	41
	[3] Currency Transfer (Inability to Transfer Foreign Exchange Abroad)	41
	Generally	41
	Types and Characteristics of Exchange Controls	42
	Violation of Exchange Laws	43
	Enforcement of Transactions That Violate a Country’s Exchange Controls	43
	Exchange Permissions and Consents	43
	Reducing Exposure to Exchange Controls	44
	[4] Currency Devaluation Risk Caused by Fluctuations in Foreign Exchange Rates	44
	Generally	44
	Indexing Revenues	44
	Matching Revenue Currency to Debt Currency	44
	Raising Debt in Local Currency	45
	Derivatives	45
	Sharing of Risk	45
	[5] Offshore Accounts	45
	[6] Special Currency Problems in Large-Scale Projects	46
	[7] Advance Approvals	46
	Consent	46
	Exemption	46
	Debt Repayment	46
	[8] Summary of Currency Risk Minimization Techniques	46
	Payment in Hard Currency	46
	Foreign Exchange Risk Insurance	47
	Indexed Local Currency Payments	47
§ 3.03	Permit, Concession, and License Risk	47
	[1] Permits	47
	[2] Concessions and Licenses	47
§ 3.04	Expropriation Risk	48
§ 3.05	Expatriation	49
§ 3.06	Change of Law Risk	49
	[1] Import Tariffs	49
	[2] Export Tariffs	49
	[3] Production or Consumption Controls	50
	[4] Taxes	50
	Generally	50
	Taxes on Income	50
	Customs Duties	50
	Withholding Tax on Payment of Interest	50
	Nondiscrimination	50
	[5] Environmental Controls	51
	[6] Regulation and Deregulation	51
	[7] Price Controls	51
	[8] Privatization of Suppliers or Purchasers	51
	[9] Change in Foreign Laws	51
§ 3.07	Political Violence, Civil Unrest, War, and Other Political Force Majeure Events	51
§ 3.08	Political Collapse and Succession	51
§ 3.09	Preemption and Priority	52
§ 3.10	Sovereign Risk	52
§ 3.11	Breach of Undertakings (Contract Repudiation)	52
§ 3.12	Collateral Risk	52
	[1] What Type of Collateral Security Does the Sovereign Government Allow?	53
	Are All Local Formalities Complied With?	53
	[3] What Is the Priority of the Lien?	53
	[4] How Is the Lien Enforced?	53
	[5] How Does the Foreclosure Process Work?	53
	[6] Collateral Trusts	54
	[7] Real Property	54
	[8] Interaction Among Risks	54
§ 3.13	Law and Legal System Risks	54
	[1] Choice of Law	55
	[2] Agent for Process and Submission to Jurisdiction	55
	[3] Dispute Resolution	55
	[4] Fees, Approvals, and Filings	55
	[5] Legal Expertise and Experience	55
	[6] General Business Law and Regulation	55
	[7] Waiver of Sovereign Immunity	56
	[8] Legal Cultures	56
§ 3.14	Illiquidity of Equity Investment	56
§ 3.15	Freezing or Blocking Orders	56
§ 3.16	Export Prohibitions	56
§ 3.17	Price Controls and Regulation	56
§ 3.18	Commercial or Political – It May Be Both	56
CHAPTER FOUR. PROJECT FINANCE COMMERCIAL RISKS		58
§ 4.01	Introduction to Commercial Risks	58
	[1] Probability of Risk Evolving Into a Project Problem	58
	[2] Due Diligence	59
	[3] Feasibility Study in Risk Identification	59
	[4] Categories of Commercial Risk	59
§ 4.02	Credit Risks	59
§ 4.03	Increase in Construction Costs	60
§ 4.04	Delay in Completion	60
§ 4.05	Force Majeure in Construction Contracts	60
§ 4.06	Experience and Resources of Contractor	61
§ 4.07	Building Materials	61
§ 4.08	Facility Site	61
§ 4.09	Technology	61
§ 4.10	Construction of Related Facilities	62
§ 4.11	Shortfalls in Mineral Reserves	62
§ 4.12	Raw Material Supply and Utilities	62
§ 4.13	Creditworthiness of Off-Take Purchaser	63
§ 4.14	Market for Product or Service	63
§ 4.15	Shortfalls in Anticipated Capacity, Output, and Efficiency	64
§ 4.16	Operator Experience	64
§ 4.17	General Operating Expenses	64
§ 4.18	Sponsor Commitment	64
§ 4.19	Management Experience	65
§ 4.20	Permits and Licenses	65
§ 4.21	Political Environment	65
§ 4.22	Interest Rate	65
§ 4.23	Force Majeure	65
§ 4.24	Economic Projection and Feasibility Report Inaccuracy	66
§ 4.25	Environmental	66
§ 4.26	Contract Mismatch	66
§ 4.27	Contract Risks Generally	66
§ 4.28	Commercial Risk Mitigation	66
	[1] Construction Period Risk Mitigation	67
	Contractual Undertakings	67
	Contingency Reserve Funds and Equity and Other Funding Commitments	67
	Insurance	67
	[2] Operation Period Risk Mitigation	67
	Contractual Undertakings	67
	Contractual Arrangements	67
	Contingency Reserve Funds	68
	Cash Traps	68
	Insurance	68
PART THREE. PROJECT FINANCE STRUCTURES
CHAPTER FIVE. PROJECT FINANCE PARTICIPANTS AND THEIR ROLES		71
§ 5.01	Project Sponsor	71
§ 5.02	Project Company	71
§ 5.03	Borrowing Entity	71
§ 5.04	Commercial Lender	72
	[1] Arranging Bank	72
	[2] Managing Bank	72
	[3] Agent Bank	72
	[4] Engineering Bank	72
	[5] Security Agent	72
§ 5.05	Bondholders	72
§ 5.06	International (Multilateral) Agencies	73
§ 5.07	Bilateral Agencies	73
§ 5.08	Rating Agency	73
§ 5.09	Supplier	73
§ 5.10	Output Purchaser	73
§ 5.11	Contractor	73
§ 5.12	Operator	74
§ 5.13	Financial Advisor	74
§ 5.14	Technical Consultants	74
§ 5.15	Project Finance Lawyers	74
§ 5.16	Local Lawyers	74
§ 5.17	Host Government	74
§ 5.18	Insurers	77
CHAPTER SIX. PROJECT FINANCE STRUCTURES		78
§ 6.01	Generally	78
§ 6.02	Commercial Loan Financing	78
	[1] Construction Phase	79
	[2] Operations Phase	79
§ 6.03	Export Credit Financing	79
	[1] Generally	79
	[2] Types of Export-Import Financing	79
	Direct Lending	79
	Financial Intermediary Loans (Bank-to-Bank)	79
	Interest Rate Equalization	79
§ 6.04	Lease Financing	80
	[1] Generally	80
	[2] Advantages to the Project Company	80
	Control Over the Project	80
	Total Financing	80
	Lower Financing Costs	80
	Tax Deductibility of Rent	80
	Shifting of Residual Risk	80
	Equity Risk Taker Replaces Lender as Financing Source	80
	[3] Lease Financing From the Lessor’s Perspective	81
§ 6.05	Bond Financing	81
§ 6.06	BOT	81
§ 6.07	Co-financing	81
§ 6.08	Production Payments	81
§ 6.09	Forward Purchase Agreements	82
CHAPTER SEVEN. SELECTING THE PROJECT FINANCE OWNERSHIP STRUCTURE		83
§ 7.01	Generally	83
§ 7.02	Pre-development Activities	84
	[1] Generally	84
	[2] The Development Agreement	84
	Definition of Project	84
	Exclusivity	84
	Roles and Responsibilities	84
	Tasks and Schedule	84
	Cost Funding	84
	Management and Voting	84
	Withdrawal	85
	Abandonment	85
	Confidentiality	85
	Antitrust and Restrictive Trade Practices Considerations	85
§ 7.03	Determining the Structure to Use	85
	[1] Need for Leverage	85
	[2] Grade of Investment	85
	[3] Tax Laws and Treaties	85
	[4] Project Management	85
	[5] Accounting Treatment and Objectives	85
	[6] Lender Preferences	86
	[7] Transferability of Equity Interests	86
§ 7.04	Avoiding Parent Company Direct Involvement	86
§ 7.05	Special-Purpose Nature of Project Company	86
§ 7.06	Host-Country Investment Requirements	86
	[1] Generally	86
	[2] Ownership of Real Estate	86
	[3] Local Participation	87
	[4] Local Formation of Project Company	87
§ 7.07	Corporation	87
	[1] Generally	87
	[2] Reasons for Selection	87
	[3] Management	88
§ 7.08	General Partnership	88
	[1] Generally	88
	[2] Liability	88
	[3] Reasons for Selection	89
	[4] Collateral Considerations	89
§ 7.09	Limited Partnership	89
	[1] Generally	89
	[2] Reasons for Selection	89
	[3] Management	89
§ 7.10	Limited Liability Company	90
§ 7.11	Joint Venture	90
	[1] Generally	90
	[2] Reasons for Selection	90
	[3] Types	90
	[4] Project Management	90
	[5] Conflicts of Interest	90
	[6] Nature of Liability	90
§ 7.12	European Economic Interest Groupings (EEIG)	91
	[1] Generally	91
	[2] Nature of Liability	91
	[3] Management	91
	[4] Collateral Considerations	91
§ 7.13	Development Consortium	91
§ 7.14	Preserving Flexibility	91
§ 7.15	Fragmentation: The More the Merrier	92
PART FOUR. TECHNICAL, POLITICAL, AND ECONOMIC FEASIBILITY
CHAPTER EIGHT. THE FEASIBILITY STUDY AND NEEDS ASSESSMENT		95
§ 8.01	Purpose of Feasibility Study	95
§ 8.02	General Description	95
§ 8.03	Project Sponsors and Project Company	95
