BANKABLE PROJECT AGREEMENTS
The Bankable Project Agreements (PBAs) are contracts structured to meet lender or investor requirements for providing the necessary funding for the EPCIM of the Project, minimising legal and commercial risks to ensure repayment from project cash flows. They require strong, creditworthy off-takers, clear risk allocation, and security. The main agreements include EPC Contracts, SPAs / PPAs, and OM Agreement ensuring predictable revenue and project viability.
The PBAs are contracts structured to meet lender or investor requirements for providing the necessary funding for the Project EPCIM, EPCI, EPC, or EP, minimising legal and commercial risks to ensure repayment. They require strong, creditworthy off-takers, clear risk allocation, and security. The main agreements include EPC Contracts, SPAs / PPAs, and OM Agreement ensuring predictable revenue and project viability.
What is an Agreement?
An agreement is a mutual understanding, arrangement, or promise between two or more parties regarding their rights, obligations, or actions. While all contracts are agreements, not all agreements are legally binding contract, but for the purpose of bankability all Agreements / Contracts are binding. Hence, the Bankable Project Agreements (PBAs) are contracts structured to meet lender or investor requirements for providing the necessary funding for the EPCIM, EPCI, EPC or EP of the Project, minimising legal and commercial risks to ensure repayment from project cash flows. They require strong, creditworthy off-takers, clear risk allocation, and security. The main agreements include EPC Contracts, SPAs / PPAs, and OM Agreement ensuring predictable revenue and project viability.
Core Financing & Security Contracts
Protect lenders' rights to project assets in case of default.
- Loan Agreement. Aka as Facility Agreement, itis the cornerstone document between lenders and the SPV.
- Security Contracts. Establish collateral (mortgages on land/plant, pledges of shares, and revenue assignments).
- Intercreditor Agreement. In multi-lender projects, this defines repayment priority, voting rights, enforcement rights between senior, mezzanine, and other lenders.
- Direct Agreements. Aka Tripartite agreements between the lender, the project company, and key contractors (e.g., EPC) that allow lenders to "step in" and cure defaults, preventing contract termination.
Revenue and Supply Contracts
Ensure the project has reliable revenue to cover debt service, crucial for project finance.
- Offtake Agreement. Aka Take-or-Pay Contract, this is a long-term agreement of the main products and byproducts of the Project with a credible buyer to purchase the project's output (electricity, heat, water, fuel, technology, equipment or tools ) at an agreed fixed price, ensuring stable cash flows for at least the preiod of repayment back of the loan.
- Supply/Input Agreement. Ensures that essential raw materials (e.g., fuel for power plants, water for irrigation) are provided on time and at agreed prices to an indicated place of delivery under CIF/DAP/FOB as the cas be.
Construction and Operational Agreements
- EPC Contract. This Engineering, Procurement and Construction (EPC) Agreement is usual a turnkey, fixed-price, date-certain contract with a capable contractor, limiting cost overruns and delays.
- O&M Agreement. aka Operations Management Agrement, sets performance standards, penalties, and fixed costs for operating the facility after construction.
Site and Government Agreements
- Concession / Implementation Agreement. A contract with the government that grants the project company the right to construct, operate, and collect revenue from the asset (crucial for PPP projects).
- Land Lease / Site Acquisition Agreement. Secures long-term rights to the land on which the project is situated.
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