Regulatory guarantee agreements: These have emerged as an extension of the concept underlying the direct agreement of lenders. Ancillary agreements shall be concluded between the Authority and contractors entering into contracts with Projectco. If Projectco fails to meet its contractual obligations during the construction phase, the authority can ensure that the project is completed by taking the corresponding order from Projectco. In addition, the agency can accept Projectco`s operating contract when the project is terminated. Buyer: For infrastructure projects, Projectco will typically enter into a contract in advance with a buyer who will acquire the production of the project over the long term. Lenders want the specified period to run from the moment the third party can terminate and not at the same time as the contractual notice period. Subcontracts: Projectco enters into various subcontracts to disclose the risks it incurs under the project agreement. It is common for Projectco not to carry out any of the key activities itself, but rather to be a vehicle for the formation of contracts associated with the project – hence the term “special purpose vehicle”. Collateral Collateral Guarantees: Lenders and the agency typically require contractual guarantees from key contractors and consultants appointed by Projectco. In particular, the value of guaranteed guarantees for the Authority is that they protect the Authority`s position after the end of the project if the Authority`s losses exceed the value of the constructed (or partially constructed) project. Project Sponsor: The person who plays an active role in the management of the project. The project promoter owns Projectco and receives profits, either due to projectco ownership or through management contracts, if the project is successful.
The project proponent often has to cover certain liabilities or risks of the project by providing guarantees or entering into management or service agreements. Private Sector Partner/Owner: Usually, a corporation or limited partnership established solely for the purposes of the respective project. This part is at the center of all contracts, obligations, as well as the construction and operation of the project. For the sake of simplicity, we call this part “Projectco”. Suppliers, contractors and customers: This includes suppliers of materials for the project, contractors responsible for the design and construction of the project and customers of the project. Consortia of entrepreneurs may be involved in larger projects. As regards liability, these Contracting Parties may be jointly and severally liable or jointly or severally. Joint and several liability means that each contractor is only liable for its own contribution to the project, while under joint and several liability, each contractor can be sued for the entire obligation and it is then the responsibility of the consortium to regulate the scope of each contractor`s obligations. Lenders prefer joint and several liability, as the risk of loss of performance is then the overall liability of each consortium member. As a general rule, there is no debate as to whether direct agreement should be given in principle. However, it is still common for certain provisions to be intensively negotiated, and it often seems that disproportionate time is spent on such a short agreement.
To my knowledge, no one has ever intervened in a direct agreement, and there would be practical difficulties in doing so, such as. B the overhaul of all project contracts. However, direct agreements are common practice and are an integral part of a lender`s suite of security rights. Construction company: The contractor is one of the most important parts of the project during the construction phase of the project. Typically, a contractor`s contract is based on one of two models: • Ability of lenders to terminate during the specified period or after a default under the facility agreement to appoint an entity to assume the rights and obligations of the project company from the project document; By Katie Liszka Direct agreements are used in project financing transactions to provide protection to lenders in case the project gets into trouble. These are contractual mechanisms that allow lenders to enter the position of the project company (borrower) and take over the project and/or find a replacement unit for the continuation of the project. The parties to the direct agreement include the project company itself and the counterpart of the project document for which the direct agreement is obtained. ]]> project documents are contracts that set out each party`s responsibilities in relation to a project, and the success or failure of most projects often depends heavily on it. A direct agreement is an agreement that gives project lenders direct rights to certain key project documents. These rights are explained in direct agreements in project finance operations – important provisions. Project Agreement: The Project Agreement is the primary agreement for each PFI project and governs the relationship, rights and obligations between the Authority and Projectco throughout the duration of the Project.
It can also be called a concession contract. If necessary, a direct agreement may contain clauses in which the counterparty to the project document consents to the collection or assignment of the project company`s rights under the project document. Service Agreements: Projectco enters into service agreements with service providers and communicates its delivery obligations under the project agreement to these contractors. As above, service providers offer guarantees in favor of the authority and the authority has entry-level rights in certain circumstances – again subject to the rights of lenders. In addition to this security, project funders generally expect direct contractual relationships with counterparties for the most important project documents. This is achieved through direct agreements. Wouldn`t the termination of EPC contractor services extend the project completion period since a new EPC contractor must replace the previous one? Direct agreements usually contain provisions on the following topics: The contractor and the planning team provide guarantees for the benefit of the authority and the lenders. Lenders usually have the first right to enter into the construction contract instead of Projectco. All rights vested in the authority are generally subject to the rights of lenders.
The direct agreement of the lenders: This is a tripartite agreement between the authority, Projectco and the lenders, under which the authority undertakes to give the lenders a period of time to give the lenders notice of the imminent termination of the project agreement. This Agreement also provides lenders with the opportunity to intervene, either directly or through an agent or representative, to resolve the termination event or to find another party acceptable to the authority to assume Projectco`s rights and obligations under the Project Agreement. In early PFI projects, it was common to enter into separate agreements for different phases of the project, e.B. a development agreement for the design and construction phase and an operation or facilities management agreement for the operational phase. Nowadays, however, it is more common to have a single project agreement that covers all aspects of the project. Host governments/contracting entities: The government of the country where the project is based is likely to be involved in the issuance of permits and permits at the beginning and throughout the life of a project. The successful client is the sponsoring municipality that enters into the project agreement with Projectco. EPC Direct Agreement means the EPC Direct agreement dated to or near the date of issue between the issuer, the EPC Contractor, the Security Trustee and the intervening entity. A direct agreement often involves changes to the underlying project documents. This is especially true for concession contracts where the project company receives the concession before the lenders are heavily involved. .