§ 8.04	Project Participants	95
§ 8.05	Technical Information	96
§ 8.06	Economic Information	96
§ 8.07	Contracts	96
§ 8.08	Project Schedule	96
§ 8.09	Government	97
§ 8.10	Market	97
§ 8.11	Proposed Financing Sources	97
§ 8.12	Privatization	97
	[1] Generally	97
	[2] Types	97
	[3] Benefits	97
	[4] Effect on Project Feasibility	98
§ 8.13	Needs Assessment	98
§ 8.14	The Independent Engineer	98
CHAPTER NINE. HOST-COUNTRY BUSINESS ENVIRONMENT FOR PROJECT FINANCE		99
§ 9.01	Introduction	99
§ 9.02	Political Conditions	99
§ 9.03	Social and Human Rights Conditions	100
§ 9.04	Legislative and Regulatory Conditions	100
§ 9.05	Economic Conditions	101
§ 9.06	Project Finance in Developing Countries	101
CHAPTER TEN. ECONOMIC FEASIBILITY		103
§ 10.01	Purpose	103
§ 10.02	Construction Budget	103
§ 10.03	Operating Budget	103
§ 10.04	Debt Service	103
§ 10.05	Working Capital	103
§ 10.06	Assumptions	104
§ 10.07	Ratios	104
§ 10.08	Valuation	104
CHAPTER ELEVEN. ENVIRONMENTAL REGULATION AND ENVIRONMENTAL FEASIBILITY OF THE PROJECT		105
§ 11.01	Growth of Environmental Regulation	105
	[1] Generally	105
	[2] Host Country	105
	[3] Multilateral and Bilateral Institutions	105
	[4] International Treaties	106
	[5] Home Country	106
§ 11.02	Environmental Impact of Project	106
	[1] Site	106
	[2] Air	106
	[3] Water	106
	[4] Plant and Animal Habitats	106
	[5] Health Hazards	106
	[6] Noise	107
	[7] Aesthetics	107
	[8] Historic and Cultural Significance	107
	[9] Transportation, Public Services, and Utilities	107
	[10] Indigenous People	107
§ 11.03	Permits	107
§ 11.04	Public Opposition	107
§ 11.05	World Bank Environmental Standards	108
§ 11.06	Environmental Damage and Audits	108
§ 11.07	Future Environmental Regulation	109
§ 11.08	The Equator Principles	109
	[1] Assessment	109
	[2] Management	110
	[3] Documentation	110
	[4] 2006 Revisions	110
	[5] Effects on Project Finance	110
PART FIVE. PROJECT FINANCE DOCUMENTATION
CHAPTER TWELVE. AN OVERVIEW OF PROJECT DOCUMENTATION		113
§ 12.01	Generally	113
§ 12.02	Transnational Contracting	114
	[1] Governing Law	114
	[2] Forum	114
	[3] Contract Formation	114
	[4] Contract Structure and Validity	114
	[5] Formalities	114
	[6] Enforceability of Risk Allocation and Remedies	114
	[7] Currency Issues	115
	[8] Government Action	115
	[9] Term	115
	[10] Language	115
§ 12.03	Document Types	115
§ 12.04	Amendments, Modifications, and Supplements	115
§ 12.05	Nonrecourse Provision	115
	[1] Introduction	115
	[2] Sample Provisions	116
§ 12.06	Cooperation With Financing	116
	[1] Introduction	116
	[2] Sample Provision	116
§ 12.07	Term	117
§ 12.08	Completion	117
	[1] Introduction	117
	[2] Sample Provision	117
§ 12.09	Come Hell or High Water	118
§ 12.10	Force Majeure	118
§ 12.11	When Things Go Wrong	119
	[1] Generally	119
	[2] Contract Damages	119
	[3] Liquidated Damages	119
	[4] Specific Performance	119
§ 12.12	Internationalization of Contracts	120
CHAPTER THIRTEEN. REPRESENTATIONS AND WARRANTIES IN PROJECT FINANCE CREDIT AGREEMENTS AND CONTRACTS		121
§ 13.01	Generally	122
	[1] Definition	122
	[2] Purpose	123
	[3] Role of Representations and Warranties in Project Finance	123
§ 13.02	Mechanics of Representations and Warranties	123
	[1] Affirming the Basic Assumptions	123
	Legal Status	123
	Authority to Enter Into Transaction	124
	[2] Additional Facts Received in Negotiation Process	124
	[3] Date Representations and Warranties Are Made	124
	[4] Materiality and Knowledge Limitations in Representations and Warranties	124
§ 13.03	Verification of Representations and Warranties	125
§ 13.04	Introduction to Sample Provisions	125
§ 13.05	Formalities of Business Organization	125
	[1] Generally	125
	Due Incorporation; Due Formation	126
	Valid Existence	126
	Good Standing	126
	Power and Authority	126
	Due Qualification	127
	[2] Corporation	126
	[3] General Partnership	126
	[4] Limited Partnership	127
	[5] General Partners of Limited Partnership	127
§ 13.06	Power and Authority	127
	[1] Introduction	127
	Authority to Enter Into and Perform Transaction	127
	Corporate or Partnership Approval	127
	Violation of Law or Judicial Order	127
	Breach of Existing Agreement	127
	Creation of Liens	127
	[2] Sample Provision	128
§ 13.07	Legally Enforceable Agreement	128
	[1] Introduction	128
	[2] Sample Provision	128
§ 13.08	Financial Statements, Project Budget, and Projections	128
	[1] Introduction	128
	[2] Sample Provision for Project Finance Credit Agreement for New Project	128
	Project Budget	129
	Projections	129
	[3] Modification of Financial Statement Representation for Existing Project	129
	Generally Accepted Accounting Principles	129
	Fair Presentation of Financial Condition	129
	[4] Financial Statement Representation for Contracting Party	130
§ 13.09	Litigation	130
	[1] Introduction	130
	[2] Litigation Representation When No Litigation Exists	130
	[3] Litigation Representation When Litigation Exists	130
§ 13.10	Judgments and Orders	131
	[1] Introduction	131
	[2] Sample Provision	131
§ 13.11	Existing Agreements	131
	[1] Introduction	131
	[2] Sample Provision	131
§ 13.12	Force Majeure	132
	[1] Introduction	132
	[2] Sample Provision	132
§ 13.13	Asset Ownership and Liens	132
	[1] Introduction	132
	[2] Sample Provision	132
§ 13.14	Subsidiaries and Ownership of Securities	132
	[1] Introduction	132
	[2] Sample Provision	132
§ 13.15	Operation of Business	133
	[1] Introduction	133
	[2] Sample Provision	133
§ 13.16	Project Assets and Necessary Assignments	133
	[1] Introduction	133
	[2] Sample Provision	133
§ 13.17	Project Contracts	133
	[1] Introduction	133
	[2] Sample Provision	133
§ 13.18	Debt	133
	[1] Introduction	133
	[2] Sample Provision	134
§ 13.19	Taxes	134
	[1] Introduction	134
	[2] Sample Provision	134
§ 13.20	Regulatory and Legal Status	134
	[1] Introduction	134
	[2] Sample Provision	134
§ 13.21	Permits	134
	[1] Introduction	134
	[2] Sample Provision	135
§ 13.22	Compliance With Laws	135
	[1] Introduction	135
	[2] Sample Provision	135
§ 13.23	Infrastructure	136
	[1] Introduction	136
	[2] Sample Provision	136
§ 13.24	Completion	136
	[1] Introduction	136
	[2] Sample Provision	137
§ 13.25	Collateral	137
	[1] Introduction	137
	[2] Sample Provision	137
§ 13.26	Full Disclosure	137
	[1] Introduction	137
	[2] Sample Provision	137
§ 13.27	Representations and Warranties Made in Other Project Contracts	137
	[1] Introduction	137
	[2] Sample Provision	137
§ 13.28	No Prior Business Activity	137
	[1] Introduction	137
	[2] Sample Provision	137
§ 13.29	Complete Project	138
	[1] Introduction	138
	[2] Sample Provision	138
CHAPTER FOURTEEN. PRELIMINARY HOST-COUNTRY AGREEMENTS		139
§ 14.01	Introduction	140
§ 14.02	Bidding (Tendering) Processes	140
	[1] Generally	140
	[2] Advantages of Bidding Programs	141
	[3] Disadvantages of Bidding Programs	141
	[4] Prequalification of Bidders (the RFQ)	141
	[5] Bid Design and Preparation of Bid Documents (the RFP)	142
	Generally	142
	Evaluation and Scoring	142
	[6] Model Contracts	143
	[7] Bid Meetings and Bidder Questions	143
	[8] Security	143
	[9] Promotion of Public Bids by Multilateral Agencies	143
	[10] Bidding in the Project Finance Context	143
	Generally	143
	Special-Purpose Entities	143
	The Problem of Consortium Bids	144
	When to Involve the Lenders	144
§ 14.03	Letter of Intent and Memorandum of Understanding	144
§ 14.04	Concessions and Licenses	145
	[1] Generally	145
	[2] Concession Agreement	145
	Terms From the Host Government’s Perspective	145
	Terms From the Project Company’s Perspective	145
	Ongoing Consents and Approvals by the Host Government	146
	[3] Example in a BOT Structure	146
	[4] Disputes	146
§ 14.05	Legislative Approval	146
§ 14.06	Implementation Agreements	147
	[1] Generally	147
	[2] Sovereign Guarantees	147
	[3] Expropriation	147
	[4] Permits and Other Governmental Approvals	148
	[5] Currency Concerns	148
	[6] Tax Benefits and Customs Duties Relief	148
	Generally	148
	Tax Holiday	149
	[7] Legislative Protection	149
	[8] War, Insurrection, General Strikes, and Political Violence	149
	[9] Authorization to Do Business	149
	[10] Exclusive Right to Develop Project	149
	[11] General Cooperation for Project Development and Nondiscrimination	149
	[12] Good Citizenship	150
	[13] Enforcement and Dispute Resolution	150
	[14] Constitutionality Considerations of Implementation Agreements	150
	[15] Damages	150
	[16] Contrast: Country Support Agreements	150
	[17] Stabilization Clauses	151
	[18] Sovereign Guarantees From the Government’s Perspective	151
§ 14.07	Other Considerations for Preliminary Agreements	153
	[1] Infrastructure Development	153
	Land and Air Transportation	153
	Water Ports and Harbors	154
	Power	154
	Water	154
	Waste Disposal	154
	Communications	154
	[2] Product or Service	154
	[3] Milestones	155
	[4] Expansion Rights or Requirements	155
	[5] Social Program Support	155
	[6] Option to Acquire Raw Materials in the Host Country	155
	[7] Importation of Construction Equipment	155
	[8] Price Regulation	156
	[9] Government-Owned Natural Resources	156
	[10] Local Restrictions on Sale	156
	[11] Export Restrictions	156
	[12] Import Restrictions	156
	[13] Employees	156
	[14] Withholding Taxes on Loan Interest	157
§ 14.08	Host-Country Approval of Political Risk Insurance	157
§ 14.09	The Problem of Binding Future Governments to Actions of Predecessor Governments	157
	[1] Introduction	157
	[2] The Effectiveness of Contracts With Host Governments as Risk Mitigation	157
	[3] Contractual Damages and Assurances	158
	[4] Sanctity of Contract Versus State Sovereignty	158
§ 14.10	Waiver of Sovereign Immunity	158
	[1] Generally	158
	[2] Foreign Sovereign Immunities Act of 1976	159
	Generally	159
	Exceptions to Immunity	159
	Counterclaims	160
	Extent of Sovereign Liability	160
	Attachment of Sovereign’s Property	160
	Case Study: Waiver of Sovereign Immunity in a Project Finance Transaction	161
	[3] State Immunity Act of 1978 (U.K.)	162
	Generally	162
	Exceptions to Immunity	162
	Application	162
§ 14.11	Act of State Doctrine (U.S.)	162
§ 14.12	Cooperative Risk Management	163
CHAPTER FIFTEEN. CONSTRUCTION CONTRACTS		164
§ 15.01	Generally	165
§ 15.02	Important Construction Risks	165
	[1] Increase in Construction Costs	166
	[2] Delay in Completion	166
	[3] Performance Guarantees	166
	[4] Force Majeure in International Construction Contracts	167
	[5] Experience, Reputation, and Resources of Contractor	167
	[6] Building Materials	168
	[7] Construction of Related Facilities	168
	[8] Raw Material Supply and Utilities	168
	[9] Excuses for Contractor Nonperformance – The Owner Did It	168
	[10] Coordination	169
§ 15.03	Creditworthiness	169
§ 15.04	Types of Construction-Related Contracts	169
	[1] Engineering Contract	169
	[2] Procurement Contract	170
	[3] Construction Contract	170
	[4] EPC Contract	170
§ 15.05	Fixed-Price Contract	170
§ 15.06	Cost-Plus-Fee Contract	171
§ 15.07	Cost-Plus-Fee Contract With Maximum Price and Incentive Fee	171
§ 15.08	Project Finance Turnkey Contract	171
§ 15.09	Typical Provisions in Project Finance Turnkey Construction Contracts	172
§ 15.10	Scope of Work	172
	[1] Introduction	172
	[2] Sample Provision	172
§ 15.11	Contractor’s Responsibilities	172
	[1] Introduction	172
	[2] Sample Provision	172
§ 15.12	Project Company’s Responsibilities	173
	[1] Introduction	173
	[2] Sample Provision	173
§ 15.13	The Notice to Proceed and Commencement of Construction	174
	[1] Introduction	174
	[2] Sample Provision	175
§ 15.14	Price	175
	[1] Introduction	175
	[2] Sample Provision	176
§ 15.15	Payment and Retainage	176
	[1] Introduction	176
	[2] Retention Money Guarantee	176
	[3] Liens	177
	[4] Sample Provision	177
§ 15.16	Completion Date Guarantees, Performance Guarantees, and Liquidated Damages	177
	[1] Introduction	177
	[2] Mechanical Completion	177
	[3] Substantial Completion	177
	[4] Final Completion	178
	[5] Correction	178
	[6] Delay Liquidated Damages	178
	[7] Testing	178
	[8] Bonuses for Early Completion	179
	[9] Environmental Guarantees	179
	[10] Exceptions to Guarantees	179
	[11] Alternatives to Guarantees	179
	[12] Sample Provision	180
§ 15.17	Warranties	180
	Introduction	180
	[2] Sample Provision	180
§ 15.18	Changes	181
§ 15.19	Title to Work	181
	[1] Introduction	181
	[2] Sample Provision	181
§ 15.20	Remedies for Breach	181
	[1] Introduction	181
	[2] Sample Provision	181
§ 15.21	Suspension of Work and Termination	182
	[1] Introduction	182
	[2] Sample Provision	182
§ 15.22	Payment and Performance Bonds	183
	[1] Introduction	183
	Performance Bond	183
	Payment Bond	183
	Warranty Bond	183
	Money Retention Bond	183
	[2] Sample Provision	183
§ 15.23	Insurance	183
	[1] Introduction	183
	[2] Sample Provision	183
§ 15.24	Force Majeure	184
	[1] Introduction	184
	[2] Sample Provision	185
§ 15.25	Coordination Concerns	185
	[1] Introduction	185
	[2] Sample Provision	185
§ 15.26	Training	185
	[1] Introduction	185
	[2] Sample Provision	185
§ 15.27	Subcontractors	185
	[1] Introduction	185
	[2] Sample Provision	185
§ 15.28	Liability Limitations	186
	[1] Introduction	186
	[2] Sample Provision	186
§ 15.29	Site Conditions	186
	[1] Introduction	186
	[2] Sample Provision	186
§ 15.30	The Special Problem of Compliance by the Contractor With the Other Project Contracts	186
	[1] Introduction	186
	[2] Sample Provision	186
§ 15.31	Unraveling the Project Finance Deal: Termination for Convenience	187
§ 15.32	Compliance With Concession Terms and Conditions	187
	[1] Introduction	187
	[2] Sample Provision	187
CHAPTER SIXTEEN. INPUT CONTRACTS		188
§ 16.01	Introduction	188
§ 16.02	When Input Contracts Are Not Needed	189
§ 16.03	Important Input Risks	189
	[1] Increase in Input Costs	189
	[2] Delay in Completion of Transportation Facilities	190
	[3] Availability of Supply	190
	[4] Disruption to Transportation	190
	[5] Force Majeure in International Input Contracts	190
	[6] Experience and Resources of Input Supplier and Transporter	190
	[7] Fuel Management and the Fuel Manager	190
	[8] Quality	190
	[9] Linking Project Inputs to Outputs	191
§ 16.04	Types of Input Contracts	191
	[1] Fixed Amount	191
	[2] Requirements	191
	[3] Output	191
	[4] Spot	191
	[5] Dedicated Reserves	191
	[6] Firm Versus Interruptible	191
	[7] Subordination of Project Costs to Debt Service	192
	[8] The Commodity Supplier as Project Partner	192
§ 16.05	Excuses to Performance	192
	Creditworthiness	192
§ 16.07	Typical Provisions in Project Finance Input Contracts	192
§ 16.08	Quantities and Commencement of Deliveries	193
	[1] Introduction	193
	[2] Sample Provision	193
§ 16.09	Price	193
	[1] Introduction	193
	[2] Sample Provision	193
§ 16.10	Payment	193
	[1] Introduction	193
	[2] Sample Provision	193
§ 16.11	Scheduling, Metering, and Weighing	193
	[1] Introduction	193
	[2] Sample Provision	194
§ 16.12	Quality and Rejection	194
	[1] Introduction	194
	[2] Sample Provision	194
§ 16.13	Title and Risk of Loss	194
	[1] Introduction	194
	[2] Sample Provision	194
§ 16.14	Term	194
	[1] Introduction	194
	[2] Sample Provision	194
§ 16.15	Force Majeure	195
	[1] Introduction	195
	[2] Uncontrollable Events	195
	[3] Change of Law	195
	[4] Sample Provision	195
§ 16.16	Default	195
	[1] Termination Events Generally	195
	[2] Termination by Supplier	195
	[3] Termination by Project Company	195
	[4] Sample Provision	196
§ 16.17	Remedies for Breach	196
	[1] Introduction	196
	[2] Termination Payments	196
	[3] Specific Performance	196
	[4] Alternative Inputs	197
	[5] Sample Provision	197
§ 16.18	Reserves and Mining or Production Plans	197
CHAPTER SEVENTEEN. OPERATION AND MAINTENANCE AGREEMENTS		198
§ 17.01	Generally	198
	[1] Operating Agreement	198
	[2] Self-Operation	199
§ 17.02	Important Operation Risks	199
	[1] Increase in Operating Costs	199
	[2] Performance Guarantees	199
	[3] Force Majeure in International Operation Contracts	200
	[4] Experience and Resources of Operator	200
	[5] Raw Material Supply and Utilities	200
	[6] Excuses for Operator Nonperformance – The Contractor Did It; The Owner Did It	201
	[7] Coordination	201
	Creditworthiness	201
§ 17.04	Fixed-Price Contract	201
§ 17.05	Cost-Plus-Fee Contract	202
§ 17.06	Cost-Plus-Fee Contract With Maximum Price and Incentive Fee	202
§ 17.07	Typical Provisions in Project Finance Operation and Maintenance Agreements	202
§ 17.08	Operator’s Responsibilities	202
	[1] Introduction	202
	[2] Sample Provision	203
§ 17.09	Project Company’s Responsibilities	203
	[1] Introduction	203
	[2] Sample Provision	203
§ 17.10	Operating Standard	204
	[1] Introduction	204
	[2] Sample Provision	204
§ 17.11	Price and Payment	204
	[1] Introduction	204
	[2] Sample Provision	204
§ 17.12	Performance Guarantees and Liquidated Damages	204
	[1] Introduction	204
	[2] Sample Provision	205
§ 17.13	Capital Changes	205
	[1] Introduction	205
	[2] Sample Provision	205
§ 17.14	Remedies for Breach	205
	[1] Introduction	205
	[2] Sample Provision	205
§ 17.15	Suspension of Services	206
	[1] Introduction	206
	[2] Sample Provision	207
§ 17.16	Procedure at End of Agreement	207
	[1] Introduction	207
	[2] Sample Provision	207
§ 17.17	Insurance	207
	[1] Introduction	207
	[2] Sample Provision	207
§ 17.18	Force Majeure	208
	[1] Introduction	208
	[2] Sample Provision	208
CHAPTER EIGHTEEN. PROJECT FINANCE OFF-TAKE SALES CONTRACTS		209
§ 18.01	Necessity for Off-Take Contracts	209
§ 18.02	Types of Off-Take Contracts	209
	[1] Great Confusion	209
	[2] Take-or-Pay	210
	[3] Take-and-Pay	210
	[4] Blended	210
	[5] Long-Term Sales Agreement	211
	[6] Spot Sales	211
§ 18.03	Contractual Risk – The Value of Contracts to the Project Company and as a Credit Support	211
§ 18.04	Risks in Contract Terms and Defenses	211
	[1] Commercial Impracticability	212
	[2] General Contract Theories	213
	[3] An Example of Project Contract Risks: Output and Requirements Contracts	213
§ 18.05	Revenue Contracts in Transnational Projects	214
§ 18.06	Enforcement of Revenue Contracts in Transnational Projects	214
§ 18.07	Assignment of Revenues to the Project Lenders	215
§ 18.08	Selected Provisions in Off-Take Contracts	215
§ 18.09	Agreement for Allocation of a Portion of Production Capacity	215
	[1] Introduction	215
	[2] Sample Provision	215
§ 18.10	Option Capacity	215
	[1] Introduction	215
	[2] Sample Provision	215
§ 18.11	Reserve Capacity	215
	[1] Introduction	215
	[2] Sample Provision	215
§ 18.12	Standby Charge	216
	[1] Introduction	216
	[2] Sample Provision	216
§ 18.13	Sanctity of Contracts	216
	[1] Introduction	216
	[2] Analysis Under U.S. Law	216
	[3] Retroactivity and Settled Expectations – The Effect of Governmental Actions on Existing Contracts	217
	[4] Lessons for International Project Finance	219
	[5] Stability of Contracts in Emerging Markets – The Dabhol Project	219
CHAPTER NINETEEN. POWER SALES AGREEMENTS		222
§ 19.01	Introduction	223
§ 19.02	Revenue Contracts in Transnational Projects	223
§ 19.03	Development Obligations	223
§ 19.04	Performance Milestones	224
	[1] Generally	224
	[2] Approval of Project Contracts	224
	[3] Financial Closing	225
	[4] Penalties for Missed Milestones	225
	Generally	225
	Delayed Entry Into Commercial Operation	225
	Failure to Construct Facility	225
	Shortfall in Nameplate Capacity	225
	[5] Commercial Operations	225
	[6] Force Majeure	226
§ 19.05	Obligation to Deliver Power; Obligation to Take Power	226
§ 19.06	Delivery Point and Interconnection	227
	[1] Delivery Point	227
	[2] Interconnection Facilities	227
	[3] Power of Eminent Domain	227
	[4] Wheeling	227
	[5] Land Rights	227
§ 19.07	Price for Power	227
	[1] Introduction	227
	[2] The Political Side of Energy Rates – A Lesson Learned in the United States	227
	[3] General Forms of Power Contract Price Provisions	228
	Take-or-Pay	228
	Take-and-Pay	228
	[4] Capacity and Energy Payments Structure	228
	[5] Capacity Payment	228
	Fixed or Variable	228
	Floor	228
	Front-Loaded	229
	Back-Loaded	229
	Levelized	229
	[6] Adjustments to Capacity Charges	229
	[7] Energy Payment	229
	Fixed or Variable	230
	Floor	230
	Forecasted	230
	Indexed	230
	[8] Fuel Costs	230
	[9] Penalties and Bonuses	230
	[10] When Capacity Payments Begin	231
	[11] When Capacity Payments End	231
	[12] The Problem of Equity Return for Developing Countries	231
	[13] What If the Deal Turns Out to Be a Bad One?	232
§ 19.08	Security and Commitment of Project Sponsor	232
	[1] Security for Performance	232
	[2] Project-Based Security	232
	[3] Minimum Equity Undertaking	233
	[4] Cash and Letters of Credit	233
	[5] Tracking Accounts – Front-End Loaded	233
§ 19.09	Force Majeure	233
	[1] Political Risk	234
	[2] Uncontrollable Events	234
	[3] Change of Law	234
§ 19.10	Payment	234
§ 19.11	Currency Convertibility	234
§ 19.12	Term and Termination	234
	[1] Term	234
	[2] Termination Events	235
	[3] Termination by Power Purchaser	235
	[4] Termination by Project Company	235
	[5] Project Lenders	235
	[6] Remedies	235
	[7] Termination Payments	235
	[8] Power Purchaser’s Right to Operate the Project	236
	[9] Ownership of Project at Expiration of Term	236
§ 19.13	Penalties	236
§ 19.14	Technical Standards	236
§ 19.15	Operating Procedures	236
§ 19.16	Metering	236
§ 19.17	Third-Party Sales and Project Transfers of Ownership	237
	[1] Generally	237
	[2] Right of First Refusal	237
	[3] Effects of Third-Party Sales	237
§ 19.18	“Regulatory Out” Provisions	237
§ 19.19	Power Purchaser Responsibilities	238
§ 19.20	Project Company Responsibilities	238
§ 19.21	Insurance	239
§ 19.22	Successors to the Power Purchaser	239
§ 19.23	Common Risk Allocation in Developing Country Power Purchase Agreements	239
	[1] Construction	239
	Cost Overrun	239
	Delay	239
	Failure to Achieve Performance Standards	240
	[2] Operating	240
	Cost Overrun	240
	Operating Performance Shortfall	240
	[3] Fuel	241
	Price	241
	Supply	241
	Transportation	241
	[4] Market	241
	Demand	241
	Price	241
	Inflation	241
	Exchange Rate Fluctuations	242
	[5] Political	242
§ 19.24	Tolling Agreements	242
	[1] Fuel Availability and Force Majeure	242
	[2] Efficiency and Fuel Use	242
PART SIX. CREDIT ENHANCEMENT
CHAPTER TWENTY. PROJECT FINANCE CREDIT ENHANCEMENT		245
§ 20.01	Introduction to Credit Enhancement in Project Financings	246
§ 20.02	Guarantees	247
	[1] Generally	247
	[2] Sponsor	247
	[3] Third Party	248
	[4] Contrast to Put Options	248
	[5] Collateral	248
§ 20.03	Transnational Guarantees	248
	[1] Introduction	248
	[2] Varying Interpretation of Terms	248
	[3] Payments and Currency Risks	249
	[4] Tax Implications	249
	[5] Foreign Law	249
§ 20.04	Limited Guarantees	249
	[1] Generally	249
	[2] Claw-back	249
	[3] Cash Deficiency	250
	[4] Completion	250
	[5] The Risk With Unlimited Guarantees	250
§ 20.05	Indirect “Guarantees”	250
	[1] Take-or-Pay Contracts	250
	[2] Take-and-Pay Contracts	251
	[3] Other Forms	251
§ 20.06	Implied Guarantees and Undertakings	251
	[1] Generally	251
	[2] Comfort Letter	251
§ 20.07	Put Options	251
	[1] Generally	251
	[2] Regulatory Put	251
	[3] Contrast to Guarantees	251
§ 20.08	Letters of Credit	252
§ 20.09	Surety Obligations	252
	[1] Bid Bonds	252
	[2] Performance Bonds	252
	[3] Payment Bonds	252
	[4] Warranty Bonds	252
	[5] Retention Money Bonds	253
	[6] Labor and Material Payment Bond	253
§ 20.10	Commercial Insurance	253
	[1] Generally	253
	[2] Commercial Insurance and the Project Lender	253
	Additional Insured	253
	Loss Payee	253
	Non-vitiation Clauses	254
	Reinsurance	254
	Waiver of Subrogation	254
	Collateral Security	254
	Other Insurance Issues	254
	[3] Types of Commercial Insurance	254
	Contractor’s All Risks	254
	Advanced Loss of Revenue	255
	Marine Cargo	255
	Marine Advanced Loss of Revenue	255
	Operator’s All Risks	255
	Operator’s Loss of Revenue	255
	Third-Party Liability	255
	Employers’ Liability/Workers’ Compensation	255
	Finite Risk	255
	Trade Disruption	255
	[4] The “Commercially Available in the Marketplace” Standard	255
	[5] Exchange Controls	256
	[6] Export Financing Requirements	256
§ 20.11	Political Risk Insurance, B Loan Programs, and Guarantees	256
	[1] Generally	256
	[2] Multilateral Investment Guarantee Agency	256
	Generally	256
	Eligibility	257
	Coverage	257
	[3] International Finance Corporation	258
	[4] World Bank Guarantees	259
	[5] Asian Development Bank	259
	[6] Inter-American Development Bank	259
	[7] Overseas Private Investment Corporation (U.S.)	260
	[8] United States Export-Import Bank	263
	[9] Japanese Bank for International Cooperation	263
	[10] Export Credit Guarantee Department of the United Kingdom Department of Trade and Industry	264
	[11] Export Development Corporation (Canada)	264
	[12] Other OCED Government Insurance Entities	264
	[13] Other OCED Export Credit Agencies	264
	[14] Commercial Insurance	264
	Scope of Coverage	264
	MIGA Cooperative Underwriting Program (CUP)	265
	Portfolio Political Risk Insurance	265
	[15] Assignment Rights	265
	[16] Political Risk Insurance for Bond Financing in Emerging-Market Project Finance	265
	[17] Credit Evaluation of Political Risk Insurance Policies	266
§ 20.12	Warranty	266
§ 20.13	Liquidated Damages in Fixed-Price Construction Contracts and Other Liquidated Damages	266
§ 20.14	Indemnification Obligations	267
§ 20.15	Sovereign Guarantees	267
	[1] Project	267
	[2] World Bank	268
	[3] Are Sovereign Guarantees Useful Without World Bank Involvement?	268
	[4] Availability of Funds to Pay Guarantee Claims	268
	[5] Are Sovereign Guarantees From the Host Government Always Necessary?	268
§ 20.16	Other Forms of Government Credit Enhancement	269
	[1] Generally	269
	[2] Government Subordination	269
	[3] Government-Funded Accounts	269
	[4] Pledge of Receivables	269
	[5] Government Account Supported With Local Country Bank Letter of Credit	270
	[6] Use of State Devolution Account as Collateral	270
	[7] Replacement of the State-Owned Off-Take Purchaser With a More Creditworthy Purchaser	270
§ 20.17	Implementation Agreements	270
§ 20.18	Reserve Funds	271
§ 20.19	Cash Calls	271
§ 20.20	Subordination of Project Costs to Debt Service	271
§ 20.21	Hedging Strategies	271
§ 20.22	The Commodity Supplier as Project Partner	271
PART SEVEN. DEBT AND EQUITY FINANCING
CHAPTER TWENTY-ONE. FINANCING SOURCES FOR THE PROJECT		275
§ 21.01	Generally	277
§ 21.02	Banks and Institutional Lenders	277
§ 21.03	The Equity Markets	278
	[1] Domestic Equity Markets and Equity Placements	278
	[2] International Equity Markets	278
§ 21.04	The Bond Markets	278
	[1] Generally	278
	[2] Credit Ratings	278
	Sovereign Risk Analysis	278
	Currency Risk Analysis	279
	Political Risk Analysis	279
	Legal (Contract) Risk Analysis	279
	Market for Output	279
	[3] Advantages	279
	Large and Liquid Market	279
	Longer Term of Debt	279
	Less Onerous Terms	279
	[4] Disadvantages	280
	Regulatory Oversight	280
	Ratings	280
	Consents to Changes to Underlying Project Are Difficult	280
	Negative Arbitrage	280
	Expensive Transaction Costs	280
	[5] The Mini-perm and Amortizing Mini-perm	280
§ 21.05	Rule 144A Debt Placements (U.S.)	281
	[1] Advantages	281
	Large and Liquid Market	281
	Longer Term of Debt	281
	Less Onerous Terms	281
	Limited Regulatory Oversight	281
	[2] Disadvantages	281
	Consents to Changes to Underlying Project Are Difficult	281
	Negative Arbitrage	282
§ 21.06	Investment Funds	282
§ 21.07	The World Bank Group Financing Sources	282
	[1] Global and Regional Multilateral Involvement	282
	[2] The International Bank for Reconstruction and Development (IBRD)	282
	Generally	282
	Loan Program	283
	Guarantee Program	284
	General Requirements	284
	Enclave Projects	285
	Indirect Support	285
	Negative Pledge	285
	[3] International Monetary Fund (IMF)	286
	[4] International Development Association (IDA)	286
	[5] International Finance Corporation (IFC)	287
	Generally	287
	Loan Program	287
	Equity Program	288
	Guarantee Program	288
	Benefits of IFC Participation	288
	[6] Role of World Bank Group Credit in Project Financings	289
	Financing From the IBRD and IDA	289
	IBRD Financing for Enclave Projects	289
	IDA Credits	290
	Equity Financing	290
	Debt Refinancing	290
	[7] Role of World Bank Group Guarantees in Project Financings	290
	IBRD Guarantees	290
	IBRD Indirect (Financed) Guarantee Coverage	290
	When Are World Bank Guarantees Available?	291
	IDA Guarantees	291
	Other Credit Support – Take-or-Pay and Take-and-Pay Contracts	291
	[8] Benefits of World Bank Involvement	292
	Catalyst for Participation by Other Entities	292
	Financial Resources	292
	Ability to Lend to Developing Countries	292
	Ability to Finance Government Investment	292
	Favorable Maturities and Interest Rates on Debt	292
	Political Risk Protection and Comfort	292
	Ability to Influence Governmental Actions Through Cross-Default Provisions in Loan Agreements	292
	Ability to Influence Governmental Actions Through Decisions About Financing Future Governmental Projects	293
	Influence Over Macroeconomic Policies That May Affect a Project	293
	Less Emphasis on Project Risks	293
	Use of World Bank Procurement Policies	293
	Use of World Bank Management Requirements	293
§ 21.08	Regional Development Banks	293
	[1] Generally	293
	[2] African Development Bank	293
	[3] Arab Fund for Economic and Social Development	294
	[4] Asian Development Bank	294
	[5] European Bank for Reconstruction and Development	294
	[6] European Union	294
	[7] European Investment Bank	294
	[8] Inter-American Development Bank	294
	Inter-American Investment Corporation	295
	[9] Islamic Development Bank	295
	[10] Nordic Investment Bank	295
	[11] Nordic Development Fund	295
	[12] OPEC Fund for International Development	295
§ 21.09	Bilateral Agencies	295
	[1] Generally	295
	[2] The OECD Consensus	296
	[3] Methods of Export-Import Financing	297
	Direct Lending	297
	Financial Intermediary Loans (Bank-to-Bank)	297
	Interest Rate Equalization	297
	[4] U.S. Export-Import Bank	297
	[5] Export-Import Bank of Japan	298
	[6] Overseas Private Investment Corporation	298
	[7] Office National du Ducroire (Belgium)	299
	[8] Export Development Corporation (Canada)	299
	[9] Eksportkreditraadet (Denmark)	299
	[10] Finnish Export Credit Limited (Finland)	299
	[11] Compagnie Française d’Assurance pour le Commerce Extérieur (France)	299
	[12] Hermes Cover (Germany)	299
	[13] Instituto Centrale per il Credito a Medio Termine (Italy)	299
	[14] The Netherlands	299
	[15] Export Credit Guarantee Department (United Kingdom)	299
	[16] Export Finance and Insurance Corporation (Australia)	300
	[17] Oesterreichische Kontrollbank AG (Austria)	300
	[18] Garanti-Instituttet for Eksportkreditt (Norway)	300
	[19] Swedish International Development Authority	300
	[20] Export Credit Insurance Company (Spain)	300
	[21] Export-Import Bank of Korea	300
	[22] Other Bilateral Support	300
§ 21.10	Global Environment Facility	300
§ 21.11	Subordinated Debt	300
	[1] Generally	300
	[2] Subordinated Debt Terms in Project Financings	300
	Funding	300
	Conditions to Funding	301
	Other Indebtedness	301
	Payment Blockage Periods	301
	Amendment of Senior Debt Documents	301
	Amendment of Project Contracts	301
§ 21.12	Development Loans	301
	[1] Introduction	301
	[2] Definition	301
	[3] Goals of Project Sponsor	301
	[4] Goals of Developmental Lender	301
§ 21.13	Financing From Project Participants	302
§ 21.14	Other Sources	302
	[1] Generally	302
	[2] Host Government	302
	[3] Contractor	303
	Generally	303
	Retainage as Financing	303
	No Right of Offset	303
§ 21.15	Financings Consistent With the Koran	304
§ 21.16	Securitizations of Project Cash Flows	304
	[1] Generally	304
	[2] Benefits of Securitization	304
	[3] Structure of Securitizations	305
CHAPTER TWENTY-TWO. THE OFFERING MEMORANDUM		306
§ 22.01	Purpose	306
§ 22.02	Key Provisions	306
§ 22.03	Project Overview	306
§ 22.04	Borrower	306
§ 22.05	Project Sponsors	307
§ 22.06	Debt Amount	307
§ 22.07	Uses of Proceeds	307
§ 22.08	Collateral	307
§ 22.09	Sources of Debt and Equity	307
§ 22.10	Equity Terms	307
§ 22.11	Cost Overruns	307
§ 22.12	Other Sponsor Guarantees and Credit Enhancement	308
§ 22.13	Interest Rate	308
§ 22.14	Repayment and Debt Amortization; Mandatory and Optional Prepayments	308
§ 22.15	Commitment, Drawdown, and Cancellation of Commitment	308
§ 22.16	Fees	308
§ 22.17	Conditions to Closing and Drawdown of Funds	308
§ 22.18	Conditions to Each Drawdown of Funds	308
§ 22.19	Covenants	308
§ 22.20	Defaults	308
§ 22.21	Governing Law	309
§ 22.22	Lawyers, Advisors, and Consultants	309
CHAPTER TWENTY-THREE. PROJECT FINANCE DEBT COMMITMENT LETTERS		310
§ 23.01	The Term Sheet	310
	[1] Approaching the Project Finance Lender for Business Advice	311
	[2] The Project Finance Loan Application – When Should the Process Begin?	311
	[3] The Letter of Intent – Showing Interest Without a Commitment	311
	[4] The Oral Commitment	312
§ 23.02	The Commitment	312
	[1] The Commitment and Its Scope	312
	Introduction	312
	Sample Provision	312
	[2] The Loan Amount	312
	Introduction	312
	Sample Provision	312
	[3] Use of Proceeds	313
	Introduction	313
	Sample Provision	313
	[4] Repayment Terms	313
	Introduction	313
	Sample Provision	313
	[5] Representations and Warranties	313
	Introduction	313
	Sample Provision	313
	[6] Covenants	314
	Introduction	314
	Sample Provision	314
	[7] Events of Default	314
	Introduction	314
	Sample Provision	314
	[8] Conditions to Closing	315
	Introduction	315
	Sample Provision	315
	[9] Term	316
	Introduction	316
	Sample Provision	316
	[10] Non-disclosure	316
	Introduction	316
	Sample Provision	316
	[11] Expenses	316
	Introduction	316
	Several Options Exist	316
	Sample Provision	316
	[12] Material Adverse Change	316
	xsIntroduction	316
	Sample Provision	317
§ 23.03	General Recommendations on Commitment Letters	317
CHAPTER TWENTY-FOUR. CREDIT AND RELATED DOCUMENTATION FOR PROJECT FINANCE TRANSACTIONS		318
§ 24.01	The Commercial Lender’s Perspective	321
§ 24.02	Analyses of Project Risks in the Credit Appraisal Process by the Commercial Lender	322
	[1] Experience and Reputation of Project Sponsor	322
	[2] Experience and Reputation of Project Management Team	322
	[3] Experience and Resources of Contractor	322
	[4] Experience and Resources of Operator	323
	[5] Predictability of Price and Supply of Raw Materials to Be Used for the Project	323
	[6] Predictability of Price and Supply of Energy to Be Used for the Project	323
	[7] Market for Product or Service	323
	[8] Terms and Enforceability of Off-Take Contracts	324
	[9] Completion and Cost Overrun Risks Are Addressed	324
	[10] Technology	324
	[11] Real Estate	324
	[12] Construction of Related Facilities	324
	[13] Permits and Licenses	324
	[14] General Operating Expenses	325
	[15] Political Environment	325
	[16] Currency and Exchange Risks	325
	[17] Timing and Certainty of Equity Contributions	325
	[18] Equity Returns for Equity Owners	325
	[19] Value of Project and Project Assets as Collateral	325
	[20] Interest Rate	326
	[21] Force Majeure	326
	[22] Project-Specific Risks	326
§ 24.03	Protecting the Lender From Project Risks	327
	[1] Due Diligence	327
	[2] Assignments	327
	[3] Control Over Excess Cash Flow	327
	[4] Approval of Contract Amendments	327
	[5] Restrictions on Sale of Project Interests	328
§ 24.04	Overview of Project Finance Credit Agreements	328
§ 24.05	Significant Provisions of the Project Finance Credit Agreement	328
§ 24.06	Conditions Precedent to Closing	328
	[1] Generally	328
	[2] Organization and Existence of Project Company, Project Sponsors, Guarantors, and Other Major Project Participants; Copies of Governing Documents of Project Company, Project Sponsors, Guarantors, and Other Major Project Participants	329
	Generally	329
	Sample Provision	329
	[3] Execution and Delivery of Credit Agreement and Related Financing Documents	329
	Generally	329
	Sample Provision	329
	[4] Lien Filings and Possession of Certain Collateral	329
	Generally	329
	Sample Provision	329
	[5] Availability of Funds	329
	Generally	329
	Sample Provision	329
	[6] Related Equity Documents and Availability of Funds	329
	Generally	329
	Sample Provision	330
	[7] Sponsor Support Documents	330
	Generally	330
	Sample Provision	330
	[8] Third-Party Support Documents and Credit Enhancement	330
	Generally	330
	Sample Provision	330
	[9] Host-Government Concessions and Guarantees	330
	Generally	330
	Sample Provision	330
	[10] Off-Take Agreements	330
	Generally	330
	Sample Provision	330
	[11] Supply Agreements	331
	Generally	331
	Sample Provision	331
	[12] Construction Contract and Issuance of the Notice to Proceed	331
	Generally	331
	Sample Provision	331
	[13] Operation and Maintenance Agreements	331
	Generally	331
	Sample Provision	331
	[14] Permits	331
	Generally	331
	Sample Provision	332
	[15] Insurance and Insurance Consultant’s Report	332
	Generally	332
	Sample Provision	332
	[16] Real Estate	332
	Generally	332
	Sample Provision	332
	[17] Financial Statements of Project Company, Project Sponsors, Guarantors, and Major Project Participants	333
	Generally	333
	Sample Provision	333
	[18] Construction Budget and Construction Drawdown Schedule	333
	Generally	333
	Sample Provision	333
	[19] Revenue and Expense Projections	333
	Generally	333
	Sample Provision	333
	[20] Engineering Report	333
	Generally	333
	Sample Provision	334
	[21] Consultants’ Reports	334
	Generally	334
	Sample Provision	334
	[22] Environmental Review	334
	Generally	334
	Sample Provision	334
	[23] Legal Opinions	334
	Generally	334
	Sample Provision	334
	[24] No Material Adverse Change	335
	Generally	335
	Sample Provision	335
	[25] No Defaults	335
	Generally	335
	Sample Provision	335
	[26] No Litigation	335
	Generally	335
	Sample Provision	335
	[27] Other Conditions Precedent	335
	Generally	335
	Sample Provision	335
§ 24.07	Conditions Precedent to Each Construction Loan Drawdown	335
	Generally	335
	[2] Recertification of Representations and Warranties	336
	Generally	336
	Sample Provision	336
	[3] No Change in Law	336
	Generally	336
	Sample Provision	336
	[4] Permit Status	336
	Generally	336
	Sample Provision	336
	[5] No Default	336
	Generally	336
	Sample Provision	336
	[6] No Material Adverse Change	336
	Generally	336
	Sample Provision	336
	[7] No Litigation	336
	Generally	336
	Sample Provision	337
	[8] Construction Progress	337
	Generally	337
	Sample Provision	337
	[9] Construction Budget and Funds Available to Complete the Project	337
	Generally	337
	Sample Provision	337
	[10] Lien Waivers	337
	Generally	337
	Sample Provision	337
	[11] Other Conditions Precedent	337
	Generally	337
	Sample Provision	337
§ 24.08	Conditions Precedent to Conversion of Construction Loan to a Term Loan	337
	[1] Generally	337
	[2] Recertification of Representations and Warranties	338
	Generally	338
	Sample Provision	338
	[3] No Change in Law	338
	Generally	338
	Sample Provision	338
	[4] Permit Status	338
	Generally	338
	Sample Provision	338
	[5] No Default	338
	Generally	338
	Sample Provision	338
	[6] No Material Adverse Change	338
	Generally	338
	Sample Provision	338
	[7] No Litigation	338
	Generally	338
	Sample Provision	338
	[8] Completion	339
	Generally	339
	Sample Provision	339
	[9] Other Conditions Precedent	339
	Generally	339
	Sample Provision	339
§ 24.09	Representations and Warranties	339
	Covenants	339
	[1] Generally	339
	[2] Reports on Project Construction and Completion	340
	Generally	340
	Mechanical Completion	340
	Operation Completion	340
	Final Completion	340
	Sample Provision	340
	[3] Reports on Project Operation	341
	Generally	341
	Sample Provision	341
	[4] Notice of Certain Events	341
	Generally	341
	Sample Provision	341
	[5] Maintain Existence	341
	Generally	341
	Sample Provision	341
	[6] Maintain Interest in Project	341
	Generally	341
	Sample Provision	341
	[7] Pay Taxes	341
	Generally	341
	Sample Provision	342
	[8] Compliance With Laws	342
	Generally	342
	Sample Provision	342
	[9] Obtain and Maintain All Approvals, Permits, and Licenses	342
	Generally	342
	Sample Provision	342
	[10] No Merger or Consolidation	342
	Generally	342
	Sample Provision	342
	[11] Engineering Standards for Construction and Operation	343
	Generally	343
	Sample Provision	343
	[12] Maintenance of Properties	343
	Generally	343
	Sample Provision	343
	[13] Environmental Compliance	343
	Generally	343
	Sample Provision	343
	[14] Insurance and Insurance Proceeds	343
	Generally	343
	Sample Provision	343
	[15] Performance of Project Documents	344
	Generally	344
	Sample Provision	344
	[16] Amendment, Modification, Termination, Replacement, and So Forth of Project Documents	344
	Generally	344
	Sample Provision	344
	[17] Change Orders	344
	Generally	344
	Sample Provision	344
	[18] Engaging in Other Business	345
	Generally	345
	Sample Provision	345
	[19] Indebtedness	345
	Generally	345
	Sample Provision	345
	[20] Liens	345
	Generally	345
	Sample Provision	345
	[21] Investments	345
	Generally	345
	Sample Provision	345
	[22] Dividends and Restricted Payments	346
	Generally	346
	Sample Provision	346
	[23] Maximization of Use of Export Financing, Sponsor Support, and Subordinated Debt	346
	Generally	346
	Sample Provision	346
	[24] Mandatory Prepayment on Occurrence of Certain Events From Excess Cash Flow	346
	Generally	346
	Sample Provision	346
	[25] Financial Tests	347
	Generally	347
	Sample Provision	347
	[26] Special Milestones	347
	Generally	347
	Sample Provision	347
	[27] Change in Project	347
	Generally	347
	Sample Provision	347
	[28] Project Support	347
	Generally	347
	Sample Provision	347
	[29] Financial Reporting	348
	Generally	348
	[30] Use of Proceeds	348
	Generally	348
	Sample Provision	348
	[31] Security Documents	348
	Generally	348
	Sample Provision	348
	[32] Operating Budget	348
	Generally	348
	Sample Provision	348
	[33] Accounts	349
	Generally	349
	Sample Provision	349
	[34] Guarantee Obligations of Others	349
	Generally	349
	Sample Provision	349
	[35] Sale of Assets	349
	Generally	349
	Sample Provision	349
	[36] Capital Expenditures	349
	Generally	349
	Sample Provision	350
	[37] Transactions With Affiliates	350
	Generally	350
	Sample Provision	350
	[38] Construction Cost Overruns	350
	Generally	350
	Sample Provision	350
	[39] Other Covenants	350
	Generally	350
§ 24.11	Events of Default	350
	[1] Generally	350
	[2] Payment	350
	Generally	350
	Sample Provision (Project Company)	351
	Sample Provision (Project Participant)	351
	[3] Breach of Covenants	351
	Generally	351
	Sample Provision (Project Company)	351
	Sample Provision (Project Participant)	351
	[4] Breach of Representation or Warranty	351
	Generally	351
	Sample Provision (Project Company)	351
	Sample Provision (Project Participant)	351
	[5] Filing of Bankruptcy Petition	352
	Generally	352
	Sample Provision (Project Company)	352
	Sample Provision (Project Participant)	352
	[6] Commencement of Bankruptcy Proceeding	352
	Generally	352
	Sample Provision (Project Company)	352
	Sample Provision (Project Participant)	353
	[7] Judgments	353
	Generally	353
	Sample Provision (Project Company)	353
	Sample Provision (Project Participant)	353
	[8] Final Acceptance Date	353
	Generally	353
	Sample Provision	353
	[9] Government Approvals	353
	Generally	353
	Sample Provision	354
	[10] Project Contracts	354
	Generally	354
	Sample Provision	354
	[11] Abandonment	354
	Generally	354
	Sample Provision	354
	[12] Expropriation	354
	Generally	354
	Sample Provision	354
	[13] Ownership and Control	355
	Generally	355
	Sample Provision	355
	[14] Payment of Obligations	355
	Generally	355
	Sample Provision (Project Company)	355
	Sample Provision (Project Participant)	355
	[15] Breach of Credit Support	355
	Generally	355
	Sample Provision	355
	[16] Security Documents	356
	Generally	356
	Sample Provision	356
§ 24.12	Remedies	356
§ 24.13	Governing Law	356
§ 24.14	Limitations on Recourse	356
CHAPTER TWENTY-FIVE. EXPORT CREDITS DOCUMENTATION FOR PROJECT FINANCE TRANSACTIONS		357
§ 25.01	The Export Lender’s Perspective	357
	[1] Generally	357
	[2] OECD Consensus	357
§ 25.02	Methods of Export-Import Financing	358
	[1] Direct Lending	358
	[2] Financial Intermediary Loans (Bank-to-Bank)	358
	[3] Interest Rate Equalization	358
§ 25.03	Export-Import Banks	358
§ 25.04	Overview of Project Finance Export Credits Agreements	358
§ 25.05	Significant Provisions of the Project Finance Export Credits Agreement	358
	[1] Currency of Loan	358
	[2] Right to Prepay	358
	[3] Conditions Precedent	358
	[4] Representations and Warranties	359
	[5] Covenants	359
	[6] Events of Default	359
PART EIGHT. COLLATERAL
CHAPTER TWENTY-SIX. PROJECT COLLATERAL		363
§ 26.01	The Role of Collateral in a Project Financing	364
	[1] Generally	364
	[2] Collateral as a Defensive Tool	364
	[3] Collateral as an Offensive Tool	364
	[4] Uncertainty in Collateral Protections Available to Lenders – You Can’t Always Get What You Want	364
§ 26.02	The Collateral Package	365
	[1] The “Blanket” Lien	365
	[2] Project Cash Flow	365
	[3] Personal Property	365
	Intangible Assets	365
	Permits, Licenses, and Concessions	365
	Contracts	366
	Insurance Proceeds	366
	Surety Bonds	366
	Guarantees	366
	Liquidated Damages	366
	Political Risk Insurance	366
	Accounts	366
	[4] Real Property	367
§ 26.03	Collateral Documents	367
	[1] Generally	367
	[2] Personal Property Security Agreement	367
	[3] Mortgage, Deed of Trust, and Indenture	367
	[4] Pledge of Ownership Interests	367
	[5] Voting Trust	368
	[6] Offshore Accounts	368
	[7] Disbursement Agreement	368
§ 26.04	Negative Pledges	369
§ 26.05	The Floating Lien	369
§ 26.06	Other Collateral Problems	369
	[1] Types of Liens Allowed	369
	Common Law Countries	370
	Civil Law Countries	370
	Developing Countries	370
	[2] Local Formalities	370
	[3] Denomination of Liens in Local Currency	370
	[4] Priority of Lien	370
	[5] Enforcement	370
	[6] Foreclosure	370
	[7] Real Property	371
	[8] The Problem of Transferability of Project Ownership and Operation Rights	371
	[9] Limited Potential Purchasers of Collateral	371
	[10] If You Think You’re So Smart	371
§ 26.07	Collateral Trusts	372
§ 26.08	Security Interests in Project Contracts	372
	[1] Contract Assignment and Anti-assignment Clauses	372
	[2] Consents to Assignment: Approving Assignments and Enhancing the Contract’s Value as Collateral	375
	The Secured Party’s Perspective	375
	The Contracting Party’s Perspective	376
	The Project Company’s Perspective	376
	The Host Government’s Perspective	376
	[3] The Project Finance Lender’s Rights Under U.C.C. § 9–406	376
	[4] The Project Finance Lender’s Liability for Obligations Arising Under Assigned Contracts	377
§ 26.09	Offshore Collateral Accounts	378
§ 26.10	Intercreditor Agreements	378
	[1] Generally	378
	[2] Goals of Lenders in an Intercreditor Relationship	379
	[3] Typical Intercreditor Arrangements	379
	Generally	379
	Nonrecourse Nature of Project Debt	379
	Project Contracts	379
	[4] Insurance	379
	[5] General Terms of Intercreditor Agreements	380
§ 26.11	Commercial Insurance	380
	[1] Additional Insured	380
	[2] Loss Payee	380
	[3] Non-vitiation Clauses	380
	[4] Reinsurance	381
	[5] Waiver of Subrogation	381
	[6] Other Insurance Issues	381
PART NINE. PROJECT SPONSOR AND INVESTOR AGREEMENTS
CHAPTER TWENTY-SEVEN. GOVERNING THE PROJECT COMPANY: STOCKHOLDER, PARTNERSHIP, JOINT VENTURE, AND MANAGEMENT AGREEMENTS		385
§ 27.01	Generally	385
§ 27.02	Stockholder Agreements	385
§ 27.03	Partnership Agreements	386
§ 27.04	Joint Venture Agreements	386
§ 27.05	Management Agreements	386
PART TEN. SPECIAL TOPICS IN PROJECT FINANCE
CHAPTER TWENTY-EIGHT. BANKRUPTCY		389
§ 28.01	Introduction	389
§ 28.02	Types	389
	[1] Universal	389
	[2] Territorial	389
	[3] Universal and Territorial	389
§ 28.03	U.S. Debtor Filing for Bankruptcy Protection in United States and With Foreign Assets	390
§ 28.04	Foreign Debtor Filing for Bankruptcy Protection Abroad and Has U.S. Assets	390
§ 28.05	Selection of Bankruptcy Forum for the Debtor With Multi-country Assets	391
§ 28.06	Structuring Bankruptcy Solutions Before Closing	391
CHAPTER TWENTY-NINE. UNITED STATES LAWS AFFECTING FOREIGN INVESTMENTS		392
§ 29.01	Introduction	392
§ 29.02	Foreign Corrupt Practices Act Generally	392
	[1] Anti-bribery Prohibition	393
	[2] Accounting Provisions	393
	[3] Multilateral Agency Anti-corruption Prohibitions	394
§ 29.03	Anti-bribery Provisions of the FCPA	394
	[1] Corrupt Intent	394
	[2] Interstate Commerce and Acts in Furtherance	394
	[3] Offer, Payment, Gift, or Promise of Money or a Thing of Value	394
	[4] Foreign Official	395
	[5] For the Purpose of Influencing the Foreign Official, in His “Official Capacity,” to Assist the Company in Obtaining or Retaining Business	395
	[6] Exceptions and Defenses	395
	“Facilitating” Payments	395
	Payments Authorized by Local Law	396
	Promotional Expense Reimbursement	396
	Payments by Subsidiaries of U.S. Corporations	396
	[7] Enforcement and Penalties	396
	[8] Avoiding Violations of the FCPA	397
	[9] The Problem of the Local Partner	397
	[10] Document Drafting Considerations	397
	Representations	397
	Conditions Precedent	397
	Covenants	397
	Termination	398
§ 29.04	The Securities Exchange Act of 1934	398
§ 29.05	The Mail and Wire Fraud Acts	398
§ 29.06	The Internal Revenue Code	398
§ 29.07	The Currency and Foreign Transactions Reporting Act	398
§ 29.08	The False Statements Act	398
§ 29.09	National Security and Related Political Considerations	399
	[1] Introduction	399
	[2] Trade Embargo Regulations	399
	[3] Terrorist States	399
	[4] Export Restrictions	399
	[5] Exon-Florio Amendment	399
CHAPTER THIRTY. LOCAL LAWYERS AND OVERVIEW OF LOCAL LAWS		400
§ 30.01	Introduction	400
§ 30.02	Local Lawyers	400
	[1] Need and Timing	400
	[2] Identifying Competent Lawyers	400
	[3] Criteria for Selection	401
	[4] Managing Local Lawyers	401
§ 30.03	Overview of Local Laws	401
§ 30.04	Local Counsel Opinions	401
§ 30.05	Opinion of Counsel on Permits and Approvals	401
	[1] Purpose of Opinion	401
	[2] Status of Permits, Approvals, and Concessions	401
	[3] Change of Law	402
	[4] Rights of Lender	402
	[5] Renewal	402
	[6] Typical Problems Encountered and Disclosed	403
CHAPTER THIRTY-ONE. DISPUTE RESOLUTION IN PROJECT FINANCE TRANSACTIONS		404
§ 31.01	Introduction	404
§ 31.02	On Whether to Litigate or to Arbitrate	405
	[1] Advantages of Arbitration	405
	[2] Advantages of Litigation	405
	[3] Can a Party Select Both?	406
	[4] Alternatives to Arbitration and Litigation	406
	[5] Which Is “Best” for a Project Financing?	406
§ 31.03	Inconsistent Preferences	407
	[1] Lender	407
	[2] Project Company	407
	[3] Contractor and Operator	407
	[4] Off-Take Purchaser	407
§ 31.04	Inconsistent Procedures	407
	[1] Consistency	407
	[2] Uniformity	408
	[3] Consolidation	408
§ 31.05	Choice of Law	408
	[1] Substantive Law	408
	[2] Procedural Law	408
	[3] Renvoi	408
	[4] Lex mercatoria	409
	[5] New York Law	409
	[6] Failure to Select a Law	409
	[7] Flexibility for Application of Governing Law	409
§ 31.06	Choice of Forum	409
	[1] Litigation	409
	[2] Arbitration – The New York Convention	409
	[3] Arbitration – Other Conventions	410
	[4] Arbitration – Bilateral Investment Treaties	410
	[5] Failure to Select a Law	410
	[6] Developing Countries	410
§ 31.07	Choice of Panel	411
	[1] American Arbitration Association	411
	[2] International Chamber of Commerce	411
	[3] London Court of International Arbitration	411
	[4] United Nations Commission on International Trade Law	411
	[5] Inter-American Commercial Arbitration Commission	411
	[6] Stockholm Chamber of Commerce	411
	[7] International Centre for Settlement of Investment Disputes	411
	[8] Others	411
	[9] Ad Hoc	412
§ 31.08	Disputes Involving Project Participants Not Parties to the Contract in Dispute	412
§ 31.09	Challenging Arbitration Awards	412
§ 31.10	Arbitration and Host-Country Disputes	413
	[1] Generally	413
	[2] Pacta Sunt Servanda, Private Contracting, and State Sovereignty	413
§ 31.11	Arbitration in Developing Countries	414
§ 31.12	Arbitration Provisions	416
	[1] Final and Binding Arbitration	416
	[2] Scope of Arbitration	416
	[3] Location of Arbitration (Choice of Venue)	416
	[4] Institution Selected for Arbitration	417
	[5] Selection of Arbitration Panel	417
	[6] Procedure	417
	[7] Governing Language	417
	[8] Governing Law	417
	[9] Continuing Performance	417
	[10] Res Judicata	417
CHAPTER THIRTY-TWO. MULTILATERAL AGENCY PROHIBITIONS ON ANTI-COMPETITIVE ACTIVITY		419
§ 32.01	Introduction	419
§ 32.02	Procurement Guidelines	420
	[1] Generally	420
	[2] World Bank	420
	[3] Inter-American Development Bank	420
	[4] European Bank for Reconstruction and Development	420
§ 32.03	Organization of American States Inter-American Convention Against Corruption	421
§ 32.04	Council of Europe Criminal Law Convention on Corruption	423
§ 32.05	Organisation for Economic Co-operation and Development (OECD) Recommendation of the Council on the Tax Deductibility of Bribes to Foreign Public Officials	424
§ 32.06	Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions	424
§ 32.07	European Union Convention on the Fight Against Corruption Involving Officials of the European Communities or Officials of the Member States of the European Union	425
§ 32.08	United Nations	425
§ 32.09	International Chamber of Commerce Rules of Conduct to Combat Extortion and Bribery	426
CHAPTER THIRTY-THREE. MERCHANT FACILITIES – PROJECT FINANCE WITHOUT CONTRACTUALLY ASSURED REVENUE FLOWS		429
§ 33.01	Definition of Merchant Facility	429
§ 33.02	Market Risk	430
§ 33.03	Management of Commodity Risk	430
	[1] Generally	430
	[2] Long-Term Contracts	431
	[3] Linking Inputs and Outputs	431
	[4] Reserve Funds	431
	[5] Cash Calls	431
	[6] Subordination of Project Costs to Debt Service	431
	[7] Hedging Strategies	432
	[8] The Commodity Supplier as Project Partner	432
§ 33.04	Management of Commodity Output Risk	432
§ 33.05	Loan Covenants for the Merchant Project	432
Appendix A: A Checklist of Due Diligence Considerations for a Project Financing		433
Appendix B: UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects		439
Project Finance Terms, Abbreviations, and Acronyms		449
Select Bibliography		455
Index		463

CONTENTS